Thursday, March 31, 2016

Today's financial news

* USD was strong a short while ago against EU and I bet it is still higher compared to one year ago. Low oil price should help Europe as most except Norway depend on import.

* The infrastructure bank was set up by China to help them to build the two modern Silk Roads. It would help China if they import solar panels from China to build the 500M project. India with a lot of sun shine should benefit even most green energies are not economically feasible.

* ALU was one of the 15 or so stocks recommended in my SA article Amazing Returns. I bought it at $1 and it was acquired by Nokia for about $3.5 (from my memory) recently. What are the French thinking in internet network?

* Microsoft, IBM... all have a lot of cash in foreign countries. They cannot move the cash back to the US due to taxes and restrictions by these countries. May be they should invest the research centers over there.

* Earnings announcements could make some money. I'm still learning with real money.

Wednesday, March 30, 2016

Today's news and a joke

* Low interest rates affect earnings and the record-margin debt. Both are positive for the market. When the world economies are connected, they're affected too. As posted before, Japan is in its bottom for a while. They're news today but not a lot that cannot be predicted so far.

* China is moving from a economy based on export to one based on internal consumers. Of course, they have over-capacity in manufacturing. One problem is the banks are holding many bad loans from these companies and some turns into equities for the banks - a risky action.

* Most foreign investments from China are not doing good. They're still learning.

* I do not like all the running politicians. I may run as an individual. However, it would take a lot of votes (:)) from the less of all evils. However, you can donate funds to my special account (also labelled as TP Retirement account). Relax, it is just the joke of the day.

Monday, March 28, 2016

Who care about the next generations

All for him/herself and none for the good of the country.

- 40% not paying Federal income tax want a negative tax rate for them. :)

- All the senior citizens want the entitlements to be doubled.

The politicians have to satisfy these two large groups otherwise they cannot be elected.

How to pay all these goodies and freebies? Borrow more and pass the debts to next generation(s) who cannot vote today so everyone is happy.

On today's financial news

* Dell seems to lose about 20% of the investment plus the money they invested. Not a good business decision for Dell but for Perot it is great. It is hard to compete with IBM and HP in IT.
* Bernie is bouncing like a dead cat. By statistics, it is a horse race between the billionaire and the lady and the billionaire will win as illustrated in my blog.
* Myanmar depends on China. With China's dispute with Vietnam, Myanmar is in a better position. It is like China 35 years ago.
China is moving to a consumer market from one based on trading. Some industries will suffer for a while and some will prosper. Hope the losers will not drag down the entire economy.
AVP is doomed to fail for many reasons.
* A frequent terrorist attack is a norm. We will see more in Europe with more Middle East refugees.

Sunday, March 27, 2016

Free book today

Today and next Saturday.

Humor in Investing.

Friday, March 25, 2016

Momentum stocks

Recently there are two: Fitbits and GPro. Both stock prices surged through the roof and crashed down.

If you have read my books such as Complete The Art of Investing, you should profit on these momentum stocks using Buy High and Sell Higher strategy. You need to protect your profit by adjusting your stops.

The momentum is caused by the publicity and the public who follow the trend blindly. If you looked at the fundamentals of both companies (now they're more reasonable), they did not justify for the prices. It is like buying a hot dog cart in NYC for a million dollar. Of course, you will sell a lot of hot dogs as long as you do not have another hot dog cart next to your cart. However, your investment may never be recouped. In addition, both are one-product company; it would be very risky if there is competition. Apple is one for Fitbits and I bet many Chinese companies are making products similar to GPro's. GPro's products could be a fad or will fall into a limited, specialized market.

Thursday, March 24, 2016

The truth on global warming

The following is from my fellow blogger and it seems very interesting.  XactGuess wrote:

