Friday, December 31, 2010

Happy New Year to you, Death to scammers like TVI Express

Wish the liars stop lying... but that may be impossible. Until the day when TVI Express is dead and buried...

Sunday, July 18, 2010

Breakdown Insurance

A mechanical breakdown insurance, also known as auto extended warranty, is supposed to be insurance that covers your repair bills in case your car needs BIG repairs. Two of the biggest names (i.e. advertise a lot on TV) are Mogi, and StopRepairBills. Your automaker would also offer them as well, as would the dealer. They are very profitable... for the seller, not the buyer. Thus, they are usually a bad deal for you.
Please note that I am NOT against either company. They offer a service that some people want. However, you may not understand all the pros and cons of what they offer.

Here's a few things you need to know before you call their number and pay up.

1) Neither companies un-named above are the actual policy issuers. Both are sales agents who will "match" you with the appropriate policy issuers / administrators (who remains unnamed in their ads). In other words, they are actually more like 1-800-DENTIST  who match you with the right vendors, even though in the ads they sound like they actually sell the policies. 

2) Deductibles are barely mentioned in their ads. All they claim is you don't have to pay for repair bills. There's a small disclaimer somewhere that basically says your deductible depends on the specific policy you buy. And it could be several hundred dollars. Obviously, the higher the deductible, the cheaper the policy.

3) The policies are far more expensive than you think. Quotes go beyond two thousand PER YEAR. And you are often pushed into buying multi-year policies for "discounts".

4) You are required to pay for regular maintanence, and actually provide PROOF of such maintanence, else your policy is VOID! (It's in the policy, really.) The policy issuers are known to have denied claims UNTIL such evidence is submitted, and you better have all the i's dotted and t's crossed! (And don't miss even ONE!). Thus, paying for one of these policies may actually INCREASE your maintanence bill, NOT decrease it as you hoped, esp. when you throw in the deductible!

5) You are automatically pushed toward the highest coverage (read: the most expensive), because it's the only way you can cover almost everything. Murphy's law pretty much predicts that the stuff you don't cover is the stuff that WILL break. However, did you actually analyze what may break, how likely it is like to break, and how much are the repair bills? And thus, what are the expected cost PER YEAR? Of course not. That's the insurance company's business. It's called actuarial science (or probabilities, close enough). They did the numbers already, so they came up with a rate that will make THEM a lot of money, not you. They are relying on your ignorance.

6) How can a company insure something they haven't even seen? They do it by making the "worst case assumption", not the average case. They have built-in a large enough profit margin that even if your car is a virtual junker that needs lots of parts, they probably won't lose much money. For an average car, the policy would be VERY very profitable... for them, that is.

7) Newer cars already have longer and longer warranties. Most new cars come with 3/36 bumper to bumper and 10/100 powertrain warranty, and very rarely would you see major repairs in the first 3-5 years of the vehicle any way, if you do the proper maintanence to start with.
If you are considering such policies, there are many things you should look into:
1) What are excluded? i.e. what is NOT covered? Even so-called bumper-to-bumper warranties have exclusions, like "not for commercial vehicles", "not for racing, rally, competition, etc." The more expensive the policy, the more it will cover. Aftermarket parts are never covered.
2) Claim limit: do you need to use specific repair shops such as AAA approved or CSE approved? Or would just any licensed facility would do? Or just those in a certain "network"? Do you have those in locations convenient for you? How about when you travel?
3) Does the policy come with any perks, such as road rescue services (tow truck, battery service, emergency gasoline delivery, key lock-out), rental car, trip interruption insurance, etc? The less perks, the less expensive the policy.
4) What is the cost-benefit ratio for the policy, vs. just putting the money in the bank for those repairs when they *do* come up?
5) Is your car actually covered? Generally the newer the car, the less it is to insure for breakdown. Most insurers won't touch vehicles over 100000 miles.
6) Did you shop around? Dealer usually tack on about 200% markup on those policies, so it can be VERY profitable. ANYTHING in a dealership can be negotiated. While it is hard comparing apples to oranges your car insurer may offer such a policy as well for comparison.
Consider all the factors before committing.


