Thursday, December 29, 2016

Where are you from?

You should know that the Red Indians (the natives) are actually Chinese. I have my genes to prove it. Both are not legally responsible after the second drink (we're lacking some enzyme). It could be they lost the way after too many Moti (that our bodies cannot take) or escaped from wars or shrews (instead of taming them). The Bering Strait was frozen at one time.

Click here for Funny video

Wednesday, December 28, 2016

Everything is changing

This is written by my friend's (Ken) friend Yue Fung (the Canadian Roman, the singer). Facebook's translation does not do justice and I try my best to translate



Hopefully better translated than Facebook's:

When you understand "everything is changing", you won't be boosting your achievements. Today's splendid life could be a mess tomorrow.

When you understand "everything is changing", you won't be sad. Today's gloom could turn into
sunshine tomorrow.

When you understand "everything is changing", you know today's gain could be tomorrow's loss and vice versa.

When you understand "everything is changing", there is no need to react to today's loss, gain, happiness and sadness.

I bet "Everything is changing (無常)" is Buddhist philosophy.

Jokes on Trump

They should be many. Here are my share.

Trump will build a better white house financed by donations like the wall by Mexicans. It will be painted yellow to avoid racism and it will be built by illegal aliens for the least cost without union intervention.

He will lease it out with an option of extending for another 4 years.

He will receive one dollar for his annual salary, so he still qualifies to pay zero for ObamaCare.

His wife will win the beauty pageant for presidents and first ladies.

Carrie Fisher

I do not think Carrie Fisher's death has any impact on the Space Wars franchise as those guys who played 007.

First she was old (60 years old). Second she was not a good model for young kids due to her drug addiction. A movie character is not a real person.

Unless drug addiction is the part of the culture now as evidenced from the legalization of certain drugs, we're in a permissive society! Brits pushed opium as a nation when they had nothing better to trade. Opium killed millions of Chinese and bankrupted China. When we do not learn from history, we will repeat history.

It is another sad story of fame and money and then lose it all. I bet she would be happier in a normal life instead of being born in a privileged class. Same can be said for many celebrities such as Presley,  Houston and her daughter. RIP.

On today's financial news

* Toshiba's nuclear venture with Westinghouse and France failed to sell the reactors profitably to China. With 20-20 hindsight, all projects should be calculated with risk and profit potential (not profit). China was the major buyer many years ago. When the 20 or so new reactors are on-line, uranium price could skyrocket.

* Stay away from Chinese banks. I do not like the idea that the banks are forced to take equity of failing companies. A bailout by banks holding the short side of the stick.

* Brexit is not a certainty as it has to be approved by the Parliament. I hope it will not passed.

* Freedom of speech is again 'echoed'.

* EU tries to make another buck from the US corporations. It is easy money. They proclaim they're not our puppet any more. We can pay them but withdraw our troops.

Tuesday, December 27, 2016

Deflation and inflation

The historical annual average is about 3% inflation. CPI is not a good gauge any more after energy and food have been excluded.

Inflation is:

·         An invisible tax to the rich.

·         A strategy to lessen the loan burden. To illustrate, your loan of $1 can buy a loaf of bread now, and you will pay back the $1 plus negligible interest that can buy only half a loaf of bread due to inflation.

·         An invisible salary cut.

·         An invisible cut to your entitlements/welfare. Social security is supposed to be adjusted to CPI, which can be manipulated by the government by not using food and energy to reduce social security payment increases.

·         An invisible cut to your investment incomes (dividends and appreciation).

Deflation is no angel:

Deflation is far worse than inflation to the economy. When the company produces a product and finds out they have to sell it for less due to deflation, then their profit would be cut and they might need to lay off employees.

Deflation would destroy all financial institutions. It makes all their collaterals on all loans less valuable and the borrowers may give up their collaterals as they’re worth less.

Inflation and deflation at the same time

As of 2014, we have both inflation and deflation at the same time for several years now. 

