More new articles

 

13       National debt and USD

 

If you believe we should receive more free money from the government during this pandemic, think again. It is the tool that has been used by our government to buy votes for decades, as well as many foreign governments today.

 

Our government prints more money to buy our national debts. That is why our national debt has been sky rocketed. The poor should be helped for sure. However, the wealth of the rich has been increased substantially due to the rise of the stock market. It also reflects that we have plenty of free cash that are being invested in the stock market. It is a very unhealthy sign that the market rises while the economy is falling.

 

It is the same as in 2009. However, the economy did pick up and the debts were quite manageable. This time could be very different. Our children and grandchildren have to pay for the debts. When we have to service the debts, we will not be competitive in global markets. It is easy to pass the blame to China.

 

This is NOT the major problem. The major problem is the confidence of our USD as a reserve currency is shaken. The “supply and demand” rule works again. When we have too many USD circulating, we should have inflation.  When one USD can buy only half a loaf of bread and previously we could buy the full loaf, we are in trouble. Foreigners would dump the reserve USD that are used for trading and our treasury bills they own. With today’s internet and financial systems, it could happen in a day or even less.

 

USD is not backed up with gold today. Most likely, there will be new USD issued to replace the old one with one-to-ten, and then even higher. But, it is not helping us.

 

In the 50s, the British pound was replaced by USD as the reserve currency after WW2 and at that time many British colonies became independent.

 

Today, USD has been challenged. We gave Iran a tough time for not using USD in trading oil. So are Russia and China. I sincerely hope the USD would be strong in my lifetime.

14       Africa

 

Europeans colonized many African countries and stole their resources. U.S. enslaved them. Chinese have been building roads, railroads, hospitals, stadiums, convention centers, etc. Some of the debts have been forgiven. Chinese shift many factories jobs to Africa to take advantage of the cheap labors. Many Africans have still to get accustomed to working in closed buildings. Africans have to limit the explosive population growth.

 

African countries should control their destinies and learn how to deal with all foreigners. I believe China's economic model is better suited to Africa than the Western model as China was at a similar stage before. The west/USA imports the same U.S. agricultural model to Africa which will not be useful when the U.S. advisors and technicians leave someday. We need to let them be independent for longer term as Warren Buffet’s son Howard mentioned. So are the foreign aids that make some African farms bankrupt as they cannot compete with free farm products from charities.

China helps them to build roads in order to extract their mines and oil. Without that, the natural resources will remain unexplored forever. That is strategic and it also benefits the majority of Africans. China “teaches them how to fish rather than giving them fishes” for their rest of their lives. Contrast to colonization from the West, China helps them to build infrastructure, opera houses, stadiums, hospitals and universities.

As in most of the previous investments from all foreign countries, Chinese make mistakes and hopefully they will learn from them and will not repeat the same mistakes. China and Africa should be good trade partners. When there is money available, corruption follows. That happens in most developing countries. Human rights typically improve with better economy in most cases. Therefore in theory, China's economic improvement of the African economies ought to improve the human rights.

Being a developing country herself, it is not China’s responsibility to fight for the human rights / freedom of its trade partners. In many yardsticks, China is close to a developed country. Africa is facing a lot of problems: debt, explosive population growth, competing with China’s cheap products and bribery. Africans should start the project that can be paid back financially. Africa should force China to move some factories to Africa especially those labor-intensive products. Following China’s ‘one child’ policy is not a bad start.

 

The following is from an African. There was no new modern building, as they were expensive to buy from the Europeans. Now, there is almost a new one started every day with Chinese investment. China also helps us to have street lights even in villages among many improvements. The French had taken advantage of us in many ways as a colonial master, but not the Chinese.

 

---------------------------------------------

Afterthoughts

# Here is a great debate 

(http://www.YouTube.com/watch?v=FXck9BS3Hfw&feature=youtu.be) on China's aids to Africa.  It is a long 7 parts and full of updated info. The two panelists against China did not debate with facts but had their own agenda (one selling a book). Be your own judge.

 

# Hillary Clinton talked about importing value to Africa. Value cannot feed Africans but Chinese investment does. Most of her argument about civil human rights has overlooked the most basic human rights: food and shelters. The West dictates what African governments do with their own hidden agenda.

 

Her biased speech on China during a commencement was quite shocking as it was filled with unsubstantiated facts. The fact is China has improved miraculously in the last 30 years. As it has been slowing down recently, its economy has not been crashed.

 

Obviously Secretary Clinton is more interested in selling her books and giving expensive speeches after leaving Obama’s administration. She is impractical and irrational. She addresses China through controversies as controversies sell.

 

Links

Is China colonizing Africa? (Recommended) https://www.youtube.com/watch?v=RENmQ2MBgZ0

‘Filling the void

https://www.youtube.com/watch?v=wMCF2eu1D0E

Becoming China’s China

https://www.youtube.com/watch?v=zQV_DKQkT8o

15 More strategies

 

·         Some mutual funds have been losing a lot of money such as during the internet crash in 2000. Buy those funds (usually sector funds) that you expect them to recover. It could be a tax strategy as they will not distribute profits to their fund owners for a while.

 

·         Fighting inflation as described in Strategy 18. They are gold (GLD, gold mines such as RING as an ETF and gold coins / bars) and silver. I prefer skipping copper and other commodities including oil unless the economy is trending up. Bonds and CDs are most likely not good investments as they return you with cash that have been depreciated due to inflation.

