A strategy tells you what stocks to buy, sell and when.
We should match one of the past strategies that match the current market conditions. It is not an easy job nor an exact science. You will never match them exactly. However, when it does or it is close, it will be firework in display and your pocket will be stuffed with dollar.
The following strategies are for illustration only.
1. Side way market like March to July 2012 (as of today).
Buy at dips and sell at temporary highs like 1.5% to 3% from last. The holding period could be 1 day to 2 weeks. It takes advantage of the fluctuations of good news and bad news scenario.
2. The market is up or down steadily.
Momentum profits better. Buy high and sell higher. Use contra ETFs for down market. Avg. holding period could be 2 to 6 months.
3. Buy value.
Avg. holding period could be more than 1 year. You're buying against the tide, so it will take longer time for the value to be 'discovered'. Buy low and sell high. It seems to be easy. The retail investor do not buy when the market is bleeding, and vice versa.
4. Buy from bottom.
2009 is one bottom. Bottom fishing strategy buying value stocks that have been beaten is the best profit maker. Average holding time is about 1 year and the average one year return from the bottom is about 35%. My best returns are from the last two bottoms in 2003 and 2009.
I try to guess what the current market conditions are. When the market is up or down steadily, you will lose money in using side way strategy.
There are some testing variations:
* Holding periods.
* ETF. Some small blend ETFs could be better than SPY.
* Use contraETF to guess the other direction to boost total return.
* Try to make it automated for other criteria such as holding periods, different ETFs...
* Do not play data fitting.
* If the testing period is long, break it down into smaller ones like one for each stage of the market cycle.
You may find some strategy works great like annualized to 60%. Do not be too excited. When you play with real money, you expect 30% at best. Review your test procedures when the return is excessive like 60%. However, when you find one strategy yields 60% and another one yields 20% with same testing conditions, stick with the winner for real money.
There is no holy grail in investing as the market changes and is not rational otherwise there would be no poor folks. Investing with a good strategy is better than investing without one.
Thursday, May 31, 2012
Royal asses!
This is the year of Queen's Diamond Jubilee. Should the royal families be loved as publicized by the world? My short answer is No and they're the parasites of societies. They have no useful functions for any society today even with all the fancy titles. They are sucking up the resources which should be given to the poor. How dare of them asking for raises in a recession for doing nothing besides practicing waving hand? It is like Robin Hoods in reverse. Who pay for the expensive 'celebration' for doing nothing? What an untimely approval of the selfish spending for the rich and powerful!
Chinese have suffered a lot from the decisions of the 'royal' families.
Opium Wars.
How outrageous a nation pushing drugs to another nation? Queen Victoria, did you stamp the seal of approval? They burned the summer palace for 3 days and 3 nights and looted like bloody barbarians. Visit the ruin in Beijing for proof, and you will be amazed and sad if you have conscience. The loots are being displayed 'proudly' but actually shamelessly in museums in London and Paris. Even after many hand changes, loots are still loots. Return the loots and no question will be asked.
It led China to centuries of humiliation, bankrupted China, and changed China forever with millions starved to death who must have shed their tears from heaven on the cloudy celebration day.
WW2.
Inspired by their ambitious and wicked emperor, Japanese turned themselves into animals to conquer its neighbors. Their shameful terms are 'The Greater East Asia Co-Prosperity Sphere', 'Comfort Women'...
These soldiers are war criminals killing innocent folks, tossing babies to the sky, looting, raping... Many of them are being paid respect by high officials in the 'shrines', similar to paying homage to Hitler. They should be tracked down like animals and prosecuted like the German war criminals. Instead, they bragged on how they raped young girls as described by these soldiers without remorse in the documentary Nanjing, which you can rent from Netflix. Another small girl 'wanted' to be raped to save her grandpa. The lowest of the lowest human beings!
One A-bomb should have been dropped on the Imperial Palace and the other one on the 'shrine' instead of killing innocent citizens. Even this punishment is too small for the crime. I'm sorry for the recent tsunami esp. on the suffering of the current generation who has nothing to do with WW2. It must be formed by the tears of the victims asking for justice. It could be a late punishment from God on their war crimes that they want to ignore and they change this history in the text books.
The ignorant Japanese mayor said Nanjing Massacre never happened. Japanese, young and old, please use Wikipedia and search for 'Nanjing Massacre'. Read Iris Chang's book. The pictures in this link are gruesome.
We should not spread hatred esp. from one generation to another. However, if we do not learn from history, most likely we will repeat history. I wrote this blog for no fame and no money but trying to give a voice to millions of victims who never have a voice.
Chinese have suffered a lot from the decisions of the 'royal' families.
Opium Wars.
How outrageous a nation pushing drugs to another nation? Queen Victoria, did you stamp the seal of approval? They burned the summer palace for 3 days and 3 nights and looted like bloody barbarians. Visit the ruin in Beijing for proof, and you will be amazed and sad if you have conscience. The loots are being displayed 'proudly' but actually shamelessly in museums in London and Paris. Even after many hand changes, loots are still loots. Return the loots and no question will be asked.