Micro-franchising is a new trend among charity entrepreneurs, but first we have to define the terms.
A charity entrepreneur is one that offers opportunities, often to very poor third-world countries, and often with help of some NGOs (non-government organizations, such as Red Cross, or Doctors without Borders).
Micro-franchising is basically make the franchise very affordable. A typical full franchise in the US is 20000 dollars and probably a lot more. Microfranchises can often be had for well under $1000, by using a lot of charity work and simplify the training. By combining the two, third world countries economies and lives are improved.
One such example given in Entrepreneur magazine was for reading glasses, which is increasingly important due to the aging population all over the world. Those simple "reading glasses" with fixed prescriptions that you can buy in a US pharmacy or market for $10 may just be something curious for you, as you have access to an optician and an optometrist that will give you full eye care. For someone in the third world, who has no opticians, no doctors, and no health insurance, a travelling salesperson with a simple backpack of glasses for sale, some simple eye charts, and a little training, is a godsend. The reading glasses micro-franchise is a win for all sides. The franchisor gets to do good and make a little money by selling things with opportunity to sell more, if any. Most are probably written off as charity. The franchisee gets to learn a business and make a livelihood, by selling the glasses at an affordable price, usually 10% of the monthly wages in the area. The clients are happy because they are getting something they did not have before at a price that is not prohibitively expensive. The NGO's are happy to help the franchisor train the new franchisees because it improves the overall quality of life in the area. They often also offer low to no-interest financing to the franchisees, which are typically paid back within 1 year.
The reading glasses microfranchise, as reported in Entrepreneur magazine, is packaged as "franchise in a box". The franchisee gets one full kit, which contains glasses, eye charts for rough determination of of lens strength, and some sample reading material. The NGO will conduct 3 days of training and work out the pricing and financing detials.
A while back there was another article about another NGO providing cell phones / satellite phones to rural village woman, one per village, in remote areas. The women are trained on how to use and troubleshoot the devices. It provided a lifeline for local villagers, who can receive advice for everything from farming to medicine, and contact relatives who had moved to the cities and such. The phones are "franchised" by the NGOs to the women, who them charge villagers a modest fee per use. All parties benefit.
Of course, there is no need for this idea to be third-world charity world only.
When you think about it, those hot dog carts and mobile food vendors are basically mini-franchises. Most of their food is pre-prepared in a central kitchen every morning, and the carts basically heat, pack, and serve. There really is little reason for a food franchise to be fixed to a location except "tradition", given the capabilities of a modern food vending truck.
What services or products are widely needed, small enough to carry in quantity, AND can be sold for reasonable profit yet be affordable, in your area?
If your business already provides goods or services for sale, can it be micro-franchised?

Thursday, April 22, 2010

Password Protection with Password Card

This is a bit of a stretch of topic for this blog, but identity and password protection is important in the modern age, when one must be vigilant in protecting one's assets. Weak passwords (basically, anything less than 8 characters) are not that hard to guess, and most people fall into simple patterns like birthdays and such. However, people cannot remember the really tough passwords. Here's a little help, called Password Card.

Password Card is a card filled with gobbledygook that makes no sense to anybody, but it is really a password reference. Go to the website and it will randomly create a card for you. The chance of someone else getting the same card is infinitesimal. You will need to guard the specific "key" (which is the number above the card) in case you need to recreate the card.

How you use it? For each account you need to make a password for, pick a specific combination of symbol and color. Yes, you will need a color printer. Then pick at least 8 characters from the starting point, going any direction you choose, left/right/up/down/diagonal. That is your password. As long as you remember the combination, like smiley/pink or diamond/blue, and you used a consistent direction that you recall, you know your password, that is nearly impossible to guess. EVEN if you lost the card, as long as you did not leave any hints on the card itself (finger smudges, pen marks...) it is useless to anybody except you.

You can use this for multiple accounts, and it should vastly increase your password strength.
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Wednesday, April 21, 2010

Tenant paying your mortgage? Is it possible again?

Picture of the "Gingerbread House" i...Image via Wikipedia
AP just did a week-long study of major real-estate markets, and they are pinpointed a lot of markets where it is cheaper to OWN a home instead of renting one. While this is usually good news to the renters (who want to become owners), it is also a golden opportunity for those who have the down payment available to pay down house, and get a tenant to pay the mortgage for you.

