When we do business, income is the first thing we look at. A company cannot survive without income. An Income Statement is a financial statement that covers a specific period. It is normally for 3 months or for a year. I have often heard someone said that the company made a lot of money. But when I asked him what was the earnings per share (EPS), he was not able to tell me that. This means that the person did not know about earnings. Earnings must always be looked at as EPS which is net earnings divided by the number of shares issued.
An Income Statement (IS) is also known as a Profit & Loss Statement or a Statement of Revenue or Expense. They are all the same.
An IS is divided into 2 parts, namely the operating and non-operating activities. The operating activities discloses information about revenues and expenses that are a direct result of the regular business operations.
The non-operating activities disclose revenue and expense information about activities that are not tied directly to a company's regular operations. For example, if a textile company sold a factory or some old plant equipment, then this information would be in the non-operating items section.
Ideally, revenue and EPS must go up in tandem. So when you look at EPS, don't forget to look at revenue as well.
马 到 功 成. Success is when the horses come. Success goes only to those who dare and act, it seldom goes to the timid. The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.
Monday, February 22, 2010
Sunday, February 21, 2010
Genting
If you own shares of Genting or Genting Singapore, or intend to buy shares of these two companies, you own yourself the responsibility of finding out what is happening in the casino at Sentosa, Singapore. Here is the link: Teething problems at casino Don't forget to read the comments. They give you plenty of information of what is happening there. All feedbacks are welcome. Thanks.
Saturday, February 20, 2010
Know what you buy
What is a Balance Sheet (BS)? If you don't know this, you need more help than you think.
Simply put, in the annual report of a company, the BS shows you what a company has and what it owes others on a specific date, usually the last day of December or June of a year. When you read the BS, make sure you note this, the date.
Before you buy any share of a company, you should take a look at the BS. This is actually "a must" if you want to invest intelligently. Yet how many people do this. I believe as much as 90% of the people don't do this. This is because, most people are interested in the price than the value of a stock. Because these people are traders, they normally do not bother to look into the fundamental aspects of the company they are buying.
"Why bother about the company? What matters is that the prize must be moving up." That's probably what they are saying.Yes, that's what really matters. But they forget to ask what's moving up the price or why the price is moving up.
Warren Buffett once said, "Only when the water has receded, would one know who's swimming naked." What did he mean by this simple statement? I take it to mean that when the market is at the top, everyone is happy and there are no losers; it is only when the market has turned down, then only we know who's who.
Do not count your winnings when the market is near or at the top. Count your winnings when the market is at the bottom. And if you have won when the market is at the bottom, then only you can say you have won.
Simply put, in the annual report of a company, the BS shows you what a company has and what it owes others on a specific date, usually the last day of December or June of a year. When you read the BS, make sure you note this, the date.
Before you buy any share of a company, you should take a look at the BS. This is actually "a must" if you want to invest intelligently. Yet how many people do this. I believe as much as 90% of the people don't do this. This is because, most people are interested in the price than the value of a stock. Because these people are traders, they normally do not bother to look into the fundamental aspects of the company they are buying.
"Why bother about the company? What matters is that the prize must be moving up." That's probably what they are saying.Yes, that's what really matters. But they forget to ask what's moving up the price or why the price is moving up.
Warren Buffett once said, "Only when the water has receded, would one know who's swimming naked." What did he mean by this simple statement? I take it to mean that when the market is at the top, everyone is happy and there are no losers; it is only when the market has turned down, then only we know who's who.
Do not count your winnings when the market is near or at the top. Count your winnings when the market is at the bottom. And if you have won when the market is at the bottom, then only you can say you have won.
Friday, February 19, 2010
Acid-test Ratio
Gold does not corrode in acid. To confirm that their gold nuggets are indeed gold, gold miners submerge them into acid for the test. If the nuggets do not get dissolved or destroyed, they have passed the test.
To determine how solvent a company is, you can use the acid-test ratio to find out. The acid-test ratio means: Cash + A/cs Receivable + Short Term Investment divided by Current Liabilities. If the result is less than one, view it with extreme caution.
To determine how solvent a company is, you can use the acid-test ratio to find out. The acid-test ratio means: Cash + A/cs Receivable + Short Term Investment divided by Current Liabilities. If the result is less than one, view it with extreme caution.
Thursday, February 18, 2010
Emotion
Joy, sorrow, fear, hate, love, greed and hope are all parts and parcels of emotion. Emotion can make you laugh, cry, perspire, tremble with joy or excitement, or shake with sorrow and even irrationalize your action.
In the stock market and in live, it is important that you control your emotion or else, others will control it. Invest wisely and you will live comfortably by retirement age. Trade unwisely or gamble, and chances are that you will have to work until you can work no more. Choose your own destiny.
In the stock market and in live, it is important that you control your emotion or else, others will control it. Invest wisely and you will live comfortably by retirement age. Trade unwisely or gamble, and chances are that you will have to work until you can work no more. Choose your own destiny.
Sunday, February 14, 2010
Saturday, February 13, 2010
Ajinomoto
Though Ajinomoto is a safe stock to invest, it is not suitable for those looking for quick money. The stock is normally thinly traded and lacks volatility. Traders should avoid this counter. For investors with a long term horizon and looking for a good dividend yield, this stock is recommended.
China is concerned about their overheating economy. It's intention to raise bank reserve by another another 50 basis points come Feb 25,2010 has caused jitters in the US stock markets. After opening down 116 points, it eventually closed at 10,099 this morning, down 45.05 from it previous level.
China is doing the right thing. Speculation in its property market is excessive presently. If it doesn't take preventive measures to cool down its economy, it may follow the US market that has a severe downturn in 2008. If this happens, many people will get hurt not only in China but in other countries as well.
China is concerned about their overheating economy. It's intention to raise bank reserve by another another 50 basis points come Feb 25,2010 has caused jitters in the US stock markets. After opening down 116 points, it eventually closed at 10,099 this morning, down 45.05 from it previous level.
China is doing the right thing. Speculation in its property market is excessive presently. If it doesn't take preventive measures to cool down its economy, it may follow the US market that has a severe downturn in 2008. If this happens, many people will get hurt not only in China but in other countries as well.
Friday, February 12, 2010
A Sleeping Beauty
Ajinomoto ( Aji - Stock Code 2658 )
For the year ended 31.03.2009, Aji has a paid-up capital of RM60,798,534. The par value of its share is RM1 each. EPS is 31.19 sen and total dividend paid out is 17 sen
Aji has just announced a set of commendable result for the three months ended 31.12.2009. Its EPS at 15.67 sen compares well with the earnings of its previous corresponding period of 9.17 per share. For the 9 months ended 31.12.2009, the EPS is 36.94.
On a conservative estimate, the full year's EPS should not be less than 52.61 sen, assuming that the 4th quarter result is somewhat similar to that of the 3rd quarter. At yesterday's closing price of 3.38, the forward PE ratio is 6.4246.
This stock has a clean balance. As at 31.12.2009, it has reserve of RM141,836,000. Its total current asset is RM135,137,000 while its total current liabilities is only RM21,294,000. Cash & bank balances stand at RM50,574,000. NTA per share is RM3.33. It has zero debt.
The Ajinomoto brand needs no introduction. They are very well known and used by every household in more than 100 countries. At less than RM3.40 per share, this stock is a Sleeping Beauty.
For a more understanding of Ajinomoto, click here to learn more
Disclaimer: The writer is not responsible for any action you take after you have read this article.You buy or sell at your own risk absolutely.
