Wednesday, October 31, 2012

Microsoft's new tablet

It has at least two major impacts. This tablet looks good for Microsoft and the potential price appreciation of its stock price. It should be an event but the media treat it as a non event.

* There is no pundit about this tablet. They flopped too many times, but it could be the most important event since Office and for sure at least at the same level of XBox.

It differs from selling Windows to PC makers like Dell but it poses direct competition with its PC makers. It could be a case that your mother (Microsoft) calls your children ugly (Dell, HP...) or punishes your children for abandoning the parents (Windows) for tablets.

* It will be a perfect travel companion for me satisfying all my needs for using it running investment software that require Internet Explorer and most of my data are stored in Excel.

iPad is a good one with thousands of apps. However, it lacks a USB port for printers, backup devices...The most beautiful woman will not do you any good, if she does not satisfy your needs. :)

It is about time that Microsoft's management wakes up from the dreams on how to spend their bonus money and take some risk to launch new products instead of living from the hard work of their parents (the young Bill and those who toiled for their first million). 

Asian Model for education

Is it a better model than the U.S.? It is not totally better, but it has good points that we should copy.

       Rote memorization.
Rote memorization (also known as Bejing duck stuffing in Asia) has more benefits than most would admit. I and my classmates in early education are the living proofs.

My theory. Rote memorization teaches us discipline and working hard. Creativity comes later in life.  Most grade 6 students in Hong Kong knew how to solve the following mathematical problem and its variations: when the two trains meet driving at opposite directions from different speeds and distances. We did not know the theory behind then. After high school, most of us understood as they’re the basics of algebra and it can solve some real-life problems. Similar to reciting Chinese poems and remembering the long list of important events in Chinese history.

By very rough estimate, we need less than 1% geniuses and about 25% professionals for all workers. The professionals are doctors, lawyers (some are good and some are parasites), accountants, computer programmers, teachers, managers, etc. The rest are jobs for farmers, salesmen, technicians, office workers, factory workers, service workers, etc. that do not require a college education more than two years. As long as everyone works or has a desire to work instead of making quick money (via lotteries and the TV reality shows that give you free stuffs and money), we should have a harmonious society. Our family and high schools should teach them to be good citizens first.

The geniuses are researchers and entrepreneurs like Steve Jobs, Gates and many others. They create jobs. Steve Jobs may have created more than a million jobs. Most Tier I cities in China do have schools to accommodate geniuses.

Rote memorization teaches us how to do a task. It is good for our professionals and workers. It also emphasizes on discipline and working hard, so it would help us to be good citizens instead of burdens to the society. 

Education starts at home.
It has been described in my blog.

Our next generation will have a tough time to compete with China if you understand how hard the Chinese children study. We still have resources and inheritance from our ancestors, so the next generation should still have a good time. However, the next, next generation will not maintain the same kind of living standard if they do not work hard.

It is no surprise to me that some Shanghai students beat all countries in a unified test.

One advantage is China’s one-child policy. Now, the whole family (two parents and four grandparents) concentrate their effort in educating the only child.  There are bad side effects like producing many so-called ‘little emperors’ who are spoiled, fat and lazy. However, these ‘little emperors’ are a small percent and the parents are realizing the problem.

The Chinese high school dropouts will not be a big burden to society.
The Chinese high school dropouts are different from the U.S. counterparts. They drop out for many reasons and many are not related to academics. Chinese compulsory education is 9 years. If the families do not have money, they will drop out after the 9 years.
Very few Chinese dropouts are a burden to the society. It could be the quality of the dropouts and the fierce punishment in China. The U.S. has about 25% high school dropout and about 40% for black / Hispanics. When you count how many prisoners are dropouts, it will show the dropout has an effect to the burden of the society.

Other Myths.

The U.S. education system is good to educate a citizen all-around. If you do not have a job, you cannot survive for being all-around.

Leave no one behind. In the classroom, these losers will disrupt learning for others.

No homework. The average kid will spend their extra time in playing video games.

Wednesday, October 24, 2012

Trading gold

Here is my experience in trading gold.

* The gold coins you sold do not need to report to IRS as long as they are below a certain quantity.

* Most coin shops make high commissions. Use trustworthy on-line shops and you need to pay shipping with insurance. You may want to find a bank box for storing gold coins.

* I owned gold coins for about 20 years. There were no appreciation for about that time period. Suddenly gold coin went to 900. Most likely you sell them before they reach 1800. It is psychology 101.

After the inflation in 20 years, they do not make a real appreciation in turn of buying power, but you still have to pay taxes.

* Made some tiny profits in GLD by buying low and selling high. When gold reaches all time high, all traders and investors look like geniuses until...

My crystal ball on the market

From my crystal ball:

1. We will have a major correction before 2/15/2013.

2. The secular bull market will start from 2020 or even as earlier as 2015 and it will last for the next 15 years. Check the link for my arguments.