This is that Robert "Rich Dad" Kiyosaki promotes in his books and his Cashflow game: find a property with "net positive cashflow", and according to the AP study, some markets have rent HIGHER than that of mortgage (esp. in foreclosure-ravaged areas), and that is without counting any special benefits like tax credits and such that only owners can benefit from.

If you currently rent, it is a great time to buy, esp. in those markets. Even if you already own your home, you may want to look into what credits and loans you can get for investment property (non-owner-occupied) and if you can generate any positive cashflow from it. When the home prices go back up in a few years, you will be raking in money... maybe.
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Tuesday, April 20, 2010

China's Real Estate Bubble is a sign of MAJOR economic problem

A quick comparison between China's real estate bubble and the American real estate bubble of 1998-2005 shows that China's bubble is growing at TWICE the rate of the American bubble. During the bubble, the average price index of the American home grow by about 80 percent in 7 years. China managed to do 60% real estate price increase in just THREE years, and it is STILL going up.

You can see the details at

And the Chinese government is FINALLY taking notice. They are cracking down on special promotions and such prohibiting "advance sales" on properties not even finished yet. This is causing a huge CRASH as all the various real-estate holders dumping their inventory on the market. And who will lose most of the money? Those who already own their houses and cannot sell, but have taken out loans on them for other uses.

Not all "experts" are convinced. Some claim that China has already clamped down on bank lending, thus the money supply is tighter. What those American analysts are NOT realizing is most Chinese do NOT borrow from banks, but instead from friends and relatives. So the actual number cannot be measured through bank lending.

And people are noticing all around the world, even CNN Money. And when the real estate bubble actually crash (more than twice as hard?) it will destroy the the mirage of "leader in economic recovery" that China is sprouting, and hold back the "real" global economic recovery that everybody is eager to enjoy.

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Sunday, April 4, 2010

What goes in a business contract?

A contract is something everybody needs, especially business. But there are legal aspects of a contract you must be aware of to make the whole thing enforceable. Keep in mind that individual jurisdictions may have additional legal requirements that supersedes some of the following aspects of the contract. Also, as I am not a lawyer, I can only write in very generic terms. You should consult a legal self-help book, such as those published by Nolo Press, for the exact verbiage, or check an existing contract used by your competitor(s).

A contract is composed of these major components:

* Names Clause
* Signature Clause
* Standard Clauses
* Dispute Resolution Clauses
* Attachments (if any)
* Amendments (if any)

The CANSLIM investment strategy

CANSLIM is a stock trading/investing strategy created by William O'Neal, who also created Investors Business Daily. CANSLIM is an acronym, which really stands for
Current quarterly earnings per share
Annual earnings growth
New products, New Management, New Highs
Shares outstanding
Leading industry
Institutional sponsorship
Market direction

Pros and Cons of Diversification

The New York Stock Exchange on Wall Street, Ne... New York Stock Exchange, Image via Wikipedia
Diversification is a risk management technique, that mixes a wide variety of investments within a portfolio. The idea is summarized by the adage: don't put all your eggs in one basket.

The problem is, most people are doing it wrong. Either they are NOT diversified when they think they are, or they think diversification will minimize their risk, when it does not, because they don't really understand what they are giving up when they diversify.

Let me give you an example: Say you have a dozen eggs. You decided to put each in one basket on the table. Now you have a dozen baskets, each with one egg. You are diversified, yes, as one basket tipping over will not ruin all of your eggs. Right?

Right, until someone tip over the whole table.

When the economy went into a recession, all baskets on the table are affected. No amount of diversification will save you, if you leave everything on the table.

Most people, when they hear the word diversification, they think investing in stocks of different sectors... If you remember the 6 stock archetypes from earlier, they'll put some in fast grower, and some in stalwarts, with some risky stuff in cyclical, turnaround, and maybe asset play. The really safe ones may put some in bonds and mutual funds. The problem is... These are all PAPER ASSETS. What's worse, mutual funds are just "diversified" stock investments: the fund manager invests in a bunch of different stocks. So investing in diversified stocks and investing in a mutual fund is the same thing. Also, while the bond market usually moves opposite that of the stock market, it does NOT always do so. Thus, relying on it always do so is rather foolish. Therefore, investing in all paper assets is NOT diversification.