For the year ended 31.03.2009, Aji has a paid-up capital of RM60,798,534. The par value of its share is RM1 each. EPS is 31.19 sen and total dividend paid out is 17 sen
Aji has just announced a set of commendable result for the three months ended 31.12.2009. Its EPS at 15.67 sen compares well with the earnings of its previous corresponding period of 9.17 per share. For the 9 months ended 31.12.2009, the EPS is 36.94.
On a conservative estimate, the full year's EPS should not be less than 52.61 sen, assuming that the 4th quarter result is somewhat similar to that of the 3rd quarter. At yesterday's closing price of 3.38, the forward PE ratio is 6.4246.
This stock has a clean balance. As at 31.12.2009, it has reserve of RM141,836,000. Its total current asset is RM135,137,000 while its total current liabilities is only RM21,294,000. Cash & bank balances stand at RM50,574,000. NTA per share is RM3.33. It has zero debt.
The Ajinomoto brand needs no introduction. They are very well known and used by every household in more than 100 countries. At less than RM3.40 per share, this stock is a Sleeping Beauty.
For a more understanding of Ajinomoto, click here to learn more
Disclaimer: The writer is not responsible for any action you take after you have read this article.You buy or sell at your own risk absolutely.
Wednesday, February 10, 2010
The bulls hit back
It's all green at Wall Street as the market closes this morning. The Dow closes at 10,058.64 up 150.25. S & P is up 13.78 at 1,070.52 and gold is now 1,076.70 per ounce, up 11 dollars.
Debt problems in Portugal, Italy, Ireland, Greece and Spain (PIIGS) will probably be solved. The White Knight is the European Union. It has come to the rescue.
So, perhaps we are going to have a Chinese New Year rally as we come closer to THE TIGER. Let's pray and hope for the best.
Debt problems in Portugal, Italy, Ireland, Greece and Spain (PIIGS) will probably be solved. The White Knight is the European Union. It has come to the rescue.
So, perhaps we are going to have a Chinese New Year rally as we come closer to THE TIGER. Let's pray and hope for the best.
Tuesday, February 09, 2010
Market poised to drop further
The Dow lost 103.84 points and broke the 10,000 psychology level early this morning on concern of debt problems in Portugal, Ireland, Greece and Spain (PIGS). Other concerns are the unemployment rate rise in the US and Obama's move to restrict the activities of big banks in America. Of concern also is that China may suddenly cool down. The Dow closed at 9,908.39. This means that it has dropped 817 points or 7.6% since Jan 19, 2010.
Today, here in Malaysia, we are likely to have another down day. Be prepared for another beating!
Today, here in Malaysia, we are likely to have another down day. Be prepared for another beating!
Monday, February 08, 2010
Quotable Quotes
Wide diversification is only required when investors do not understand what they are doing.
Warren Buffett
Warren Buffett
Sunday, February 07, 2010
mYprice
In a race, the winner shot into prominence, while the losers faded away even though fractions of a second separated them.
In life, man against time, speed is what really matters. That's what 4G is all about.
A wonderful idea needs a great company to make things happen.
Comrades, put on your thinking cap, the prize money is there for the taking.
The USD1million challenge is on. Go to mYprice to know more.
Best wishes.
In life, man against time, speed is what really matters. That's what 4G is all about.
A wonderful idea needs a great company to make things happen.
Comrades, put on your thinking cap, the prize money is there for the taking.
The USD1million challenge is on. Go to mYprice to know more.
Best wishes.
Quotable Quotes
When considering a potential investment, the first step is to look for sectors that are experiencing growth.
SmallCapInvestor
SmallCapInvestor
Saturday, February 06, 2010
Quotable Quotes
Stay away from leverage. Nobody ever goes broke that doesn't owe money.
Warren Buffett.
Avoid companies whose debt to equity ratio exceeds 1. The higher the debt, the more risky the company is.
Warren Buffett.
Avoid companies whose debt to equity ratio exceeds 1. The higher the debt, the more risky the company is.
Friday, February 05, 2010
Bear Trap or Bull Trap
What's the difference between a Bear Trap and a Bull Trap?
A Bear Trap is a false signal that a rising trend of a stock or index has changed when actually it has not. Those who short will lose money when the market resumes its uptrend.
A Bull Trap is a false signal that a downtrend in a stock or index has reversed when actually it has not. Those who buy lose money when the downtrend continues.
Simply put, a BearTrap is a trap to trap the bears, whereas a Bull Trap is a trap to trap the bulls. So you see, whether you are a bull or a bear, you can be trapped.
A Bear Trap is a false signal that a rising trend of a stock or index has changed when actually it has not. Those who short will lose money when the market resumes its uptrend.
A Bull Trap is a false signal that a downtrend in a stock or index has reversed when actually it has not. Those who buy lose money when the downtrend continues.
Simply put, a BearTrap is a trap to trap the bears, whereas a Bull Trap is a trap to trap the bulls. So you see, whether you are a bull or a bear, you can be trapped.
Knights
In the corporate world, we have many kinds of knights.
White Knight, Black Knight, Gray Knight and Yellow Knight
Do you know what they are?
A White Knight is a company that makes a friendly offer to a target company that faces a hostile bid. It is best remembered by the phrase: A White Knight to the rescue!
A Black Knight is the opposite of a White Knight. It is a company that makes a hostile bid to takeover a target company. A Black Knight is usually thought of as someone having unpleasant personalities and is normally associated with kidnapping nubile girls, burning villages and slaying peasants.
A Gray Knight or Grey Knight is best thought of as a waiting vulture waiting to scoop up any leftovers. It is actually an unsolicited second bidder in a corporate takeover.
A Yellow Knight is a company that attempts a hostile bid to a takeover but chickens out at the eleven hour and ends up with a friendly merger discussion instead.
White Knight, Black Knight, Gray Knight and Yellow Knight
Do you know what they are?
A White Knight is a company that makes a friendly offer to a target company that faces a hostile bid. It is best remembered by the phrase: A White Knight to the rescue!
A Black Knight is the opposite of a White Knight. It is a company that makes a hostile bid to takeover a target company. A Black Knight is usually thought of as someone having unpleasant personalities and is normally associated with kidnapping nubile girls, burning villages and slaying peasants.
A Gray Knight or Grey Knight is best thought of as a waiting vulture waiting to scoop up any leftovers. It is actually an unsolicited second bidder in a corporate takeover.
A Yellow Knight is a company that attempts a hostile bid to a takeover but chickens out at the eleven hour and ends up with a friendly merger discussion instead.
Thursday, February 04, 2010
A Sleeping Beauty
A Sleeping Beauty is a stock that is undervalued and is ripe for a takeover. Such a stock has a strong balance sheet with plenty of cash in the bank. It is ill-liquid and normally not covered by stock analysts.
Tuesday, February 02, 2010
Value Trap
What is a Value Trap?
A trap is a trap no matter from what angle you look at it.
When the price of a stock drops substantially, many people look at it as undervalued and buy. When the stock eventually declines further, it means that they have walked into a trap. This is called a Value Trap.
A trap is a trap no matter from what angle you look at it.
When the price of a stock drops substantially, many people look at it as undervalued and buy. When the stock eventually declines further, it means that they have walked into a trap. This is called a Value Trap.
Thursday, January 28, 2010
PEG - the way to an undervalued stock
Print
ShareWhat if you could find a stock that not only was undervalued but had the possibility of big growth? I know what you're thinking, that it's nearly impossible to find those stocks. It's the holy grail of investing: a value stock that also has growth.
But here's a little secret. They do exist.
And no, they're not some $1 stock with little volume or other risky fundamentals.