The left tell us that global warming is a problem and use graphical tricks to present their lies. For example, the left will use the MSM to push the 97% of scientists believe in global warming, but the REAL truth is that the 97% is 75 of 77 cherrypicked climate scientists that have published more than 20 climate papers. 
What they don't tell you is that there are 9K PHD scientists AGAINST AGW (go to petitionproject dot org). Gore has made millions and gets 300k per speech to show a chart of only 100 years. Yet when speaking on the relation of CO2 to temps he forgets to mention how ice core data from multiple sources and fossil plants go MUCH further back and show that Temp drives CO2 with an 800 year lag. 
He also forgets to mention that C02 makes up only .03% of the air we breathe, with a mere 5% of that from man, much of it actually comes from rainforests. CO2 traps only 2 narrow wave lengths of solar radiation, once those bands are completely absorbed you can add all the CO2 you want to the atmosphere without increasing its effect. This is much like putting a sponge in a swimming pool, once it absorbs all the water it can it will have no additional effect on the pool's volume. It will never absorb the whole pool. 
Also, there have been five known ice ages. Within ice ages, there exist periods of more severe glacial conditions and more temperate ones referred to as glacial periods and interglacial periods, respectively. The Earth is in an interglacial period of the Quaternary Ice Age, with the last glacial period having ended approximately 10,000 years ago with the start of the Holocene epoch. WARMING would make sense and that along with COOLING are a NATURAL CYCLE. 
They panic people because CO2 levels have doubled to 400, but forget to mention that for most of our history this is extremely low. Modern life evolved over 500 million years ago, CO2 was more than 10 times higher and life flourished! Then an ice age occurred. The fact that we had both higher temps and an ice age at a time when CO2 emissions were 10 times higher fundamentally contradicts all their lies. 
That's why their 70's models failed miserably and why they switched their platform from global cooling, to global warming, and now climate change. Temps have cooled the last 20 years, despite them stating otherwise with their cherry picked weather stations, so I guess its back to global cooling or whatever is "convenient". Like most arguments from the left, they lack sense or scientific fact. The sun is the largest contributor to climate change by FAR, eclipsing man’s efforts on a cosmic scale. 
The difference between day and night time temps prove that. The sun and earth’s attitude and orbital relationship have changed considerably in recent years, so has the amount of radiation hitting our planet due to magnetic field and pole shifts. I could discuss countless other variables that CHANGE our weather, but I suggest you do your own research. Also, if the Greenheads of the Socialist/Communist Dumbocratic party and our govt bureaucratic elites in DC are for the people, why crucify Nuclear under one bubble without even discussing clean, safe Molten Salt Reactors (MSR) and the potential benefits they would bring? 
Why ignore Thorium? I am a Conservative and know that AGW is a lie, but I have no love for the RINO GOP backed by the Chamber of Commerce and big oil. Apparently the so called "Green" party will push HIGHLY ineffective and inefficient wind and solar that use rare earth metals and wipe out tons of acreage, yet they totally dismiss Thorium and MSRs because of their attachment to Nuclear. Nuclear reactions can be done thousands of different ways using many different methods.
Just another hypocritical policy in an endless line of hypocrisies (i.e. Hemp is another as that is a much stronger fiber and takes much less energy to produce higher yields, yet it' was outlawed). These hypocrisies are FORCED on us by an overbearing govt with lies and propaganda with the help of an unrepresentative, out of control, and large bureaucratic establishment in DC. Most controlled by govt loving commies in the Dumbocratic party, but the RINO GOP isn't immune from this mental disorder. Christiana Figueres, executive secretary of U.N.’s Framework Convention on Climate Change, admitted that the goal of environmental activists is not to save the world from ecological calamity but to destroy capitalism.

A sample strategy on stocks

A Sample Strategy

It is an example. Adjust it to your preferences and requirements. Instead of buying stocks, just save them in a watch list and buy them when the entire market is on sale. It consists of the following three steps.

1.       When to search stocks to trade. For example, it is once a month and the market is not risky.
2.       What to buy. It will be described in more detail later.
3.       Sell the stock(s). When the market is plunging, your objectives have been satisfied, or the bought stock(s) does not satisfy most criteria described in #2.

Step #2. There are several steps: Fundamental Analysis, Intangible Analysis, Qualitative Analysis and Technical Analysis.

For simplicity, stick with Fundamental Analysis here. The stocks have to satisfy most of the following criteria. Try to use a screener to limit your selection. If you do not find any stock, relax the criteria or do nothing as the market may be peaking. Skip those criteria that you do not have subscription or access.

·         Must be in one of the three major U.S. exchanges. No ADRs and partnerships (unless you’re expert in the countries/fields).
·         Market Cap is over 100 M.
·         Price is over $2.
·         Average daily volume must be 20 times more than your potential position.
·         Expected P/E is less than 20 and E must be positive.
·         Price/Cash Flow is less than 25 and Cash Flow must be positive.
·         Debt/Equity is less than 1 (preferable .5).
·         Blue Chip Growth: A or B in both Total Score and Fundamental Score.
·         Fidelity’s Analyst Opinion is 7 or higher.
·         Piotroski’s (from GuruFocus or other sources) F-Score is 7 or higher.


For more of my reasoning, check out the book described next. It has 800 pages (6*9) for $9.99. It could be the best $10 you ever spend.

The above is an abstract from my book "Complete the Art of Investing" which is available from Amazon.

I challenged to have the best-performed article in Seeking Alpha history, an investing site, for recommending 5 or more stocks in one year after the publish date. The concepts for that article are discussed in this book.