Wednesday, March 31, 2010

Last Chance to Make a First Impression

It is said that your initial impression is almost everlasting. Indeed, it takes a lot to undo an initial impression. In fact, you usually have about 90 seconds to make a good first impression. Beyond that, unless you are a brilliant conversationalist, people tend to tune you out. Thus, it is important to use that first 90 seconds, and there are various techniques you can use to maximize your effectiveness.

0) Have a purpose in mind

All communications have a purpose. It could be to make friends, to flirt, to persuade, to network, and so on.

Remember, it never hurts to have a bigger network, and as Harvey Mackey said, "Dig the well before your are thirsty: network now so you can use the network later!"

Or to paraphrase the Cheshire Cat in Alice in Wonderland... if you don't know where you're going, then it doesn't matter which way you go. Same with communication. Just what impression do you wish to convey? "Good impression" is such a generic term, wouldn't you agree?

Thursday, March 25, 2010

How to use P/E ratio to evaluate investment

Price-Earnings Ratios as a Predictor of Twenty...Image via Wikipedia
P/E is basically price per share of the stock divided by annual earnings per share.

Beware that there are several definitions of P/E, depending on which earnings you use. The commonly used definition is trailing P/E, which is earnings in the last 12 months. A "forward" P/E on the other hand, uses "projected earnings" over next 12 months. There's also another variation that uses last six months and projected six months.

P/E Ratio is a comparative stat. By itself, it means nothing. It is only useful when compared to some OTHER P/E ratio.

In a way, it's like a vehicle's MPG rating. If I tell you that this vehicle's MPG is 6.5 on the highway. You'd call that a gas guzzler.

But what if I tell you that this vehicle is a 45' motorcoach (i.e. a highway bus), and the industry average for a bus is merely 5.5 MPG? (and that's DIESEL, by the way). So now this is actually quite economical.

To compare MPG, you need to know the TYPE of vehicle. Sports car? SUV? Sedan? Truck? etc. Then you compare it against type average, or against another specific model.

P/E ratio is the same. It is usually used to measure whether the stock is overvalued, or properly valued, but it is impossible to use by itself. You need to compare it to something, either another company's P/E, or the sector average P/E.

Thursday, March 11, 2010

Four opportunities that are not what they seem

I spend quite a bit of time on Yahoo! Answers, and I noticed a disturbing trend: a lot of people are looking for supposedly "safe and easy ways to make money". Alarm bells go off in my head when I see words like that. The main problem is, they won't take good advice even if it bites them in the ***.

My friend was a perfect example. He got taken in by a "confidence scam". Someone online, allegedly female, befriended him through Internet chat over course of weeks, and managed to convince him to raise some money so she can pay some fees on her inheritance in Europe, which will solve all financial problems, both his and hers. My friend was so taken, he actually asked to borrow a thousand dollars from me and his other relatives and friends, to raise the "$5000 needed". He claims that FBI have given blessing to the deal and he had talked to the trust manager in Europe. It got so bad, that SFPD have to invite him down to their HQ for a long chat to tell him something that was obvious to me from the start: he had been conned. I would hate for you to experience something similar. Fortunately for my friend, he lost no money because he had none. But you may not be so fortunate.

I will go over some of these alleged "opportunities" that often appear on Internet forums or late night TV infomercials. I will point out a few things that you need to think about before you jump in. Then I will point out some things that goes into a "real" opportunity, some questions you need to ask about any supposed opportunity.

What NOT to do when facing a foreclosure

Sign Of The Times - ForeclosureImage by respres via Flickr
A lot of desperate home owners, hoping to prevent foreclosure, end up digging themselves a deeper hole by doing a lot of foolish things. Here are some things that you should NOT do when it comes to foreclosure, and why.

* Declaring homestead -- declaring homestead will protect your house from creditors for your OTHER debts, such as business, credit card, auto, and so on, but it will not stop the lender of your mortgage from foreclosing. This will not work even in Florida, with one of the strongest homestead laws in the United States. Florida Constitution spefically states that mortgages are exempt from homestead provisions. After all, it would make no sense to buy a home, pay a down payment, and keep living in the house and make NO monthly payments EVER by declaring homestead, right?

Velocity of Information

Dell LogoImage via Wikipedia
Perhaps you've heard of this oxymoron: "old news". There is no such thing as old news, as news must be, well, new. When it gets old, it's no longer "news", or as interesting.