Using the PEG Ratio to Find Great Stocks
Benjamin Graham, long considered to be the "father" of value investing, found that a low price-to-earnings ratio wasn't enough to unearth the true undervalued companies. He looked to the PEG ratio instead which combined both value and growth.
The PEG ratio is calculated by taking the price-to-earnings (P/E) ratio and dividing it by the growth rate.
Screening for PEG ratios under 1.0, which is considered the "magic" number for undervalued stocks, I was able to find dozens of companies that are cheap, have double digit growth and a Zacks Rank of #1 (strong buy) or #2 (buy).
Even though we've seen a huge stock market rally over the last 9 months, companies with low PEG ratios are clearly still out there.
I whittled down that list to 5 companies that are dirt cheap and have outstanding fundamentals.
5 Stocks With Magic PEG Ratios
Deckers Outdoor Corporation (DECK - Analyst Report), the manufacturer of the ever-popular UGG Australia brand of shoes and boots, has a PEG ratio of only 0.56.
The third quarter was a record quarter as UGG sales jumped 19.1% worldwide. Analysts expect 5-year earnings growth of 22.63%. The Zacks #2 Rank (buy) stock has a forward P/E of 12.8.
Force Protection Inc. (FRPT - Snapshot Report) trades with a PEG ratio of 0.57. The company manufactures ballistic- and blast-protected vehicles which have been recently been used in Iraq and Afghanistan.
Given the increased troop deployment to Afghanistan, analysts are projecting 5-year earnings growth of 20%. Force Protection is a Zacks #2 Rank (buy) stock and has a forward P/E of only 11.5.
Corinthian Colleges (COCO - Snapshot Report) hasn't gotten much love from investors even as it has surprised on estimates 4 quarters in a row. The higher education company which offers associates, bachelor's and master's degrees in a host of areas, has seen explosive growth during the recession as people return to school to train for new careers.
Corinthian Colleges has a PEG ratio of just 0.35. In fiscal 2010, Corinthian is projected to grow earnings by 87%. Growth isn't expected to be limited to just this year as analysts see 5-year earnings growth of 24.09%. The Zacks #2 Rank (buy) stock is trading with a forward P/E of just 8.5.
You can see the recent weakness in the stock in the 1-year chart below.
Teva Pharmaceuticals (TEVA - Analyst Report) seems an unlikely candidate to be both a value stock and have growth. But the generic drug giant has expanded its business due to its acquisition last year of Barr Pharmaceuticals.
Analysts expect big earnings growth in 2010 of 34.41% and project five-year earnings growth of 21.66%. The company has a tremendous history of beating estimates. The last time it missed was in 2007.
Teva has a PEG ratio of 0.60. It is trading at 12.9x forward earnings. Teva is also a Zacks #2 Rank (buy) stock.
True Religion Apparel Inc. (TRLG - Snapshot Report) has a strong brand in a hot segment of the clothing market: jeans.
The company has been able to grow even during the rough retail environment of 2009. By the end of the third quarter of 2009, True Religion had 66 retail stores compared to just 36 stores the year before. It forecast having 70 stores by the end of 2009.
True Religion sports a PEG ratio of only 0.23 as analysts expect big 5-year earnings growth of 43.5%. On a purely PEG ratio basis, True Religion is the best value of all of these 5 stocks. The Zacks #2 Rank (buy) stock is trading at just about 10x forward earnings.
The Holy Grail of Investing Does Exist
Value stocks don't have to be boring. Growth stocks don't have to be expensive. The Holy Grail of investing does exist if you dig deep enough. Use the magic of a low PEG ratio to find great growth stocks.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
Tuesday, January 26, 2010
An Understanding of Gold Price
From Wikipedia, the free encyclopedia
The Brown Bottom (or Brown's Bottom) is a term used to describe the period between 1999 and 2002, when gold prices were at their lowest in 20 years following an extended bear market.[1][2][3][4][5][6]
The period takes its name from the decision of Gordon Brown, then the UK's Chancellor of the Exchequer and later to become Prime Minister, to sell approximately half of the UK's gold reserves in a series of auctions. At the time, the UK's gold reserves were worth about US$6.5 billion, accounting for about half of the UK's US$13 billion foreign currency net reserves.[7] The UK government's intention to sell gold and reinvest the proceeds in foreign currency deposits, including euros, was announced on 7 May 1999, when the price of gold stood at US$282.40 perounce.[8] The advance notice of the substantial sales drove the price of gold down by 10% by the time of the first auction on 6 July 1999.[1]With many gold traders shorting, gold reached a low point of US$252.80 on 20 July.[8] The UK eventually sold about 395 tons of gold over 17 auctions from July 1999 to March 2002, at an average price of about US$275 per ounce, raising approximately US$3.5 billion.[8]
To deal with this and other prospective sales of gold reserves, a consortium of central banks - including the European Central Bank and theBank of England - were pushed to sign the Washington Agreement on Gold in September 1999, limiting gold sales to 400 tonnes per year for 5 years.[7] This triggered a sharp rise in the price of gold, from around US$260 per ounce to around $330 per ounce in two weeks,[7] before the price fell away again into 2000 and early 2001. The Central Bank Gold Agreement was renewed in 2004 and 2009.
Gold prices remained relatively low until 2001, when the price began consistently rising in a protracted bull market. By 2007, the price of gold had reached US$675, and the loss to the UK taxpayer was estimated at more the £2 billion, as the euros bought with the proceeds had also risen in value.[1] The gold price briefly passed US$1,000 per ounce in March 2008,[9] before reaching all-time highs of $1,043.77 on 6 October 2009[10] and $1,048.40 on 7 October 2009,[11] by which time the loss to the UK taxpayer was approximately £4 billion. Gold prices continued to rise, passing US$1,100 per ounce in early November 2009.[12]
The decision to sell gold at the low point in the price cycle has been likened to the mistakes in 1992 that led to Black Wednesday, when the UK was forced to withdraw from the European Exchange Rate Mechanism, which HM Treasury has estimated cost the UK taxpayer around £3.3 billion.[1]
Tuesday, January 12, 2010
The Uses of Silver
- Traditional
- Industrial
- Emerging
- Medical Applications
- Mirrors & Coatings
- Solar Energy
- Water Purification
- (Silver has many uses. The ones mentioned above, extracted from The Silver Institute are quite comprehensive.)
Wednesday, January 06, 2010
Useful Tips
To trade or invest successfully, you must have the knowledge to choose, the patience to wait, the will to win, the discipline and courage to implement, and most importantly, the wisdom to act wisely. Of course you must have cash as well.
Monday, January 04, 2010
Gold Analysis
The current bull market in gold is far from over. In fact it is only beginning.
While it has come off its highs, gold is still up 30% this year and, many factors still point to a long term bull trend.
Author: David LevensteinPosted: Monday , 28 Dec 2009
As we see the end of another year, and even though the price of gold has come off its highs of over $1225, the price gold gained some 30% this year. Now, as the dollar rebounds from it's lows, and as most equity analyst are looking for global equities to continue upwards, there is talk that gold has made it's high. While we are all entitled to our opinions, I believe that these analysts fail to see the bigger picture and that the price of gold has a long way to go before this bull market peaks.
From the 1980's high of $850, gold was in a bear market for some 21 years. During those years, the International Monetary Fund (IMF) as well as most central banks around the world tried to sell as much gold as possible. Some of the sales were done with "impeccable" timing such as the sales made by the United Kingdom that sold a large portion of their gold during 1999 and 2002 when the price of gold was around $275. And, as these bankers disposed of their gold holdings, the bullion banks in London and New York kept going short gold by using the futures markets.