·         Supply and demand. In 2009 and 2020, the Fed prints a lot of money excessively to save the economy. In the long run, our national debts are increased. In addition, it could cause inflation unless the economy recovers due to the simulation as in 2009. There is a lot of money chasing the fixed assets such as gold and stocks. As a result, both of these assets would likely rise especially in the short term. If we have hyperinflation, we would lose the buying power after cashing in the appreciated stocks.  

·         Almost day trade. When the stock is rising in the morning, there is a better chance it would continue the trend and vice versa. The chance is improved if both the market and the sector the stock is in are both rising.

·         As stated before, some strategies described in this book work better than the others in different conditions of the market. If you can match the right strategy or strategies, you will see firework, and vice versa.

·         Buy the stock, sector or the market when: 1. The SMA-50% (from Finviz) is above SMA-200%, 2. SMA-200% is positive, and 3. The price is at least 25% above the 52-week low (i.e. do not buy at the bottom as it may stay there for a long while). Sell, vice versa. Consider other metrics such as Volume, P/E, Debt / Equity, etc. It is great in concept, but I have not been convinced so far in my recent tests.

 

Related YouTube: Shorter Trend   

https://www.youtube.com/watch?v=GAH9EyydEsM

·         Index rebalancing. The index such as S&P 500 rebalances at least once a year and some do it 4 times a year. If you buy the stock before it is added to the index, you should make a lot of money. The ETFs that follow the specific index are forced to buy the stocks just added to the index and sell the stocks that have been removed from the index. I do not recommend shorting these stocks, which is risky especially for beginners.

 

Some indexes provide the criteria to rebalance. Here is my summary from what I guess. It is based on market cap, number of shares floating, the average trading volume (3 to 6 months), how long it has been in the market, profit (better with rising), sales (better with increasing) and any restrictions (such as a foreign stock). There are minor criteria.

 

I do not have inside information on how any index to rebalance. I tested a strategy based on the above criteria on S&P500 for example. First criteria is the stocks should not be in the index already. So far, the testing has been proved profitable, but the test is too limited.

There are several articles that you can “Google Index Rebalance”. 

·         Positioning strategy. Start with two ETFs: SPY (or any ETF that simulates the market) and a money market ETF for example with even positions (i.e. 50% invested in each ETF). At the end of a period (a week or a month depending on how much time you have for investing), reallocate the ETFs as a percentage of how much the each ETF gains (i.e. the higher allocation for the winner).

 

For better performance, use more ETFs such adding QQQ, GLD, SH (contra ETF to SPY) and PSQ (contra ETF to QQQ).

 

 

16       Annuities

 

There are advantages and disadvantages. I use my experience for illustration, and everyone’s situation is different.

 

Why I bought annuity

 

As of this writing, I made over 4 times after many years. I could have made far more if I were not too conservative in the last 3 years. As most of you, I hate paying taxes. After maxing out all retirement accounts, the only choice is annuity, and at that time it was not too popular. My investment was more than my annual salary then, and hence I am not boasting my return with a tiny investment.

 

I worked for Fidelity and I had to report what stocks I traded. It was very inconvenient, and by the time I got the OK I could have missed the opportunity. The only get-around is to use my wife’s and/or my son’s account, that I did not think it was ok with the company’s policy or not. However, the company let me trade mutual funds without reporting and their annuity had a lot mutual funds including sector funds. The restriction was requiring holding period of 60 days before switching without penalty for most sector funds. In March, 2000, I switched out all my tech sectors including Biotech that I had to pay a penalty from my memory. The fees in the funds could be higher than similar funds outside the annuity.

 

It turns out my tax rate after retirement is higher than the ones before due to the appreciation of my retirement accounts.

 

Why I do not recommend annuities

 

When you attend ‘free’ financial seminars, annuities is a popular recommendation. Most likely it is due to the high commissions. The policy of the annuity was written by the issuer to their own benefits not yours. For decades, I know only one annuity company lost big money due to the beneficial terms to her customers and the market behaved differently from what the issuer expected.  Many potential buyers think it is a good and safe deal as they will be paid for life. It is similar to a pension. When you have annualized (withdrew money), your heirs get nothing on the day you die.

17       Characteristics of momentum trading

 

·        Usually the beta (from Finviz) is higher than 1 (the average). The higher the price fluctuation, the better for momentum stocks.

 

·        Market caps of most momentum stocks are higher than 1B. Institutional investors move the market. However, many of my big gainers are smaller stocks; it could be due to my small bet positions.

 

·        The 4 phases of a stock: neglect, growing, peaking and plunging. Buy at the ‘growing’ phase. In the ‘neglect’ stage, you may spot bargains, but the stock would stay in this stage for a long while. Most of the time, the stock fluctuates around 200-SMA. When the volume is high in trending up and low in pullbacks, this stock may be in stage 2, a buying opportunity.

 

·         Do not be afraid of the daily surge of the price. Sometimes, you have to pay close to the market price for a rising stock.

 

·         Do not sell your winners too early. Watch out for exceptions and use stops or trailing stops to protect your portfolio.

 

·         Sell in phase 3 with the characteristics: price below 200-SMA (from Finviz), Volume higher in a losing day and lower in a profiting day and Large loss after earnings announcement.

 

·         Do not listen and follow the financial news. A lot of time, the news have been fabricated to serve the purpose of the analysts.

 

·         From my experience, many times the insiders are wrong. Most likely they do not study the trend as described in this book.

 

Do the exact opposite for shorting stocks.