Friday, November 27, 2009

Stock trading and computer assistance

Technical analysis
Investors generally three kinds of tools: toolbox, black box, and gray box when it comes to computer asistance.

Or as Alexander Elder puts it... "Toolboxes are for serious traders, black boxes are for people who believe in Santa Claus, and gray boxes are in between."

So, which group do you really belong to?

Toolbox has a whole set of tools for you to apply as you wish. A good charting program, for example, with a full complement of drawing tools, markers, flags, trends, as well as full set of technical indicators, RSI, Stochastics, Moving Averages, envelopes and bands, or even write your own, is a toolbox. You choose which tools to apply, and apply the tools your way. The tools do NOT force their views on you. They just process data, spits out some numbers / charts. You decide if they are good signals.

Monday, November 23, 2009

Pros and Cons of Momentum Investing

Stock chart showing levels of support (4,5,6, ...Image via Wikipedia
There are a LOT of myths passed around by various investment advisors, and some involve timing the market.

I've actually heard one speaker at a seminar who actually claims that "Santa Claus Rally", "Sell in May, Stay Away" and so on, are valid advice. You probably heard some others as well. And a lot of months have a myth attached to them. There's the "January Effect", "October Surprise", "Take Profit Just before St. Patrick's Day", and so on.

What I can say is... What utter... nonsense! If trend exists, then you can bet money on someone anticipating it, thus destroying the myth.

Friday, November 20, 2009

Real Estate Owners: watch out for squatters

PALMDALE, CA - FEBRUARY 25:  Real estate broke...Image by Getty Images via Daylife

If you have a property for sale now that is empty, watch out for squatters. Install alarm system if you have to. As a Bay Area man found out the hard way.

A Bay Area man had a property on the outskirts of town, and it's a pretty nice house. However, his economical situation no longer permits him to keep the house, so he moved to a smaller place, and asked his realtor to sell the house. His realtor lined up a buyer, except when they went to check out the house, there's someone living there.

Welcome to the reality of squatters.

Thursday, November 19, 2009

Stock investing goal, style, and strategy

Plot of S&P Composite Real Price-Earnings Rati...Image via Wikipedia

Most people when investing simply have this nebulous idea of "make money". But the "goal" is more than that. The goal affects the style, and you can't have an investment strategy without considering all of the above.

First, let us define the goal.

What is your investment goal? It is a monetary figure, but it also depends on your risk level AND your reward level. Risk is linked to reward, there's no way around it. The risks varies from US Treasury Bonds (guaranteed return, virtually risk free) to super-volatile tech and such stocks (extreme risk). So, what are your goals?

Creativity and Education


Just watched Sir Ken Robinson giving his TED speech in 2006. (All videos are available for download at TED.com, go see for yourself). In it, he talked about a lot about how all are born creative. However, it seems that the educational system, designed in 19th century to produce workers to work the factories in the industrial age, is actually designed to STAMP OUT creativity. Thus, it may be time to rethink the educational system.

When you think about it, what exactly are we doing to prepare our children for the future? The only things we can give them are money, education, and some love. However, love doesn't put food in the stomach, and money is worth less every day. So it must be education. However, the public education system is invented in the 19th century to feed workers to work the machines of the Industrial Revolution, and has not changed much. So what exactly are we teaching our children to cope with the future? Will what we be teaching them be useful, or not?

Friday, November 13, 2009

Peter Lynch vs. Efficient Market Hypothesis

The corner of Wall Street and Broadway, showin...Image via Wikipedia

Peter Lynch is the legendary stock picker of the Fidelity Magellan Fund, worked in Fidelity for over a decade, and worked his way from the bottom up. He took over the fund with 20 million in 1977. By the time he handed over the fund to his successor the fund is worth 13 BILLION. He averaged 29% per year growth during those years.

Yet according to "Efficient Market Hypothesis", someone like Peter Lynch cannot exist.