The reason for me mentioning this is because I believe there are still many people who are of the mindset of this era and fail to see that since 2001 gold has been in a very strong bull market and still is. And this bull market is far from over. Yet, even to this day, the major bullion banks in New York maintain unusually large short positions of gold. One simple trading rule is to always follow the trend. If they can't see this upward trend, then perhaps they are looking at their charts upside down!
While the price of gold is influenced by many different factors the major driving force has been the lack of confidence people have had in all the major currencies, especially the US dollar. And, as some of these currencies have done well against the US dollar, gold has gone up substantially against practically all these currencies. It has gone up against the US dollar, the British pound, the Canadian dollar, the Chinese Yuan, the Swiss Franc, the Russian Rubble, the South African Rand, and the Mexican Peso, just to mention a few of the currencies.
Now, because the US dollar has lost more than 30% of its value since 2001, there are many investors who believe that the it is set to rebound in a big way during 2010 and thereby cause a drop in the gold price. Frankly, I don't see it. I still see the trend for the US dollar as downward, and while we may expect to see it rally during this down trend, I doubt that we are going to see a complete reversal in trend. How is this going to be possible when the current national debt of the US is around US$ 12 trillion and counting? And, while inflation remains very low worldwide, with these expansionary monetary policies, it is a matter of time before we see inflation increase. And, this will be just another catalyst for the gold price to make more new historic highs. When this happens the current price of gold will look like bargain prices.
As this financial crisis continues, it is expected that more countries will encounter financial problems. Already, there is talk about Ireland, Spain, the UK in addition to Greece and Dubai. And despite the fact the investors usually rush into the US dollar as the ultimate safe haven, it is a matter of time before they realize that things have changed and that the US dollar is not going to be the store of wealth that it once was.
Technicals
It seems that the current correction in the gold price has found good support above $1075. While there may still be more selling pressure in the gold market, I believe that we will see the end of this correction during the month of January.
About the author
David Levenstein is a leading expert on investing in precious metals .He brings over 29 years experience in futures, equities, forex and bullion. And, although he began trading silver through the LME in 1980, when it comes to gold, he has traded gold bullion, gold coins, gold shares, gold ETF, gold funds and gold futures for his personal account as well as for clients. Over the years, David has been published in dozens of publications and has appeared on CNBC and Summit TV (South Africa), and is a regular guest on JSE Direct, a premier radio business channel in Johannesburg, South Africa. He is also a regular commentator on www.kitco.comand www.mineweb.com David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.
For more information go to: www.lakeshoretrading.co.za
Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.
Sunday, December 27, 2009
Gold - the ultimate Currency
Man has an affinity for gold. Since time immemorial, gold has been a much sought-after metal. It is a symbol of wealth and power. People of all ages treat it as precious. The price of gold was about US$35 per ounce in 1946. As of Dec 24, 2009, it was traded at US$1,105.20 per ounce. For comparison, a shop house in 1946 that costs Malayan dollars 20,000 is worth about RM500,000 now.
In the past, the price of gold has been rather slow. But in the last 10 years, it has taken a turn for the better. From below US$300 per ounce it has fairly quickly reached US1,227.50 per ounce. This is highest price of gold so far.
Gold and the US$ do not go the same way. When the US$ appreciates, the price of gold drops. This is evident in the last 3 weeks. Gold was last traded at US$1,105.20 per ounce on Dec 24, 2009. From its peak, it has dropped about 9.979%. Many analysts call it a correction. Is it a correction, and how much will it correct? From my reading of the chart, I would say that it is a correction and it is likely to come down to about US$1000 per ounce before trending up further. So watch it carefully, if you want to invest in gold.
China is now crazy for gold. Until a few years ago, the Chinese in China are not allowed to invest in gold. Now, it's the other way round. The Chinese government wants their citizens to buy and hoard gold. China has a population of 1.3 billion. Imagine how much impact the price of gold will be affected if this group of 1.3 billion people became interested in gold and started to buy and store gold. The recent increase in the demand of gold could be due to this change of heart in China.
Gold has many uses. Chief of which are for jewelry, coinage, dentistry and for the electronic industries. Our ever-upgrading use of technology has actually been a major factor in the recent increases in the demand for gold.
The paper currency everyone uses now is called fiat currency which is sure to devalue over time. Gold on the hand is sure to appreciate.
How do I invest in gold? The fastest and easiest way is to buy jewelry. However, this is not a smart way. Because when you buy jewelry, a certain amount of fees for handling and craftsmanship has been added to the price. This means when you later sell back the jewelry to the shop, you will have to sell it at a discount. Besides this, jewelry also attracts robbers and thieves who may attack you when you least expect it.
Buying bullion or gold bars also carries the same problem of risk. Perhaps opening a Gold Account at Maybank maybe the answer. If you wish to find out more, just give them a ring.
Another way to invest in gold is to buy gold mining stocks. At the New York Stock Exchange, there are many gold mining stocks you can buy. Some of these mining stocks are: Goldcorp Inc. (GG), Eldorado Gold (EGO) and Barrick Gold Corp (ABX).
Silver normally goes hand in hand with gold. Thus, if you believe in gold, you should also consider investing in silver. One silver stock that I like is SilverCorp (SVM) now selling at under US$7. I have bought 1000 shares at 6.46 per share.
Disclaimer: Whatever action you take as a result of reading this article is your own responsibility. You buy or sell at your own risk.
Happy New Year and may 2010 be a Golden Year.
In the past, the price of gold has been rather slow. But in the last 10 years, it has taken a turn for the better. From below US$300 per ounce it has fairly quickly reached US1,227.50 per ounce. This is highest price of gold so far.
Gold and the US$ do not go the same way. When the US$ appreciates, the price of gold drops. This is evident in the last 3 weeks. Gold was last traded at US$1,105.20 per ounce on Dec 24, 2009. From its peak, it has dropped about 9.979%. Many analysts call it a correction. Is it a correction, and how much will it correct? From my reading of the chart, I would say that it is a correction and it is likely to come down to about US$1000 per ounce before trending up further. So watch it carefully, if you want to invest in gold.
China is now crazy for gold. Until a few years ago, the Chinese in China are not allowed to invest in gold. Now, it's the other way round. The Chinese government wants their citizens to buy and hoard gold. China has a population of 1.3 billion. Imagine how much impact the price of gold will be affected if this group of 1.3 billion people became interested in gold and started to buy and store gold. The recent increase in the demand of gold could be due to this change of heart in China.
Gold has many uses. Chief of which are for jewelry, coinage, dentistry and for the electronic industries. Our ever-upgrading use of technology has actually been a major factor in the recent increases in the demand for gold.
The paper currency everyone uses now is called fiat currency which is sure to devalue over time. Gold on the hand is sure to appreciate.
How do I invest in gold? The fastest and easiest way is to buy jewelry. However, this is not a smart way. Because when you buy jewelry, a certain amount of fees for handling and craftsmanship has been added to the price. This means when you later sell back the jewelry to the shop, you will have to sell it at a discount. Besides this, jewelry also attracts robbers and thieves who may attack you when you least expect it.
Buying bullion or gold bars also carries the same problem of risk. Perhaps opening a Gold Account at Maybank maybe the answer. If you wish to find out more, just give them a ring.
Another way to invest in gold is to buy gold mining stocks. At the New York Stock Exchange, there are many gold mining stocks you can buy. Some of these mining stocks are: Goldcorp Inc. (GG), Eldorado Gold (EGO) and Barrick Gold Corp (ABX).