They are predictions with good arguments. However, the market is not rational otherwise there would be no poor folks. The accuracy of our predictions would improve by observing current events. If there are global wars or California is hit by the earthquake of the century, then all bets are off.

Check this post in 2013 and 2020 to see whether they're accurate and we both can learn from them. In any case, don't bet your farm on any prediction and take responsibility of your own actions as there is no holy grail in investing.

Saturday, October 20, 2012

My Chinese music selection

America has about 500 years of civilization vs 5000 for Chinese. Chinese music is just behind in quantity and quality. Is it due to our lacking of the 2 extra half step tones (5 vs 7)  and/or we do not have a language to record music like the West does?

The following is a collection of the music in my playlist from YouTube. Very rough classification. It may be deleted as most videos in YouTube do. Will find time to put my entire playlist. Will put this list in the web page that supports this book.

Hong Kong: 


 張偉文 - 不了情  

 蔡幸娟 千言萬語 月亮代表我的心 夏之旅  

 童麗 - 紅塵
萬芳 - 教我如何不想她   

Teresa Teng    
The Power of Love  

Friday, October 19, 2012

Is Olympics a good contradictary market indicator?

When Greece hosted the Olympics, I know they will create a lot of white elephants and the old civilization will created. 100% correct.

When E. Germany gained most medals, next years they were acquired.

When the USSR gained most medals, next years they're dissolved.

Only Asian countries and Australia did the opposite: Japan, S. Korea and China (I'm not 100% on China).

Barcelona '92 and Turin, Italy '96 (winter) might fit this analogy as well. 

Thursday, October 18, 2012

The political debates on China

Both presidential candidates blame China in the debates, since both do not have solutions to our problems. It is politically correct but actually is dead wrong.

* Will not gain jobs back from China.
The $20 per hour wage can never compete with the $2 wage.

To illustrate, Apple will not gained a lot of jobs returned to U.S. for too many reasons:

1. There is a huge difference in wages. You cannot live with a $2 per hour wage in U.S.
2. Our unions will never allow those forced overtimes, monotonous jobs and dormitory conditions.
3. Apple's products depend on rare earth elements that are only available in that scale and prices in and from China.
4. Our taxes are getting higher due to the generous entitlements and welfare, expenditures on the two Middle East wars, and the high cost (as a % to GDP) to service our public debts that is getting higher and higher.
5. There are about 40,000 technicians and engineers to support these manufacturing jobs at peanut wages. Where can we find so many qualified folks in U.S.?
6. China's internal market for Apple's products will be potentially larger than U.S. Chinese do not mind to pay for double the U.S.'s prices to boost their social status.
(Victoria Secret's could make a big hit if CCP allows folks to wear underwear only) :)

* If we continue to bash China, we will suffer from consequences which are bad to the U.S.
1. They will withdraw the public debts, which would cause us a deeper and longer recession.
2. We'll lose a good trade partner, since our major products do not compete with each other at least for now.
3. When you treat them as enemies, they will become one.
4. When we stop to let their products in, they will be replaced by other low-wage countries at higher prices and less quality. The recent tariff in tire does not gain us any jobs but the consumers suffer dearly, while the politicians declare 'victory'.

Thursday, October 11, 2012

Ugly Americans

I expected Canadians would like us more as we are very similar. I was in Toronto last week and oh no they do not love us as they should. I can guess easily how citizens of other countries more different from Canadians would view us.

The good.
We're generous. We welcome immigrants. We're innovative. We have a constitution and we advocate freedom. We cannot stop the jealousy due to our success. To illustrate, there are so many retail chains based on U.S. that I counted in Easton Center.

The bad and the ugly.
We act as if we're the leader and the policeman of the world (or bully). We're arrogant. Basically we keep on opening our big mouth continuously and do not care about others' feelings.

Our continuous involvement on foreign wars kills our economy and our leader does not want to admit and fix the problem. He can't unless he does not want to be re-elected. It is our political system.   

Wednesday, October 3, 2012


If there is no welfare, everyone will work even for peanuts. It is our instinct to survive.

If everyone minds their own business, there will be no war or wars will be isolated.

If the market is irrational (like today's) and we use rational methods to deal with it, we will fail.  

If you want employment, just do the following: 1. End all wars. 2. Cut all welfare and entitlements starting with the cheaters first. 3. Rule the country by a committee like China.

If you learn something from the above original quotes from me, donate one cent to my secret retirement plan and I'll be rich. :)

This economy and the market is manipulated by too many government interventions, so we have to understand and act accordingly. Historical data does not prepare us to act on exceptions.

The traditional way that still works is: Research on the market first, then the sectors, and lastly the stocks. We have to swim with the tide, not against the tide.

Defending Romney

First, I'm politically neutral. 