A new "term" coined for this is "velocity of information". In other words, how fast can information travel? While theoretically it can go quite fast (nowadays, we have mobile phones, Blackberries, e-mail, and so on), how fast does the information get acted upon? The information is no good if it's sitting in your inbox unread, no matter how fast it's delivered. And this applies to a lot more area than you think. There was the expression "the check is in the mail." If the check is in the mail, it's not in your bank, and thus it is no good for you.

Velocity of information has a LOT to do with running a successful business and/or investing. It involves getting the right information to the right people who can then act upon them. A company who cannot communicate is a slow company and in this day and age, a soon-to-be DEAD company. Similarly, an investor who lacks the proper information will not succeed.

6 Levels of Focus Horizon

Getting Things DoneImage via Wikipedia
In GTD, David Allen discusses the 6 different levels of "horizon of focus". Why do we need different "horizons of focus"? All work has different levels of importance. Different people weigh things differently. However, all weighing decisions need to fit within one's perspective(s). And it's not merely importance, but the perspective themselves also help you actually DEFINE work from generic "tasks".

The metaphor used in GTD is one of altitude... from ground level, up to 50000 ft. In GTD, it's called "horizon of focus". The higher you are, the broader your perspective, but the less details you see. When you're at 50000 ft, you're looking at your entire life, but you don't see specific tasks any more, just general guidelines. On the ground, you have individual action items, but you can't see beyond the immediate horizon. In between, you have long term goals, short term goals, and so on.

The 6 levels "horizon of focus" are:

50000 ft / Purpose & Principles: review when you have a MAJOR decision to make, such as something that affects your life-long ambitions or beliefs

40000 ft/ Vision: review when you need long-term vision and direction, as in 3-5 years, or longer down the line.

30000 ft / Goals: review to ensure you are on your way to achieve your vision, think what you need to do in about a year or two.

20000 ft / Responsibilities: review to ensure you have balance in your life, this technically does not have a time limit, but it's actually ongoing... Are you taking on too much responsibilities, or too little? Is one of them overwhelming the others? If so, how to reachieve balance?

10000 ft / Projects: review for short-term commitments, from a week to several months

Ground / Calendar and Action items: review for dated and ASAP commitments

Monday, March 1, 2010

Defining Value

Street sign for Wal*Mart Drive, south of Gordo...Image via Wikipedia
Your business must present some unique value in order to rise above the competition. What you can offer depends availability of resources, and what customers perceive as value, which will vary from market to market.

Let us take a toy retailer as an example.

First of all, what kinds of toys are there? Toys is such an all-encompassing word. It varies from balls and bicycles / tricycles and dolls, to board games, to action figures, all the way to game consoles and related games, accessories, and more. It could be for babies all the way up to teens. Everything from alphabet blocks and Legos (tm) to Nintendo Wii (tm) and Tickle-Me Elmo (tm) are toys. Thus, there are quite a few sub-market for toys: toddlers, kindergarten, elementary, middle-school, and high school. All have different interests and thus, different toys.

Second, who buys toys? Kids usually don't buy their own toys, until they are older, like middle-school and high school. Usually, it's the adults that buy toys... with or without the child's input.

More psychology of money

SAN FRANCISCO - MAY 14:  A man holds money tha...Image by Getty Images via Daylife
There are several more psychological effects you need to be aware of when it comes to investing. Any of them could cause you to "see things" that aren't there, and make irrational decisions.

Anchoring effect is basically psychology to "anchor" an answer to a number given. Say I ask you... "What is the population of Armenia?" You would have no idea, unless you're Armenian or is a trivia champ. However, if I phrase the question as "is the population of Armenia above or below 100 million?" Then I ask the same question again, you would guess the answer to be a bit above, or below 100 million, depending on which way your logic goes. In investment, it's known as "earning targets", "earning estimates", and so on, and if a company can meet those earning estimates (or not). Your expectations are anchored to it.

Saturday, February 27, 2010

Asset protection and real estate

Seal of NevadaImage via Wikipedia
Mr. Sutton, esq., wrote a very nice article in "The Real Book of Real Estate" about asset protection. I will go into a tiny bit of that. Please keep in mind, he is the attorney, I am not. So this is NOT legal advice. And to read the whole thing, you need to get that book (there's a link at the end to However, here's a taste, just a tiny bit.