Silver normally goes hand in hand with gold. Thus, if you believe in gold, you should also consider investing in silver. One silver stock that I like is SilverCorp (SVM) now selling at under US$7. I have bought 1000 shares at 6.46 per share.
Disclaimer: Whatever action you take as a result of reading this article is your own responsibility. You buy or sell at your own risk.
Happy New Year and may 2010 be a Golden Year.
Sunday, September 13, 2009
The Biggest Stock Scams Of All Time
by Investopedia Staff, (Investopedia.com)
It is unfortunate, but words often associated with money and fortune are "cheat," "steal," and "lie." Who among us hasn't "accidentally" taken two $500 bills from the Monopoly bank, or forgotten at least once to pay $5 back to a friend? Chances are you were never called on it because your friends trusted you. Just as we trust our friends, we put faith in the investing world. Investing in a stock takes a lot of research, but it also requires us to make a lot of assumptions. For example, we assume reported earnings and revenue figures are correct, and that management is competent and honest. But these assumptions can be disastrous.
IN PICTURES: Stock Scams Slideshow
Understanding how disasters happened in the past can help investors avoid them in the future. With that in mind, we'll look at some of the all-time greatest cases of companies betraying their investors. Some of these cases are truly amazing; try to look at them from a shareholder's standpoint. Unfortunately, these shareholders had no way of knowing what was really happening as they were being tricked into investing.
ZZZZ Best Inc., 1986 - Barry Minkow, the owner of this business, posited that this carpet cleaning company of the 1980s would become the "General Motors of carpet cleaning". Minkow appeared to be building a multi-million dollar corporation, but he did so through forgery and theft. He created more than 10,000 phony documents and sales receipts without anybody suspecting anything. Although his business was a complete fraud designed to deceive auditors and investors, Minkow shelled out more than $4 million to lease and renovate an office building in San Diego. ZZZZ Best went public in December of 1986, eventually reaching a market capitalization of more than $200 million. Amazingly, Barry Minkow was only a teenager at the time! He was sentenced to 25 years in prison.
Centennial Technologies Inc., 1996 - In December 1996, Emanuel Pinez, the CEO of Centennial Technologies, and his management recorded that the company made $2 million in revenue from PC memory cards - the company was really shipping fruit baskets to customers. But the employees then created fake documents to appear as though they were recording sales. Centennial's stock rose 451% to $55.50 per share on the New York Stock Exchange (NYSE). According to the Securities and Exchange Commission (SEC), between April 1994 and December 1996, Centennial overstated its earnings by about $40 million. Amazingly, the company reported profits of $12 million when it really lost about $28 million! The stock plunged to less than $3. Over 20,000 investors lost almost all of their investment in a company that was once considered a Wall Street darling.
Bre-X Minerals, 1997 - This Canadian company was involved in one of the largest stock swindles in history. Its Indonesian gold property, which was reported to contain more than 200 million ounces, was said to be the richest gold mine ever. The stock price for Bre-X skyrocketed to a high of $280 (split adjusted), making millionaires out of ordinary people overnight. At its peak, Bre-X had a market capitalization of US$4.4 billion. But the party ended on March 19, 1997, when the gold mine proved to be fraudulent, and the stock tumbled to pennies shortly after. The major losers were the Quebec public sector pension fund, which lost $70 million; the Ontario Teachers' Pension Plan, which lost $100 million and the Ontario Municipal Employees' Retirement Board, which lost $45 million.
Enron, 2001 – Prior to this debacle, Enron, a Houston-based energy trading company was, based on revenue, the seventh largest company in the U.S. Through some fairly complicated accounting practices that involved the use of shell companies, Enron was able to keep hundreds of millions worth of debt off its books. Doing so fooled investors and analysts into thinking this company was more fundamentally stable than it actually was. Additionally, the shell companies, run by Enron executives, recorded fictitious revenues, essentially recording one dollar of revenue multiple times, thus creating the appearance of incredible earnings figures. Eventually, the complex web of deceit unraveled, and the share price dove from over $90 to less than $0.70. As Enron fell, it took down with it Arthur Andersen, the fifth leading accounting firm in the world at the time. Andersen, Enron's auditor, basically imploded after David Duncan, Enron's chief auditor, ordered the shredding of thousands of documents. The fiasco at Enron made the phrase "cook the books" a household term once again.
WorldCom, 2002 - Not long after the collapse of Enron, the equities market was rocked by another billion-dollar accounting scandal. Telecommunications giant WorldCom came under intense scrutiny after yet another instance of some serious "book cooking". WorldCom recorded operating expenses as investments. Apparently, the company felt that office pens, pencils and paper were an investment in the future of the company and therefore expensed (or capitalized) the cost of these items over a number of years. In total $3.8 billion (yes, with a 'b') worth of normal operating expenses - which should all be recorded as expenses for the fiscal year in which they were incurred - were treated as investments and were recorded over a number of years. This little accounting trick grossly exaggerated profits for the year the expenses were incurred; in 2001, WorldCom reported profits of around $1.3 billion. In fact, its business was becoming increasingly unprofitable. Who suffered the most in this deal? The employees - tens of thousands of them lost their jobs. The next ones to feel the betrayal were the investors who had to watch the gut-wrenching downfall of WorldCom's stock price, as it plummeted from more than $60 to less than $0.20.
Tyco International (NYSE: TYC), 2002 - With WorldCom having already shaken investor confidence, the executives at Tyco ensured that 2002 would be an unforgettable year for stocks. Before the scandal, Tyco was considered a safe blue chip investment, manufacturing electronic components, healthcare and safety equipment. During his reign as CEO, Dennis Kozlowski, who was reported as one of the top 25 corporate managers by BusinessWeek, siphoned hordes of money from Tyco in the form of unapproved loans and fraudulent stock sales. Along with CFO Mark Swartz and CLO Mark Belnick, Kozlowski received $170 million in low-to-no interest loans, without shareholder approval. Kozlowski and Belnick arranged to sell 7.5 million shares of unauthorized Tyco stock for a reported $450 million. These funds were smuggled out of the company, usually disguised as executive bonuses or benefits. Kozlowski used the funds to further his lavish lifestyle, which included handfuls of houses, an infamous $6,000 shower curtain and a $2 million birthday party for his wife. In early 2002, the scandal slowly began to unravel and Tyco's share price plummeted nearly 80% in a six-week period. The executives escaped their first hearing due to a mistrial, but were eventually convicted and sentenced to 25 years in jail.
HealthSouth (NYSE: HLS), 2003 - Accounting for large corporations can be a difficult task especially when your boss instructs you to falsify earnings reports. In the late 1990s, CEO and founder Richard Scrushy began instructing employees to inflate revenues and overstate HealthSouth's net income. At the time, the company was one of America's largest healthcare service providers, experiencing rapid growth and acquiring a number of other healthcare related firms. The first sign of trouble surfaced in late 2002, when Scrushy reportedly sold HealthSouth shares worth $75 million, prior to releasing an earnings loss. An independent law firm concluded the sale was not directly related to the loss, but investors should have taken the warning. The scandal unfolded in March, 2003, when the SEC announced that HealthSouth exaggerated revenues by $1.4 billion. The information came to light when CFO William Owens, working with the FBI, taped caught Scrushy talking about the fraud. The repercussions were swift, as the stock fell from a high of $20 to a close of $0.45 in a single day. Amazingly, the CEO was acquitted of 36 counts of fraud, but was later convicted on charges of bribery. Apparently, Scrushy arranged political contributions of $500,000, allowing him to ensure a seat on the hospital regulatory board.