Romney pays more than his fair share of taxes. He did not take the deduction for charity donation that he is entitled legally to for the purpose of moving up his effective tax rate in an election year.

Stupid on his part. He should not donate to charities and let the poor die (a satire). Or, with better planning, he should donate next year when the election will be over and most likely the taxes will be higher (let the poor starve for a year but better tax deduction for his donation).

The reason of his low effective tax rate is due to the low capital gain tax that will most likely end next year. He or his financial adviser(s) are taking advantage of the low investment tax last few years by selling his appreciated, long-term securities as most of us do. There is nothing wrong with that.

If the guy does not take advantage of the situation, he will not be right for the president job as all political decisions are results of trade offs, compromising, taking advantage / reacting to current events...

A blog on whether we should do our own tax return.

Why the market is trending higher

We're in the best of time (the market high today) and the worst of time (the market is too risky now).

It is not a rational market and I predict it will dip before March 1, 2013. A rational market is 6 months ahead of the economy. The economy does not look that great compared to 2008 and all our trading partners (EU, Japan and China) have problems.

For this long period, we can say it is a market cycle: the plunge in 2007, the bottom in 2008, the recovery in 2009 and the peak now. The next plunge could be 2013; your crystal ball is as good as mine.

Will it be a long-term problem?

It could be as our debt as a percent of GDP is too high. The more money we use to service our debt makes us less competitive globally unless our competitors have the same problem. In this aspect, China looks good.


GM would have bankrupted with our bailout money disappeared without China; a good portion of the profit is from China even today. It thrives these days with the Sino-Japan quarrel. The other factor is the screwing up of Toyota by her stupid management, where no management is the best management.

GM's management did not respond to the market but had a wet dream of unattained potential profits and bonuses.

Volt should be in the lab for five more years. It almost drove GM to another brink of bankruptcy.

GM should be case studies in all business schools. When GM bankrupts, most likely U.S. bankrupts too with the sinking Titanic. That's the reason we really want GM to prosper even we're not a GM investor.

Fiscal cliff and the invesmtnet tax rates

The question is how will the market is affected by the new (if no change) tax rate. Most of the small investors will not be affected. However, the market is driven by big boys. The pension and insurance part of the big boys may not be affected. Their rich clients will be. Beside seeing the actual effect, we can only estimate how many of these rich clients are.

The other argument of dividend stocks in retirement accounts works for some but not for most as they have to withdraw from these accounts eventually. I'm facing this problem eventually and I need to withdraw large sum before I turn 70 1/2.

On Foxconn revolt

There are more desperate slaves all over the world want to take the works from the slaves in China. Actually there are even some in U.S. After I told them you could not live here with $2 per hour (welfare would pay you more if you do not work) and your union would not allow you to be forced to work OT, no one with the right mind wants that monotonous job.

In addition, all the robots are smiling. Your thinking is idealistic like many of our leaders here in U.S. You use a yardstick for a developed country rather than one for China. Reality and idealism do not mix.

All your ideas are picked up by folks like you, thinking the same like a robot without facing reality of what the slaves are facing and competing. 

The logic is simple. If they do not give you a raise, you look for another job. It is a free market and no one forces you to work in same place. If this is the best job offered to you, you have to thank your slave master (or termed as business folks).

Death threat does not make sense and insults your intelligence; it is good for Chinese bashers and the media to sell their stuffs. 

Using sectors to gauge the market

We use Transportation section to gauge the economy. When we move from an industrial to a service economy, this indicator is not as good as before but still viable.

The bank sector is not as good too as it depends too much on the quality of the loans and their exposures to foreign loans. 

The energy sector gives me the best return, but it is the most volatile.

Q has been a good predictor for 2000 and 2007. It is the total market value / total replacement cost. 

Is the Olympics record a good indicator?

When Greece hosted the Olympics, I know they will create a lot of white elephants and the old civilization will created. 100% correct.

When E. Germany gained most medals, next years they were acquired.

When the USSR gained most medals, next years they're dissolved.

Only Asian countries and Australia did the opposite: Japan, S. Korea and China (I'm not 100% on China).

Historical data, valuations and lessons teach us to deal with a rational market. Today the market is not rational. Better move to cash as much as possible and wait for the opportunities to move back.

Why I blog

I blog on investment ideas in seekingAlpha. They have different articles everyday. I choose the ones that are interesting to me and comment from my own experiences. I try to be against the author's ideas (you learn by arguing) and sometimes I have to accept when the ideas are sound.

It is similar to my elementary teacher giving us a topic to compose an article. It also enforces what I know and sometimes corrects my bad concepts. I write some of the better ones in this blog.

I have set up my investment trade plan and have done a lot of testing. Now, I do not have to spend a lot of time in these areas and hence it allows me plenty of time to blog especially when the market is slow. I also blog on topics on U.S. and China.