So what do you need to know about asset protection when it comes to real-estate? A lot, and the earlier you know the better. Basically, it is to setup a 'separate you' to own the properties, so that what happens to 'separate you' will not wipe you out, and vice versa.

First of all, asset protection is an overall strategy, one that starts when you invest, not something tacked onto it much later. You should have the entities that you will use setup before you invest. After all, a corporation is just a few pieces of paper and some annual paperwork. You can have it setup way ahead of time.

Creating an unexpected niche

ASUS Eee PCImage via Wikipedia
Those of you who visit Radio Shack or electronic stores could not have failed to notice a new buzzword: "netbooks". Basically, they are tiny portable computers, with a 9 or 10 inch screen (most laptops are now 15 inch screens) with correspondingly tiny keyboards and everything else, and they cost $200-250, with refurbished ones as low as $125, compared to a decent notebook at $500 or so. When closed, they are not much bigger than some people's portable executio folios in which they keep their Day-Timers (tm) and such.
The problem is they are lowest of the low-end. Even though they are x86 compatible (i.e. it will run Windows, even Vista and the upcoming Windows 7), they run VERY VERY slowly. They are good for netsurfing, word processing, e-mail, basically stuff that doesn't require much computing power.

So why am I telling you all this? Almost all the netbooks now on the market uses Intel's Atom series CPU. However, that was NOT the intended purpose of the CPU. Intel had originally planned them to be used in high-end cellphones, i.e. SmartPhones. However, the netbook was created to fill a niche that didn't exist before, and that is what's important.

How to start a small business

The model shows the marketing process in 5 dif...Image via Wikipedia
Starting a small business is a major investment, not merely of money, but also of your time. So you'd want to do it right. Do you know ALL the issues that is involved in starting a small business?

I answer a lot questions on Yahoo Answers! and a lot of the questions seem to be "how do I start a business?"  So here's a summary, with a bit of help from Nolo Books... (Buy them!)
A. Evaluating your business idea 
B. What ownership structure will you choose? (SP, GP, LP, CC, SC, LLC)
C. Choose a name and register the name
D. Prepare the ownership structure paperwork
E. Find a business location and meet legal requirements
F. Apply for necessary licenses and permits
G. Get insurance
H. Setup Tax reporting and accounting
I.  Hire employees and know the relevant laws

Monday, February 8, 2010

What is your effective tax rate?

Assorted international currency notes.Image via Wikipedia
Most people know their income tax rate, but have they considered their EFFECTIVE tax rate?

For people who are single, their effective tax rate is probably nearly the same as their real tax rate. However, for families, esp. those with children, the effective tax rate can be MUCH higher than the real tax rate. Why? It's because of our strange tax system and various income-based incentives in life, such as financial aid for schools, and in recent years, loan modification.

For example, here's a family. Father is working and earning a nice chunk of salary, and as kids are heading for college mother is contemplating going back to work. If she lands a local part-time teacher's position, which pays 35000, she will have to pay 15000 in taxes (income and payroll), lose 10000 of need-based financial aid of her kids (husband earns a lot), leaving her only 10000 ahead. In other words, her effective tax rate is not 35%, not 43%, but actually 71%.

No, the numbers are NOT made up. These are real numbers as published in a Forbes Magazine article (October 5, 2009) called "When Work Doesn't Pay". And this is hardly an anomoly.

Psychology of Money

brains!Image by cloois via Flickr
Did you know how psychology affects money? You may be surprised to find how much psychology dominates thinking about money. It even trumps logic. How? Let me illustrate.

One of the experiments economists and psychologists play on people is known as the ultimatum game. The rules are simple: you need two subjects, let's call them A, and B.

Experimenter gives A $100, and tells A, and B, that A needs to share with B. If B rejects the offer, than experimenter gets all $100 back, so neither A nor B gets anything. Both A and B should think about the amount, and come up with a strategy to maximize one's own gain. So, what should A do? And what should B do?

Logically speaking, B should accept WHATEVER A offers, because it's better than nothing. If he says no, he gets nothing. So he should ALWAYS say yes. By the same logic A should offer as little as possible, in order to maximize his gains.

Sunday, January 31, 2010

Foreclosure defense preparations

Half million dollar house in Salinas, Californ...Image via Wikipedia

Before you can even plan your foreclosure defense, you need to tabulate your assets, your strengths, your weaknesses, and decide on the goal of your defense.