Conclusion
The worst thing about these scams is that you never know until it's too late. Those convicted of fraud might serve several years in prison, which in turn costs investors/taxpayers even more money. These scammers can pick a lifetime's worth of garbage and not even come close to repaying those who lost their fortunes. The SEC works hard to prevent such scams from happening, but with thousands of public companies in North America, it is nearly impossible to ensure that disaster never strikes again.
Is there a moral to this story? Sure. Always invest with care and diversify, diversify, diversify. Maintaining a well-diversified portfolio will ensure that occurrences like these don't run you off the road, but instead remain mere speed bumps on your path to financial independence.
It is unfortunate, but words often associated with money and fortune are "cheat," "steal," and "lie." Who among us hasn't "accidentally" taken two $500 bills from the Monopoly bank, or forgotten at least once to pay $5 back to a friend? Chances are you were never called on it because your friends trusted you. Just as we trust our friends, we put faith in the investing world. Investing in a stock takes a lot of research, but it also requires us to make a lot of assumptions. For example, we assume reported earnings and revenue figures are correct, and that management is competent and honest. But these assumptions can be disastrous.
IN PICTURES: Stock Scams Slideshow
Understanding how disasters happened in the past can help investors avoid them in the future. With that in mind, we'll look at some of the all-time greatest cases of companies betraying their investors. Some of these cases are truly amazing; try to look at them from a shareholder's standpoint. Unfortunately, these shareholders had no way of knowing what was really happening as they were being tricked into investing.
ZZZZ Best Inc., 1986 - Barry Minkow, the owner of this business, posited that this carpet cleaning company of the 1980s would become the "General Motors of carpet cleaning". Minkow appeared to be building a multi-million dollar corporation, but he did so through forgery and theft. He created more than 10,000 phony documents and sales receipts without anybody suspecting anything. Although his business was a complete fraud designed to deceive auditors and investors, Minkow shelled out more than $4 million to lease and renovate an office building in San Diego. ZZZZ Best went public in December of 1986, eventually reaching a market capitalization of more than $200 million. Amazingly, Barry Minkow was only a teenager at the time! He was sentenced to 25 years in prison.
Centennial Technologies Inc., 1996 - In December 1996, Emanuel Pinez, the CEO of Centennial Technologies, and his management recorded that the company made $2 million in revenue from PC memory cards - the company was really shipping fruit baskets to customers. But the employees then created fake documents to appear as though they were recording sales. Centennial's stock rose 451% to $55.50 per share on the New York Stock Exchange (NYSE). According to the Securities and Exchange Commission (SEC), between April 1994 and December 1996, Centennial overstated its earnings by about $40 million. Amazingly, the company reported profits of $12 million when it really lost about $28 million! The stock plunged to less than $3. Over 20,000 investors lost almost all of their investment in a company that was once considered a Wall Street darling.
Bre-X Minerals, 1997 - This Canadian company was involved in one of the largest stock swindles in history. Its Indonesian gold property, which was reported to contain more than 200 million ounces, was said to be the richest gold mine ever. The stock price for Bre-X skyrocketed to a high of $280 (split adjusted), making millionaires out of ordinary people overnight. At its peak, Bre-X had a market capitalization of US$4.4 billion. But the party ended on March 19, 1997, when the gold mine proved to be fraudulent, and the stock tumbled to pennies shortly after. The major losers were the Quebec public sector pension fund, which lost $70 million; the Ontario Teachers' Pension Plan, which lost $100 million and the Ontario Municipal Employees' Retirement Board, which lost $45 million.
Enron, 2001 – Prior to this debacle, Enron, a Houston-based energy trading company was, based on revenue, the seventh largest company in the U.S. Through some fairly complicated accounting practices that involved the use of shell companies, Enron was able to keep hundreds of millions worth of debt off its books. Doing so fooled investors and analysts into thinking this company was more fundamentally stable than it actually was. Additionally, the shell companies, run by Enron executives, recorded fictitious revenues, essentially recording one dollar of revenue multiple times, thus creating the appearance of incredible earnings figures. Eventually, the complex web of deceit unraveled, and the share price dove from over $90 to less than $0.70. As Enron fell, it took down with it Arthur Andersen, the fifth leading accounting firm in the world at the time. Andersen, Enron's auditor, basically imploded after David Duncan, Enron's chief auditor, ordered the shredding of thousands of documents. The fiasco at Enron made the phrase "cook the books" a household term once again.
WorldCom, 2002 - Not long after the collapse of Enron, the equities market was rocked by another billion-dollar accounting scandal. Telecommunications giant WorldCom came under intense scrutiny after yet another instance of some serious "book cooking". WorldCom recorded operating expenses as investments. Apparently, the company felt that office pens, pencils and paper were an investment in the future of the company and therefore expensed (or capitalized) the cost of these items over a number of years. In total $3.8 billion (yes, with a 'b') worth of normal operating expenses - which should all be recorded as expenses for the fiscal year in which they were incurred - were treated as investments and were recorded over a number of years. This little accounting trick grossly exaggerated profits for the year the expenses were incurred; in 2001, WorldCom reported profits of around $1.3 billion. In fact, its business was becoming increasingly unprofitable. Who suffered the most in this deal? The employees - tens of thousands of them lost their jobs. The next ones to feel the betrayal were the investors who had to watch the gut-wrenching downfall of WorldCom's stock price, as it plummeted from more than $60 to less than $0.20.
Tyco International (NYSE: TYC), 2002 - With WorldCom having already shaken investor confidence, the executives at Tyco ensured that 2002 would be an unforgettable year for stocks. Before the scandal, Tyco was considered a safe blue chip investment, manufacturing electronic components, healthcare and safety equipment. During his reign as CEO, Dennis Kozlowski, who was reported as one of the top 25 corporate managers by BusinessWeek, siphoned hordes of money from Tyco in the form of unapproved loans and fraudulent stock sales. Along with CFO Mark Swartz and CLO Mark Belnick, Kozlowski received $170 million in low-to-no interest loans, without shareholder approval. Kozlowski and Belnick arranged to sell 7.5 million shares of unauthorized Tyco stock for a reported $450 million. These funds were smuggled out of the company, usually disguised as executive bonuses or benefits. Kozlowski used the funds to further his lavish lifestyle, which included handfuls of houses, an infamous $6,000 shower curtain and a $2 million birthday party for his wife. In early 2002, the scandal slowly began to unravel and Tyco's share price plummeted nearly 80% in a six-week period. The executives escaped their first hearing due to a mistrial, but were eventually convicted and sentenced to 25 years in jail.
HealthSouth (NYSE: HLS), 2003 - Accounting for large corporations can be a difficult task especially when your boss instructs you to falsify earnings reports. In the late 1990s, CEO and founder Richard Scrushy began instructing employees to inflate revenues and overstate HealthSouth's net income. At the time, the company was one of America's largest healthcare service providers, experiencing rapid growth and acquiring a number of other healthcare related firms. The first sign of trouble surfaced in late 2002, when Scrushy reportedly sold HealthSouth shares worth $75 million, prior to releasing an earnings loss. An independent law firm concluded the sale was not directly related to the loss, but investors should have taken the warning. The scandal unfolded in March, 2003, when the SEC announced that HealthSouth exaggerated revenues by $1.4 billion. The information came to light when CFO William Owens, working with the FBI, taped caught Scrushy talking about the fraud. The repercussions were swift, as the stock fell from a high of $20 to a close of $0.45 in a single day. Amazingly, the CEO was acquitted of 36 counts of fraud, but was later convicted on charges of bribery. Apparently, Scrushy arranged political contributions of $500,000, allowing him to ensure a seat on the hospital regulatory board.