We have inflation in most of our basic necessities: food, gasoline and heat (especially important for the NE) with the exception of rent due to the depressed house prices. Electronic stuffs and PCs are deflated considering how much we can buy today vs. last year. Cars have been slightly deflated when figuring in the extra features. They are due to technological advances.

As of 2016, our energy cost has been deflated due to OPEC’s dumping in order to finance their current projects in this poor global economy.


The government should ensure inflation and deflation are within an acceptable range (3% to me). It has printed a lot of money and lower interest rate to stimulate the economy. At the same time inflation has been accelerated in many sectors. When the economy does not improve, the government has run out of tools to improve our depressed economy.

However, beside time the shale energy may cure all problems. When the economy improves, the inflation and the interest rate would most likely increase. Oil price depends on supply and demand. The poor economy will decrease the supply and hence the oil price would be depressed.

Representation without taxation

It is worse than taxation without representation (that provoked the rebellion against the Brits).

About 50% of adult US citizens do not work.
About 40% do not pay Federal income tax.

The government job is encouraging these unemployed to work. Now, the government discourages them by taking their benefits for taking a job.

The government should retrain workers and make the businesses profitable to run. With high taxes, there is no incentive to expand business. With excessive taxes, the rich just move to tax heavens.

Most of us are middle class and we're squeezed by the poor and the rich.

Monday, December 26, 2016

Happy New Year

It seems I have more friends suffering from poor health than last year (actually year after year). It is part of life. Most of us have good choices to live healthier. I have wealthy friends died at earlier ages due to poor health that could be avoidable in a few cases. Well, health is truly the wealth.

It prompted me to read more articles on health. They are boiled down to:

1. Eat healthy. Eat more fruits and vegetables. Avoid red meat (skinless chicken and fish are fine), sugar and processed food.

Avoid fast food joints and fancy restaurants. Drink water to flush the toxins in our body. Do not drink stuffs that are too hot or too cold especially in the early morning.

2. Exercise, at least 30 minutes a day. Do not do it exceedingly (depending on our age, our conditions and the specific exercises).

3. Do not smoke and do not drink excessively.

4. Take medicines as prescribed by our doctors.

5. Have enough rest and learn how to avoid pressure. 

The above will not guarantee good health, but at least we have done our part. I will make them my objectives for 2017.

Sunday, December 25, 2016


One in-law had a surgery operation that was invented by the brother of another in-law. What is the odd?

Refuttable logic

Boston protesters learned from takeovers and this time on a highway. They must be one or all of the following: 1. welfare recipients (have nothing better to do), 2. students (either with loans or supported by their rich parents) or 3. mentally damaged (could be too many drugs or drinks from their parents).

The arguments are quite stupid. They say the white (no Asians, no Hispanics and no blacks) are using the highway to go to work. If they do not go to work, how can they support you the parasites if you're not mentally damaged. Stupid folks do stupid things with stupid arguments.

The $80 sneekers

Amazingly, some kids from welfare families show off their $80 sneakers that I cannot afford (or not too stupid) to buy. Same as going to see a doctor for a minor cold.

Tufts is giving scholarships to children of illegals. How many want to disguise as illegals (no proofs are needed to be illegal)?

No one saves. When you save too much (like myself), you lose all the goodies from the government such as free health care. With more than 40% not working, we're a nation of free loaders.

Actually the rich can afford to buy good stuffs more as the stock market is great. It widens the wealth gap and causes disputes. The problem is 1% cannot support the rest even if they spend like no tomorrow as the rest of our citizens are doing.

What's wrong with this country (compared to 50s and 60s)?

Do not get me wrong. I believe in helping the poor. However, the poor have to help themselves first. Helping them how to fish is better than giving them fish for the rest of their lives.

A tale of two friends

My classmate is a retired preacher in NY. Due to no income, he got his teeth fixed at no charge.

My other friend has two pensions, social security, hefty dividends and forced withdrawals from his retirement accounts. He did  not want to spend the $600 filling for his teeth.

It is one of the reversed social injustice incidents that I will re-post if I can find them.