It led China to centuries of humiliation, bankrupted China, and changed China forever with millions starved to death who must have shed their tears from heaven on the cloudy celebration day.
WW2.
Inspired by their ambitious and wicked emperor, Japanese turned themselves into animals to conquer its neighbors. Their shameful terms are 'The Greater East Asia Co-Prosperity Sphere', 'Comfort Women'...
These soldiers are war criminals killing innocent folks, tossing babies to the sky, looting, raping... Many of them are being paid respect by high officials in the 'shrines', similar to paying homage to Hitler. They should be tracked down like animals and prosecuted like the German war criminals. Instead, they bragged on how they raped young girls as described by these soldiers without remorse in the documentary Nanjing, which you can rent from Netflix. Another small girl 'wanted' to be raped to save her grandpa. The lowest of the lowest human beings!
One A-bomb should have been dropped on the Imperial Palace and the other one on the 'shrine' instead of killing innocent citizens. Even this punishment is too small for the crime. I'm sorry for the recent tsunami esp. on the suffering of the current generation who has nothing to do with WW2. It must be formed by the tears of the victims asking for justice. It could be a late punishment from God on their war crimes that they want to ignore and they change this history in the text books.
The ignorant Japanese mayor said Nanjing Massacre never happened. Japanese, young and old, please use Wikipedia and search for 'Nanjing Massacre'. Read Iris Chang's book. The pictures in this link are gruesome.
We should not spread hatred esp. from one generation to another. However, if we do not learn from history, most likely we will repeat history. I wrote this blog for no fame and no money but trying to give a voice to millions of victims who never have a voice.
Nokia, Window8, IPad, Bill, Steve...
Random comments on the new phone from Nokia which is one of my losers I own.
Nokia runs on Windows now. The risk is high to deal with new software and new hardware. Nokia could be just a big bargain or a bouncing dead cat. It is very risky but could be very rewarding. Do not bet your farm on it.
We have seen that money has moved away from Apple to FaceBook and then is moving back to Apple. Nokia is no Facebook and Facebook on first day of IPO is no Facebook today.
Same for tablet for Windows. When you're late for dinner, the food at least the better ones have been eaten. Apple has the advantage of a better mouse trap (judging from the initial iPad and iPhone to the current ones) and support by the huge no. of quality apps.
I predict the tablets running on Window will be popular for business users and investors like me which could be a huge but ignored market.
--
The first two jokes are from Amazing Photos:
* Steve Jobs enjoyed the heaven as there are no Windows and no Gates.
* The waiter was angry with his $2 tips from Gates and he shouted at Gates that his son gave him a $200 tips. Gates told him that guy's father was a lucky billionaire and his was a hard-working farmer.
* Chinese burned paper cars to their dead. The shopkeeper told his customer who bought a paper iPhone not to forget to buy a paper charger. It would be worse if your ancestor asked him to bring it down to his ancestor. This joke may not work for different culture.
Nokia runs on Windows now. The risk is high to deal with new software and new hardware. Nokia could be just a big bargain or a bouncing dead cat. It is very risky but could be very rewarding. Do not bet your farm on it.
We have seen that money has moved away from Apple to FaceBook and then is moving back to Apple. Nokia is no Facebook and Facebook on first day of IPO is no Facebook today.
Same for tablet for Windows. When you're late for dinner, the food at least the better ones have been eaten. Apple has the advantage of a better mouse trap (judging from the initial iPad and iPhone to the current ones) and support by the huge no. of quality apps.
I predict the tablets running on Window will be popular for business users and investors like me which could be a huge but ignored market.
--
The first two jokes are from Amazing Photos:
* Steve Jobs enjoyed the heaven as there are no Windows and no Gates.
* The waiter was angry with his $2 tips from Gates and he shouted at Gates that his son gave him a $200 tips. Gates told him that guy's father was a lucky billionaire and his was a hard-working farmer.
* Chinese burned paper cars to their dead. The shopkeeper told his customer who bought a paper iPhone not to forget to buy a paper charger. It would be worse if your ancestor asked him to bring it down to his ancestor. This joke may not work for different culture.
Wednesday, May 30, 2012
Sell Delta
Warren said: If you want to be a millionaire, first be a billionaire and then buy an airline.
Dalta looks like a bargain if you look at its low expected P/E esp. when oil price is falling. However, there are too many major problems.
1. High debt. A common problem in this industry.
2. High pension obligation. Same as what bought down GM.
3. High wages raised by unions.
Bankruptcy would reduce the above three problems. Buy it after the bankruptcy that could be coming.
4. Unable to raise the prices of the air ticket. They have to charge you to use the rest room to be profitable.
5. Deregulation has its problems. The government have to regulate some industries and airline is one of them.
6. Besides competition from other airlines, high speed rail, regular rail... will offer a lot of competition for short distance. Merger will have fewer airlines and reduce competition that harm others and also harm itself.
7. Merger is not a solution. 1 Loser + 1 Loser = 2 Losers
8. The stupid hub concept is getting more stupid with high fuel price.
The future will be less stop over with larger and newer jets that are more fuel efficient. I propose to fire all the fat stewardesses esp. those who block my way to the rest room.