Conclusion
The worst thing about these scams is that you never know until it's too late. Those convicted of fraud might serve several years in prison, which in turn costs investors/taxpayers even more money. These scammers can pick a lifetime's worth of garbage and not even come close to repaying those who lost their fortunes. The SEC works hard to prevent such scams from happening, but with thousands of public companies in North America, it is nearly impossible to ensure that disaster never strikes again.
Is there a moral to this story? Sure. Always invest with care and diversify, diversify, diversify. Maintaining a well-diversified portfolio will ensure that occurrences like these don't run you off the road, but instead remain mere speed bumps on your path to financial independence.
Friday, September 04, 2009
5 Lessons From The Recession
Lisa Smith
On Wednesday September 2, 2009, 6:56 pm EDT
The bear market of 2008 was a game-changer for many investors. Prior to 2008, a market decline of staggering proportions was a philosophical idea. The Great Depression was a distant event that few people alive today were even around to experience it - and most them were so young when it occurred that it had little or no impact on their personal investment portfolios. (Remember, the 401(k) wasn’t even introduced until 1978, so even the Great Depression did little to derail the retirement dreams of the average investor.) Now that we've lived through a stock market decline in 2008-2009 that not only wiped out a decade's worth of growth but also changed the face of Wall Street forever, what have we learned? Here we look at the top lessons.
1. Risk Matters
Clearly, the amount of risk taken in one's investment portfolio will capture a significantly greater degree of attention in the years ahead. The decline of 2008 taught us that once-in-a-lifetime events can occur. We've also learned that diversification means more than just stocks and bonds. The simultaneous decline of stocks, bonds, housing and commodities is a stark reminder that there are no "sure bets," and that a cash cushion could save the day when times get tough. The blind pursuit of profit with no thought to the downside is a strategy that failed spectacularly.
Moving forward, investors should learn to be leery. Protecting what you've got is just as important as trying to get more. Keeping one eye on risk and the other on growth is a lesson worth remembering.
2. Experts Don't Know Everything
We put a lot of trust in experts, including stock analysts, economists, fund managers, CEOs, accounting firms, industry regulators, government and a host of other smart people. They all let us down. A great many of them lied to us, intentionally misleading us in the name of greed and personal profit. Even index fund providers let us down, charging us a fee for the "privilege" of losing 38% of our money.
While the collapse of long-term capital management in the late 1990s demonstrated that genius does fail, the lesson was seen by all but felt by few. The crash of 2008 was the complete reverse. Few saw it coming, but most felt it arrive. If we've learned anything from the experience, it should be that blind trust is a bad idea and that even experts can't predict the market.
3. You Can't Live on Averages
Market projections, such as those seen in the hypothetical examples included in many 401(k) enrollment kits, always seem to show an 8% return per year, on average doubling your money every eight years. Those pretty pictures make it easy to forget that markets don't usually move in a straight line. All of those projections are based on the idea that investors should buy and hold, but 2008 showed that that strategy doesn't always work, particularly for investors who are approaching retirement.
Next time the markets start to take a dive, people on the cusp of retirement should pay more attention to the possibility of severe declines damaging their odds of leaving the work force any time soon.
What to do? If you see the train coming, get off of the tracks.
4. You Shouldn't Buy What You Don't Understand
The marketplace if filled with complex and exotic offerings that promise the world to investors. Derivatives, special investment vehicles, adjustable-rate mortgages and other new-fangled investments that may be too complex for the average investor racked up huge fees for financial services firms and huge losses for investors. Don't buy what you don't understand is a trite but true sentiment that may be the biggest lesson from the recession.
5. You Can't Delegate Your Future
Far too many investors operate on the "set it and forget it" plan. They dutifully make their biweekly contributions to their 401(k) plans and let the years pass, hoping for magic by the time they retire. Anyone on that plan who expected to retire anytime between 2008 and 2018 or so is likely in for a rude awakening. Set it and forget it failed. Even target-date-funds, which are supposed to automatically move assets to a more conservative stance as retirement approaches, didn't all do the job investors expected them to do. Moving, forward, "pay attention" may be a better mantra than set it and forget it.
The Bottom Line
If your investments are doing well and you get a good run, rebalance to remove risk. If the markets have fallen as far as you can stand, take what you have left and get out. You should know your risk tolerance and know how much damage you have the stomach to take. When you hit your limit, there's no shame in crying "uncle." It's your money, so manage it. Even if you delegate the investment management to experts, educate yourself so that you understand what your money is buying, what your hired experts are doing and what course of action you will take if things don't go your way.
On Wednesday September 2, 2009, 6:56 pm EDT
The bear market of 2008 was a game-changer for many investors. Prior to 2008, a market decline of staggering proportions was a philosophical idea. The Great Depression was a distant event that few people alive today were even around to experience it - and most them were so young when it occurred that it had little or no impact on their personal investment portfolios. (Remember, the 401(k) wasn’t even introduced until 1978, so even the Great Depression did little to derail the retirement dreams of the average investor.) Now that we've lived through a stock market decline in 2008-2009 that not only wiped out a decade's worth of growth but also changed the face of Wall Street forever, what have we learned? Here we look at the top lessons.
1. Risk Matters
Clearly, the amount of risk taken in one's investment portfolio will capture a significantly greater degree of attention in the years ahead. The decline of 2008 taught us that once-in-a-lifetime events can occur. We've also learned that diversification means more than just stocks and bonds. The simultaneous decline of stocks, bonds, housing and commodities is a stark reminder that there are no "sure bets," and that a cash cushion could save the day when times get tough. The blind pursuit of profit with no thought to the downside is a strategy that failed spectacularly.
Moving forward, investors should learn to be leery. Protecting what you've got is just as important as trying to get more. Keeping one eye on risk and the other on growth is a lesson worth remembering.
2. Experts Don't Know Everything
We put a lot of trust in experts, including stock analysts, economists, fund managers, CEOs, accounting firms, industry regulators, government and a host of other smart people. They all let us down. A great many of them lied to us, intentionally misleading us in the name of greed and personal profit. Even index fund providers let us down, charging us a fee for the "privilege" of losing 38% of our money.
While the collapse of long-term capital management in the late 1990s demonstrated that genius does fail, the lesson was seen by all but felt by few. The crash of 2008 was the complete reverse. Few saw it coming, but most felt it arrive. If we've learned anything from the experience, it should be that blind trust is a bad idea and that even experts can't predict the market.
3. You Can't Live on Averages
Market projections, such as those seen in the hypothetical examples included in many 401(k) enrollment kits, always seem to show an 8% return per year, on average doubling your money every eight years. Those pretty pictures make it easy to forget that markets don't usually move in a straight line. All of those projections are based on the idea that investors should buy and hold, but 2008 showed that that strategy doesn't always work, particularly for investors who are approaching retirement.
Next time the markets start to take a dive, people on the cusp of retirement should pay more attention to the possibility of severe declines damaging their odds of leaving the work force any time soon.
What to do? If you see the train coming, get off of the tracks.
4. You Shouldn't Buy What You Don't Understand
The marketplace if filled with complex and exotic offerings that promise the world to investors. Derivatives, special investment vehicles, adjustable-rate mortgages and other new-fangled investments that may be too complex for the average investor racked up huge fees for financial services firms and huge losses for investors. Don't buy what you don't understand is a trite but true sentiment that may be the biggest lesson from the recession.