Wednesday, March 23, 2016

Complete The Art of Investing

I have just proof read Book 0 to Book 6. Most changes are correcting my English. I still have a long way to go thru the 800 pages. If you have the paperback of the book, you may be eligible for a free Kindle version. Try to get Amazon to distribute the updated version free. They did not want to do it before as they thought it would erase the notes. I do not know how many readers use this note feature. At least, tell the user before they update a new version.

Today's financial news

* Now we're used to the terrorist attacks. During 9/11, the market plunged but recovered in a few days. Most of my stops were executed and I had not bought them back in time. A big loss for me. Now, I use mental stops (my term) to avoid these and flash crashes.

* Need to think like a terrorist to prevent such attacks. I wonder Europe still welcome refugees from the Middle East.

* Embargo causes Cuba a lot economically. We cannot use our yardstick to judge other countries.

* This market is very volatile. I bet the charts I'm using have many false signals: Tell you to exit and reenter very shortly. I just have about 50% in cash (fluctuating from 40-60% picking and unloading 'bargains'). Risks: strong USD, potential interest hikes (not possible now), poor global economies, too low oil price (first time I guess)...

* GILD has been roller coaster lately. From the fundamentals, the stock looks great but why it is too valued.

Friday, March 18, 2016

Retail investors

The average retail investor has advantages over the fund managers. However, the average retail investor does worse than the market. They buy high and sell low - a kind of herd mentality.

In quarterly summaries, Fidelity demonstrated this more than one time. It shows that most retail investors moved their investment to money market funds when the market was at temporary bottoms (or close to), and moved them to equities when the 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.

Morningstar has similar proof. From 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.

From my own observation, investors’ sentiment works in the short term, but not in the long term.

It makes ‘Buy and Hold’ look great. The best strategy is ‘Buy at the bottom and sell at the top’. It is easy to preach than practice. Can we overcome the human nature of ‘Fears and Greed’?

The majority of retail investors do worse than the market and so are most fund managers. Logically, a group of investors must beat the market. They are the institution investors besides the fund managers. We try to be as good as this group. It is achievable if you read the chapters on market timing, stock selection and strategies in this book. Most institutional investors do not time the market and we the retail investors have an advantage.

Do not act on the financial news. A lot of time, they’re contradictive, sometimes manipulative and always too late to be useful. Reading WSJ or Baron’s is more useful.

Cramer will tell you how the market is manipulated.


For more of my reasoning, check out the book described next. It has 800 pages (6*9) for $9.99. It could be the best $10 you ever spend.

The above is an abstract from my book "Complete the Art of Investing" which is available from Amazon.

I challenged to have the best-performed article in Seeking Alpha history, an investing site, for recommending 5 or more stocks in one year after the publish date. The concepts for that article are discussed in this book.

Thursday, March 17, 2016

Comment on today's financial news

* When you're in Rome, act like a Roman. Do not use our standard esp. in N. Korea. They try to bargain for money. Why students went to N.Korea in the first place?

* CMG gave out poison free and a life insurance too. They should FIX the problem. Most likely it is from the food suppliers. Organic has its problems we have to understand such as butter (vs margarine), eggs...

* China will make better strides than the US with less regulations (killing several from billions is no big deal and no lawyers will ask you for a king's ransom) in advancement for the goods of the billions. Stem cell is one and now driver-less car.

* Ackman aged 10 years in one night. There are many legends including Buffett doing badly in 2015. Depend on yourself in investing. Past winners are PAST winners.* Amazon's Cloud has many customers already. Has Google missed the opportunity?

Monday, March 14, 2016

Politics again

"Kasich has just said that in his first 100 days he would offer full amnesty to all illegals and that he believes it would pass Congress."

My reply:

It will turn most of them into new welfare recipients and will leave many jobs no one wants unfilled. After a year or so, we will have more deficits and we will have one political party.

Very short-sighted.

On Trump and his protestors

In a civilized world, you agree by raising your hand quietly, not with yelling and furious fists.

Sunday, March 13, 2016

Are dividend stocks better?

There are continuous debates for and against dividend stocks and dividend growth stocks. I hope this article would settle the debates. If you’re making money with any strategy recently, stick with it. From this test, I conclude that dividend stocks and dividend growth stocks are worse than non-dividend stocks. Read it with an open mind. I accept confirmations and challenges but not “You’re wrong without explanation”.

Do not be biased and data fit to back up your conclusion. Ensure the test can be reproduced with identical results, so there is no cherry picking and no bias. Ensure the number of stocks and the number of tests are large enough so the results are statistically acceptable.

Here is my test procedure. It would be a sample test procedure for other strategies.