First, what stage of the foreclosure process are you at? (See Six stages of Foreclosure Process) The earlier you are, the better. Preferably, you're still at stage 1, or the hypothetical stage 0, where you know you will not be able to pay the next payment, but it's NOT late yet. The later you are, the worse your options. Here are the stages again:

0) Normal, all payments up to date
1) Pre-foreclosure, some payments are late
2) Foreclosure notice, or "notice of default". Now clock starts ticking
3) Reinstatement period, catch up on payments and penalties and all is forgiven
4) Auction / Sale, house is no longer yours, and you are really in deep trouble
5) Redemption period, pay off the entire loan and you can still have the house back
6) Eviction, where you get tossed out to the sidewalk with all of your belongings

Saturday, January 30, 2010

13 Signs of a Successful Company

Peter Lynch revealed 13 favorable attributes of a company what may warrant your investment in his book "One Up on Wall Street". It basically boils down to the following adages:

* company doing dull, but necessary work, or work that is otherwise stigmatized, and goes undiscovered or unseen, but growing year after year
* company has a competitive edge such as a niche or brand, has room to grow, and a good employees and management with high morale

Having all of these signs won't guarantee you a stellar investment, but these are good signs that a company has growth potential, but so far has not been "mob-rushed", so you can get in "at the bottom". It's useful to "cull the herd".

1) It sounds dull, or better, ridiculous

Frankly, a lot of investors invest in a company because the name sounds trendy and/or exciting and/or exotic. What would you rather invest in: Consolidated Rock, or Genentech? Who would have thought that "Pep Boys -- Manny, Moe, and Jack" would be a great company to invest in? Or "Crown, Cork, and Seal"? Or Lynch's favorite, "Seven Oaks International"?

Wednesday, January 27, 2010

Harvey Mackey on Networking

Two people shaking handImage via Wikipedia
Harvey Mackey is one of the best authors on networking, and I don't mean between computers, but between people. And one of the concepts he promotes is you should consider networking as having four elements, with the acronym R.I.S.K, which are

Keeping at it


Reciprocity is about giving something, and get something in return. It is a mutual exchange, in an ongoing basis. It is utility power at one of its purest forms: quid pro quo. You don't need to like everyone you do business with, you just need to network with them. And often, you need to give before you can receive. People *do* remember you helping them, thanking them, informing them, and so on. However, do NOT do anything immoral or illegal. That's bad, bad, bad. Just remember to actually let them know when you did do them a favor, if it's not obvious, like with a third-party. (i.e. "Oh, I mentioned that your son is looking for a job to banker _____. He's looking for an intern and will be in touch."

Wednesday, January 20, 2010

The Relative Strength Index (RSI) Primer

Example of RSI Indicator DivergenceImage via Wikipedia
Relative Strength Index, commonly known as just "RSI", is first explained by J. Welles Wilder in his 1978 book "New Concepts in Technical Trading Systems". It is an oscillator, meaning it oscillates between two fixed values based on price or index movements. It is a "leading" indicator, meaning it actually predicts price tops and bottoms BEFORE they actually occur. The name is a bit of a misnomer. It is measuring strength relative to ITSELF, not to something else.

RSI has one "setting", the "period" to use. Mr. Wilder used 14, so 14 is the default in most RSI charts. However, 9 and 25 are also used. So how do you calculate RSI? First you need to calculate the RS for the period in question.

Sunday, January 17, 2010

The Greenspan Folly

Alan Greenspan, former chairman of the Board o...Image via Wikipedia
Everybody thought Alan Greenspan is the greatest economist ever. He was on capital hill for FIVE presidents (started with President Gerald Ford, in fact). And he enjoys the Libertarian view of economic regulation: the less the better. In fact, he said so in his autobiography that he is a fan of Ayn Rand, who believes that government should NOT regulate the economy at all! As a direct result of that, his policy had encouraged the current toxic asset problem, and thus, the recession we all are stuck with right now.

Alan Greenspan was given post of Federal Reserve Chairman by president Reagan, and then, under Clinton as well. Clinton also appointed Bob Reuben as economic advisor, and later Treasury secretary. Both have made fortunes on Wall Street, and both decided to do a little as possible when it comes to regulations. Tim Geitner and Larry Somers are also of the same mind.