Efficient Market Hypothesis claims that the prices on the traded commodities already reflect all the information known, and as new information arise, price(s) of affected items will quickly reflect the new information by changing (up or down). Thus, it is NOT possible to consistently outperform the market by using information that the market already knows, except luck and cheating (insider info).

This sort of hypothesis is something the academia, I mean, the eggheads, dreamed up, because it uses impossible premises. It assumes that every trader knows EVERYTHING there is to know about what they are trading (buying or selling).

Tuesday, November 10, 2009

Business plan: what, and why?

SWOT analysis diagram in English language.Image via Wikipedia

A business needs a business plan, which basically defines a business's misson, and the systems in place that clarify the procedures, as well as define the metrics that are critical to the operations of a business. We will go into What is a busines plan? why you need a plan, what would be in a plan, and how you write a plan.

== WHAT IS A BUSINESS PLAN? ==

A business plan is basically a blueprint of your business, defines what go where, what materials to use, and so on. To take the blueprint metaphore a bit further, you don't need the specific details, like what wallpaper to use and such, but at least a general outline, like "earth tones".

A business plan should start with a mission, and it better NOT be "make money". Even businesses that sell things are there to fulfill needs. After all, people buy things to fulfill needs. This "mission statement" should be left relatively simple.

Ford's mission was "automobile for the masses". Before Ford Motor Company (FoMoCo) and Henry Ford came along, automobiles are very rare, very expensive, very unreliable, basically playthings of the rich. Henry Ford believed that he can build cars by the masses cheaply, but sell a lot of them. He's out there to fulfill a need.

Friday, November 6, 2009

Do you really know thyself?


To achieve any goal, it's not enough simply to work hard. You first have to get the right mindset (i.e. get rid of the negativism), define the goal properly, then take stock of what you have to work with, formulate a plan that use the resources that you have efficiently, plan for contingencies that will deal with any weaknesses and/or problems, then execute the plan.

We have talked a lot about the proper mindset, and it goes by different names. We have discussed paradigm shifts, thinking like the rich, memes and excuses, and so on.

Defining the goal may be abstract like "get rich" or "be financially free", but you need to write a plan. However, the Rich Dad's Guide to Investing talks about all that. So I won't repeat it here.

We will talk about resources, and take stock of what you have to work with. Thus, you will gain insight into yourself, and how to apply those talents and resources most efficiently.

I've read a book called "Strengthfinder 2.0". In it the author talks about a movie called "Rudy". Any one seen that movie?

Tuesday, November 3, 2009

Money, and evil

In Christianity, Satan is considered the being...Image via Wikipedia

Ever wonder why do people consider money to be evil? There are three primary reasons people consider money evil.

1) Their religion tells them so

2) Their political belief tells them so

3) They don't have it, so they decided to vilify it. In other words, "sour grape" mentality


ARE THE REASONS LOGICAL?

Why are some religions against money? It's hard to say.

Regarding the Judeo-Christian faith... As far as I can tell, Jesus was not against money, but he did preach to the poor and was prosecuted by the rich. Others in the Bible, like Moses, are the same: Egyptian Pharaoh, the ultra rich, vs. the poor Israelites.

St. Augustin,e at the beginning of the Dark Ages, about 6th and 7th Century AD, also preached against money. By then, Roman Empire was falling, Vandals and Goths were teeming at the borders. Civilization was almost doomed. Augustin, then bishop, later St. Augustine, was preaching that one must abandon the cities, and live in the countryside, and go back to subsistance farming and such. This world and its possessions, including money is worthless, transient. Only the hereafter mattered.

But they're not really AGAINST money.

Buddhism and Hinduism placed little emphasis on money. Hinduism stressed castes and the afterlife and reincarnation. Buddha used to be a prince until he received enlightenment. Neither was particularly enthused about money, but neither are they against money.

I am afraid I am not sufficiently familiar with Islam to determine if they regard money as evil, but I will guess that they do not.

There goes 90% of world population!