Mass. does not pay for dental work for the poor adults. Why they do not move to NY? I bet Mass. will pay the $15 bus ticket.

I suspect Trump and Buffett pay zero for insurance ObamaCare as they easily can claim zero income.

Friday, December 23, 2016

Trade by headlines

I exchanged comments with Andrew McElroy, a sector rotation expert. He does not have the rules set up as in this book but he makes great trades by ‘seeing’ the market and using technical analysis. The following is from his article.

“The idea is fairly simple. There is more potential for profit (and loss) in individual sectors, especially when the index is trading sideways. I try to buy strong sectors which have pulled back onto support and avoid overbought sectors at resistance. I also use Elliott Wave to identify cycles of buying and selling and stages in trends.”

I would like to include headlines such as Trump’s election, interest rate hikes and new regulations.

When it rains in Brazil, buy coffee futures

Recently it rains too much in SE Asia, so buy rice futures. I do not trade futures, so I miss out the opportunity and unfortunately there is no equivalent ETF for rice. In the beginning of 2012, we should know the farming crops especially corn will not be good due to the flooding and drought in different parts of the world. Act accordingly for the profit potentials.

When a war is starting in Middle East, most likely the oil price will rise. Buy the oil ETF and sell it when the chance of the war is reduced. Many tiny drops of profit could turn into a river of profit.

Trade by headlines is profitable, but it is hard to master and is very time-consuming. Test this strategy on paper for years before you commit with real money as in most strategies. Most couch potatoes read newspaper and watch TV all day long without making a penny. They could be couch potato millionaires if they read this article, paper test/refine the strategy and act on it!

However, the media tend to exaggerate headlines in order to sell their ads. Ignore all the recommendations on stocks. Most likely they are outdated information and some may be used to manipulate. Do your own research as your mother teaches you that there is no free lunch.

Rules of the game

1.       Do not be too emotional; ignore your past wins and losses except using them as lessons if they are valid (i.e. educated guesses).

2.       Do not bet the entire farm. Consider option, ETFs and/or small bet on stocks, which have too many other factors to be considered.

3.       Trade it fast – today’s headlines will not be headlines tomorrow. There are very few exceptions.

4.       Where there is a winner, there is always a loser. For example, Apple was a winner with the iPhone and BlackBerry was a loser. Same for Best Buy and Circuit City.

5.       Do not forget when to exit for either a small profit or a small loss.

6.       Quick evaluation. The headline will be gone if you do not act fast. Skip companies with poor metrics such as high debt and low earnings yield. Prefer to buy an ETF related to the headline.

7.       Most likely someone has used the information before you get it. However, some info can be deducted before it occurs. Insider purchase is a good guide.

8.       I recommended crude oil at $30 per barrel in Jan. 15, 2016 as the price was rock bottom. For value sectors, you may have to wait for a long time for the market to realize its value.

9.       Learn my 5-minute evaluation process of a stock (a quick way but not recommended if you have time to do a thorough research):
              From, enter the stock or ETF symbol. Look at how many greens in metrics than reds.
·         Check out Forward P/E (E>0 and P/E < 20), Debut / Equity (< 50%) and P/FCF (not in red color).
·         SMA20 (or SMA50 for longer holding period). If SMA20 is > 10%, it is trending up.
·         Scroll down for Insider Trade. It usually is a good buy if insiders are buying recently and heavily with market prices.
      Be cautious on foreign and low-volume stocks.
·         If most of the above are positive, it is likely a buy. As in life, nothing is 100% certain.

If you have a hard time to follow the above, most likely this strategy is not for you and it is better to return to your couch. No offense.

Volatile market and headlines

As of 7/2012 (2015 too and historically a positive market in a year right before the election), the market went sideway and was influenced by headlines. 2013 had been volatile with dips and surges influenced by daily news. The trend was up though. The Federal debt problem, EU crisis… had not been resolved. Every time we had good news, the market rose, and vice versa.  In this market, buy on dips (3% down from last temporary peak) and sell on temporary surges (3% up from last temporary bottom). Some use 5% instead of 3% depending on one’s risk tolerance.