A test consists of selecting a number of stocks according to a specific criterion such as the 30 stocks giving top dividends. The performance of the test is defined as the average return of the specific number of stocks (30 in my test) after a period of time (a year in my test).

·         I have four tests for each period of a year: Dividend Stocks, Dividend Growth Stocks, Non-Dividend Stocks and All Stocks. Select the top 30 stocks for each test.  
·         There are 10 tests and the results are averaged. The first test starts in the beginning of a year and end at the end of the year.

·         The last ten years resembles the current market better than older dates. Hence, I start the test on 1-1-2005 and end on 1-1-2015.

·         The start date is Jan. 2 as Jan. 1 is a holiday. In some tests, it is Jan. 3 or Jan. 4 due to weekends. It is the same for end dates. The results are annualized (= Return * 365 /No. of days tested).

·         The data base is S&P 500. Typically they are the stocks of largest companies. It is the All Stocks.

·         Using educated estimates, I add 2% dividend yield to the performance of the S&P500 index, 5% to dividend stocks and 4% to dividend growth stocks. Testing other strategies, dividends may not be as important as these tests.

    Alternatively, I could use ^SP500TR from Yahoo!Finance. I calculated and tested estimates. It would be very time consuming and impossible not using estimates as the dividend yield changes every trade session.

·         Dividend growth stocks have the top dividend yields and dividend growth rate equal to or greater than 10%.

·         Non-dividend stocks are stocks without dividends. Just select 30 of them randomly to be consistent.

·         You can find performance reports on dividend ETFs or funds specialized in dividend stocks, dividend growth stocks or a combination. Compare the results with SPY. Use them to confirm or challenge my test results.

My test has a new set of 30 stocks every year, so an exceedingly good or bad year only affects one test, not all ten tests with the exception of some stocks moving up or down for many years.

I call it window of testing as opposed to what most funds advertise by setting $10,000 or so and let it rises and falls for a long period (say 10 years).

·         Be careful on tests using small stocks that tend to bankrupt more often. The chance of survivor bias would give them better results than the actual results.


The above tests can be reproduced from a historical database if it handles survivor bias the same as mine. It is no cherry picking and I have no bias towards any of the test strategies. The result is for educational purpose only. I am not responsible for any error.

Avg. One-Year Return
Beat All by
Dividend Growth
No Dividend
All stocks

·         From the above table, both dividend stocks and dividend growth stocks do not beat All stocks in this database.

·         Non-dividend stocks beat All stocks in this database by a sizable margin. They represent the companies plowing back their profits to development/research and/or buyback instead of giving dividends. I was surprised by the huge return.

·         You should change your tests according to what you normally do to reflect new trading. For example, you should select 3 stocks only instead of 30 and/or delete foreign countries. However, it would be cherry picking.

·         If your dividend strategy has better return than SPY, do not change your strategy. My tests here are simple without many other filters. Most likely you can improve your returns with better ROE, low Price /Cash Flow, low Debt/Equity…

·         An article (3/1/16) from MarketWatch indicated a different finding than mine; I checked out that DVY (a dividend ETF) did not perform that well. 

Improve the test if more time is available

·         Use 12 months instead of one month for each test. Hence you should have 120 tests less 11 tests due to not enough data for the last year (as of 2/15/2016).

·         Take out the top performer and the bottom performer in the 30 selected stocks.

·         More weight on the last five years than the previous five years. Alternatively, I have one test for each year in the first five years and two tests for each year in the last five years.

Survivor bias

My historical database does not handle the delisted stocks. When I see there are less than 500 stocks in the database for S&P 500, I know they just deleted the stocks taken out from S&P 500 that year. However, later on it includes new stocks added to the S&P 500 index. The adverse impact of bankrupt stocks is far higher than the acquired / merged stocks. For example, the return of the test not including Lehman Brothers makes it look far better. All the tests here look better than they actually are.

The bias can be reduced or even eliminated by:
·         Larger companies as in this test.

·     I use “All” stocks, which consists of the S&P 500 stocks without those that have been delisted.

·      The dividend stocks should have less survivor bias than non-dividend stocks. I did not compensate this in my test results.

·         Actually resolve the bias by including the delisted stocks if your database does not handle it.

From the following table, the impact of 21% (0% means no bias) difference (both including the estimated dividends) is not small. However, all the three strategies have the same impact so it should not be a show stopper.

Avg. Ann. Return
From All
S&P 500


For more of my reasoning, check out the book described next. It has 800 pages (6*9) for $9.99. It could be the best $10 you ever spend.

The above is an abstract from my book "Complete the Art of Investing" which is available from Amazon.

I challenged to have the best-performed article in Seeking Alpha history, an investing site, for recommending 5 or more stocks in one year after the publish date. The concepts for that article are discussed in this book.