9. High cost of terrorism.
Most foreign airlines are subsidized by the government. Our government has bailed out other industries but not the airline so far.
----
How Clinton and I will save the airline industry or at least for a good laugh. PG17:
http://bit.ly/KWmI1N
Dalta looks like a bargain if you look at its low expected P/E esp. when oil price is falling. However, there are too many major problems.
1. High debt. A common problem in this industry.
2. High pension obligation. Same as what bought down GM.
3. High wages raised by unions.
Bankruptcy would reduce the above three problems. Buy it after the bankruptcy that could be coming.
4. Unable to raise the prices of the air ticket. They have to charge you to use the rest room to be profitable.
5. Deregulation has its problems. The government have to regulate some industries and airline is one of them.
6. Besides competition from other airlines, high speed rail, regular rail... will offer a lot of competition for short distance. Merger will have fewer airlines and reduce competition that harm others and also harm itself.
7. Merger is not a solution. 1 Loser + 1 Loser = 2 Losers
8. The stupid hub concept is getting more stupid with high fuel price.
The future will be less stop over with larger and newer jets that are more fuel efficient. I propose to fire all the fat stewardesses esp. those who block my way to the rest room.
9. High cost of terrorism.
Most foreign airlines are subsidized by the government. Our government has bailed out other industries but not the airline so far.
----
How Clinton and I will save the airline industry or at least for a good laugh. PG17:
http://bit.ly/KWmI1N
Monday, May 28, 2012
High Frequency Trading
When we can adjust to HFT, we can take advantage of it instead of being taken advantage of. Is the flash crash in 5/2010 caused by HFT or just an order entry error? They could drive the market to a temporary low and hence cause all the orders traded at lower prices.
I use market orders very infrequently and only for some good reasons. I seldom use stop loss that can be converted into market order that can be manipulated. I use stop limit to some small extend.
HFT will see their black swan and their fund managers will lose their shirts and out-of-work for good. For these folks, you may want to brush up your resumes and do not spend your loots as your days are numbered.
I use market orders very infrequently and only for some good reasons. I seldom use stop loss that can be converted into market order that can be manipulated. I use stop limit to some small extend.
HFT will see their black swan and their fund managers will lose their shirts and out-of-work for good. For these folks, you may want to brush up your resumes and do not spend your loots as your days are numbered.
Friday, May 25, 2012
The coming secular bull market.
Eric Parnell wrote an article that there are three recessions in one secular bear market. It seems coincident to my theory on the time frame of the coming secular bull market I predict.
Does it happen due to coincidence or any theory behind it?
My theory on secular market is the war and lack of war. The following years are off by several as I do not remember the exact years.
Secular Bear Market.
1. 1960-1980. Vietnam War.
2. 2000-present. The two middle east wars.
The secular bull market in 1980-2000 is due to lack of war.
I hope our current wars will be ended completely in 3 years so I look at the starting of the next secular bull market at that time.
Most recent presidents (with exception of Bush) are not stupid enough to start another war if they understand the bad effects of the wars like employment.
----
Exception.
WW2 actually benefited US as most of its competitors were destroyed by the war and the war stayed out of its own country. US also welcomed the foreign skill workers/scientists mainly from Europe. The influx of the best of the world is just unbelievable.
US did not have to pay royalties to many inventions such as the atomic bomb.
This is the only major exception but with a good reason.
Does it happen due to coincidence or any theory behind it?
My theory on secular market is the war and lack of war. The following years are off by several as I do not remember the exact years.
Secular Bear Market.
1. 1960-1980. Vietnam War.
2. 2000-present. The two middle east wars.
The secular bull market in 1980-2000 is due to lack of war.
I hope our current wars will be ended completely in 3 years so I look at the starting of the next secular bull market at that time.
Most recent presidents (with exception of Bush) are not stupid enough to start another war if they understand the bad effects of the wars like employment.
----
Exception.
WW2 actually benefited US as most of its competitors were destroyed by the war and the war stayed out of its own country. US also welcomed the foreign skill workers/scientists mainly from Europe. The influx of the best of the world is just unbelievable.
US did not have to pay royalties to many inventions such as the atomic bomb.
This is the only major exception but with a good reason.
Is US real estate over-priced?
Yes, according to the average wage of its citizens. We used to use the 2 and 1/2 rule. If you're making 100K a year, you're supposed to afford a house costing 250K. You need a couple making 200K total to afford a 500K house. Our current financial problem is due to greed and folks not sticking with this basic rule.
No for some foreigners. Hong Kong folks are paying 1 million for a 700 square feet apartment (prices vary depending on location). If we can attract these foreigners to buy by offering them residency, they will invest.
We lost the opportunity in 1997 when HK was handed over to China. Vancouver took advantage of it, and its real estate price was increased 100% in several short years and the price is still strong today.
Now, the opportunity is on China's rich who want to escape from pollutions, quality food, prosecutions from corruption, opportunities of their children... We have to screen the right folks who will contribute to our country.
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