Trend and calendar timing

Usually following the trend is better than ignoring it.

·         Many retail investors want to get rid of the losers for year-end tax planning. Buy them at year-end and sell them early next year. In the year end of 2012, it acted the opposite as folks were selling their winners expecting larger tax bite next year that turned out to be false.

This could be the reason for sell-off of Apple in year-end of 2012 and it gave us good entry point. To me, Apple’s fundamentals were sound though the media said otherwise. In a few months, Apple became a value stock from a growth stock according to the press.

·         Investors are not rational and follow the market blindly. The strategy ‘Buy low and sell high’ works.

·         We have so many good news and bad news in the same year. Ensure the bad news will not extend to worse news. Timing is everything. Buy on bad news and sell on good news; it does not work when the market plunges.

·         The media influence the market. Analyze their arguments. If they exaggerate them, do the opposite.

·         Over-reaction to earnings missed or gained. When the company missed the earnings by 5%, there is a very good chance the stock will be down in a year, and vice versa. However, when it missed by 1% and the stock lost by 10%, it could be a buying opportunity, particularly when it was a temporary condition and the company is fundamentally sound.

·         Buy the stock at dip when a solvable problem surfaces. Sell after the problem has been resolved. Ceiling debt is such a solvable problem and it is caused by politics.  In the beginning of 2013, I mentioned that the debt problem had not been resolved and we would have this ceiling debt problem periodically until it will be eventually resolved.

Scheduled events

Some events are scheduled such as earnings announcements, unemployment reports, etc. Most likely educated guesses of the outcomes have already been circulated in the web.

The last five events on the Federal debt handling (using fancy names such as sequester and debt ceiling) were scheduled such as the government shutdown. They drove the market down by about an average of 5% each time. Sell before the event and buy back afterward. The Congress has cancelled these debt deadlines as of 1/2014.

Many sectors are impacted by events such as Trump’s success in election, hikes of interest rate and trade wars.  
Use deduction

In 2014, China has a great harvest  on wheat, corn and rice.  China’s population is #1 in the world and its middle class is growing. The farmers in the US will be hurt as they cannot export these products to their number one customer. Use the same logic to deduct that there will be problems in the companies that supply products and services to the farmers. They are combines, fertilizer companies and seed companies. It further translates into Deere, Potash, Monsanto and AGCO.

My experiences

·         When the interest rate is expected to rise, plan on investments that are favorable to it and vice versa.
·         On the same week, CROX lost almost 40% in one day. I bought some and made about 10% profit in a week. CROX's fundamentals were no good and it did have a history of roller coaster ride in its stock price. After a year, I found out that I sold it too early as the stock price doubled. Better to buy a stock on its way up than down unless we identify that the bottom has been reached.

·         I missed applying the same trick to the rise of Apple when Apple announced its new iPod. I should at least buy the stocks of its part suppliers. Hope learn this lesson and take advantage of future similar circumstances.

I missed the opportunity to buy uranium stocks. It should be bought after Japan’s disaster. When Japan approved the reopening of nuclear reactors today, these stocks including CCJ, DNN, LEU, URRE, UEC, URZ, URG and UUUU surge. When China’s new nuclear reactors are on-line, they will surge again.
·         Experiences in early 2014.
Recently and in a short time, I made a good profit on BBY and a tiny profit on TGT. Both were bought due to headlines.

Bad headlines usually cause the stocks to move faster than good headlines. The recent examples are LL selling ‘illegal’ goods and an unfavorable article from China on NUS. 

 This is one strategy of my 12 strategies in Sector Rotation, 3rd Edition.

This is one chapter of my book "Complete the Art of Investing". If it helps you, envision how 850 pages will help you. 

For more of my reasoning, check out the book described next. The Kindle has 850 pages (6*9) for $9.99. It could be the best $10 you ever spend. Paperback is also available.

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.