On the other side of Washington bureaucracy is a little known agency called CFTC, or Commodities and Futures Trade Commission. Their job is to oversee derivatives and agricultural futures, and its chairperson is Brooksley Born. She was one of the candidates for attorney general under Clinton, but when Janet Reno was chosen, she was offered chairperson of CFTC as sort of a consolation prize. She is a Securities lawyer by trade, and she is troubled by the vast use of derivatives on Wall Street.

Wednesday, January 13, 2010

Madoff's Ponzi Scheme

NEW YORK - JANUARY 5:  Bernard Madoff (C) walk...Image by Getty Images via Daylife
By now everybody have heard of Bernie Madoff, and his Ponzi scheme finally came unglued after decades of deceiving the investors involving at least 50 billion dollars. So how could he have gotten that big? There are three major factors: secrecy, greed, and deception.

A Ponzi scheme is named after Charles Ponzi. The scheme is relatively simple: the people who got out richer was paid by people who got in later. By steadily attracting new people who put their money in, and have more people coming in than going out, the people who get out will get MORE than they put in, and whoever runs this thing can skim off his share as well from the pool. Of course, when people stopped coming in, or just slow down, then the scheme will unravel. There was no real investment and the money is not growing by itself; any growth is from new investors.

Foreclosure Process

Sign Of The Times - ForeclosureImage by respres via Flickr
Foreclosure can be caused by a variety of reasons, from emotional problems (depression and grief, leading to disengagement from the world) to outright financial difficulties, or even a combination, such as divorce, or even fraud. There are a variety of options, but the first thing you need to do is acknowledge the problem. After all, you cannot solve the problem if you don't even acknowledge that the problem exists! Of course, you have to LEARN about the problem first.

There have been many cases where one member of the two-person household is in charge of all finances, and the other person does NOTHING. As Reagan said before, "Trust, but verify." You may trust your partner that he or she will do the right thing, but there have been many cases where the other is either too busy to even realize there was a problem, or too ashamed to admit that there was a problem. There were plenty of anecdotes that the owner of the house didn't even know that his house had been foreclosed on, and SOLD OFF in a sheriff's auction on the courthouse steps. He only knew when a real estate professional came to his door to inform him. He had entrusted all financial stuff to his wife, and when his wife failed to send payments, he knew nothing.

Thursday, January 7, 2010

6 signs of stocks to avoid

Peter Lynch could be called a contrarian investor in many senses, and it is with good reason: so-called hot industries and hot companies are driven up by EMOTION (I consider social pressure an "emotion" here, as "need to conform"). Once the emotion is spent, the company fizzles, and stock price nosedives so fast and so far it'll give you a nosebleed.

Advice 1) AVOID the hottest company in the hottest industry

Why? three main reasons:

a) hottest company have stock prices inflated by speculators, which in turn attracts MORE speculators, which fuels even FURTHER price inflation, until it all inevitably comes back down.
b) Hot industry attracts competitors, unless you got an exclusive niche you can exploit. Xerox was so famous, their name is synonymous with "photocopy". However, when IBM, Kodak, and various Japanese companis got into the copy machine business, Xerox stock prices tumbled, and never really recovered.
c) trend comes and goes, and so do fortunes of the trend-riders. 20 years ago carpet was the hottest thing. Now wood flooring is preferred. When will it switch back to carpet? (Robert Kiyosaki called it "flavor of the month" in Rich Dad's Guide to Investing, I think it was)

Monday, January 4, 2010

A very morbid investment

A surgical team from Wilford Hall Medical Cent...Image via Wikipedia
The business of "life settlements", is a morbid one, and unregulated, but there is an opportunity there, for both the buyer, and the seller, and the agents in between.

The idea of life settlement is very simple. Someone bought a nice big chunk of life insurance with "cash value". It's part life insurance, part savings account, so to speak. If the holder surrenders the policy, he gets the cash value back, and that's it (assuming he pays the annual premiums). If the holder dies, the insurer pays out the benefit amount to whoever the holder chooses. So say, you're old, you can no longer keep up the lfie insurance policy yearly payments, and the cash value is negligible, you can opt to sell the policy to a "life settlement investor" (through brokers, escrows, and whatnot), and yield bigger returns.