5. You Can't Delegate Your Future
Far too many investors operate on the "set it and forget it" plan. They dutifully make their biweekly contributions to their 401(k) plans and let the years pass, hoping for magic by the time they retire. Anyone on that plan who expected to retire anytime between 2008 and 2018 or so is likely in for a rude awakening. Set it and forget it failed. Even target-date-funds, which are supposed to automatically move assets to a more conservative stance as retirement approaches, didn't all do the job investors expected them to do. Moving, forward, "pay attention" may be a better mantra than set it and forget it.
The Bottom Line
If your investments are doing well and you get a good run, rebalance to remove risk. If the markets have fallen as far as you can stand, take what you have left and get out. You should know your risk tolerance and know how much damage you have the stomach to take. When you hit your limit, there's no shame in crying "uncle." It's your money, so manage it. Even if you delegate the investment management to experts, educate yourself so that you understand what your money is buying, what your hired experts are doing and what course of action you will take if things don't go your way.
Monday, August 10, 2009
Whither the market now?
Looks like the market will not reverse any time now. If history is any guide, it's odds on that the market will go on from strength to strength. New birds are probably waiting in the wings. Once these newbies come into the market in droves, completely convinced, that "this time it's different," will the market reverse direction. Presently the market is firmly embedded in an uptrend. A glance at the chart will quickly confirm this.
The market is strongest at or near the top, so the saying goes. Today's volume is less than 1.3 billion. This is a far cry from the historic high of more than 4.2 billion shares traded in a single day. The majority of investors and speculators are still not convinced that this market is sustainable. Beaten by the bears of yesteryear, they are still controlled by fear. But as the market gathers momentum positively, this fear will soon give way to greed. When that happens, the market will explode to the upside. All hell will break lose and cautious will be thrown to the wind. Rises will be phenomenal and the next day taken as a certainty of more rises. Everywhere people will be talking about the market. From shoeshine boys and ice cream sellers to company executives and business tycoons, their topic will be the stock market. This will then be a sure sign that the market is coming to an end.
Savvy investors will sense this as a golden opportunity to sell and unload their shares as quickly as possible. The naive and the not-so-experienced will rush in to buy. At the most unexpected moment, the market will reverse. Suddenly, there are no more buyers. Prices will retreat at an alarming rate and soon the market will be back to square one. By then millions and millions of shares would have changed hands. The smart laugh all the way to the banks while unintelligent ones are left holding the "babies".
The stock market is not the place for you to have fun. You need to know fundamental and technical analysis if you want to have any chance to come out unscathed in this jungle where survival is of the fittest.
Good luck.
The market is strongest at or near the top, so the saying goes. Today's volume is less than 1.3 billion. This is a far cry from the historic high of more than 4.2 billion shares traded in a single day. The majority of investors and speculators are still not convinced that this market is sustainable. Beaten by the bears of yesteryear, they are still controlled by fear. But as the market gathers momentum positively, this fear will soon give way to greed. When that happens, the market will explode to the upside. All hell will break lose and cautious will be thrown to the wind. Rises will be phenomenal and the next day taken as a certainty of more rises. Everywhere people will be talking about the market. From shoeshine boys and ice cream sellers to company executives and business tycoons, their topic will be the stock market. This will then be a sure sign that the market is coming to an end.
Savvy investors will sense this as a golden opportunity to sell and unload their shares as quickly as possible. The naive and the not-so-experienced will rush in to buy. At the most unexpected moment, the market will reverse. Suddenly, there are no more buyers. Prices will retreat at an alarming rate and soon the market will be back to square one. By then millions and millions of shares would have changed hands. The smart laugh all the way to the banks while unintelligent ones are left holding the "babies".
The stock market is not the place for you to have fun. You need to know fundamental and technical analysis if you want to have any chance to come out unscathed in this jungle where survival is of the fittest.
Good luck.
Thursday, August 06, 2009
Different colors mean different things
I have a friend, who shall be nameless for obvious reasons as I love her dearly. This friends favourite colour is red. Her car is red, flowers in her garden are red, she wears red, her lipstick is red. Need I say more – everything is red. She is a go-getter and the speed with which she embraces life is past the speed limit. So recently I was very interested to read on how wearing certain colours can reflect our mood.
We do react to colour, and scientists have ascertained that each colour transmits a unique message to the brain which impacts our moods in different ways. Consider the list of colours below and consider how your own clothes and decor can enhance particular moods.
Red
Red is a stimulating and energizing colour. It also enhances self-assurance; what woman in a fiery red dress doesn’t exude confidence. Red will produce an illusion of fantasy. It can promote opposition in others ( you have been warned) If you want to be attention-getting, feel powerful and dominate – wear red. The colour also symbolizes love. It is a hot and passionate color. Red is said to increase the appetite, so you may want to keep it out of the dining room unless you’re having a dinner party. In the bedroom, red light helps sexual activity, and could lead to active nights.
Yellow
To wear yellow will rejuvenate and balance the mind. It wipes out the feeling of heaviness and oppression. Yellow is a sunny and reflective and is a pensive colour. It will lift ones mood to be positive and optimistic.
Orange
This is also the colour of love. It is perhaps a little less serious and a little more fun. Wear it to lift your love life. Orange is a very high energy colour imparting boldness and distinction. Is about being different. Like red and yellow, orange is stimulating. It is an antidepressant and also stimulates the mind. Anyone with a desire to sharpen and add focus and purpose to their life can do with a little orange. ( It is potent, do not add too much)
Green
Green is relaxing and tranquil to the eyes. It reduces stress and brings a feeling of tranquility. It presents natural healing and balance. Wear it to inspire harmony in others and restore your energy. It is the second most popular color. Green is symbolic of faithfulness and unity and hope. It is quick to help others even at their own expense. It represents dependability and tactfulness.
Pink
The colour pink is trendy. Its a girly color and is a symbol of innocence and beauty. Pink has a soothing effect. It also speaks of pure love. It is a romantic color, while red is hot and passionate. It also is bright, vibrant, a strong and healthy color.
Blue
Blue relaxes muscles, lowers blood pressure and was found to have a calming effect on hyperactive children. Blue causes a slight psychological change which results in people feeling less hungry. I don’t think you could call it a weight loss program though. Blue is also regarded to be effective for increasing wisdom energy. It is the color of peace, tranquility and is excellent in increasing spiritual meditation and healing.
Purple
Purple balances the mind, brings serenity and combats fear. It’s connected with psychic powers and helps wake up that aspect. Its also the colour that speaks of royalty. Purple stands out in a crowd.
In conclusion; consider the colours you are wearing – maybe you can create the mood you want to reflect. The chose is yours!
Resource Box:
Lynn Zingel is the author and editor of http://www.icando.co.nz. Here you will find words of http://www.icando.co.nz/ encouragement, inspiration, and challenge to change/ whatever you focus your mind upon
We do react to colour, and scientists have ascertained that each colour transmits a unique message to the brain which impacts our moods in different ways. Consider the list of colours below and consider how your own clothes and decor can enhance particular moods.
Red
Red is a stimulating and energizing colour. It also enhances self-assurance; what woman in a fiery red dress doesn’t exude confidence. Red will produce an illusion of fantasy. It can promote opposition in others ( you have been warned) If you want to be attention-getting, feel powerful and dominate – wear red. The colour also symbolizes love. It is a hot and passionate color. Red is said to increase the appetite, so you may want to keep it out of the dining room unless you’re having a dinner party. In the bedroom, red light helps sexual activity, and could lead to active nights.
Yellow
To wear yellow will rejuvenate and balance the mind. It wipes out the feeling of heaviness and oppression. Yellow is a sunny and reflective and is a pensive colour. It will lift ones mood to be positive and optimistic.
Orange
This is also the colour of love. It is perhaps a little less serious and a little more fun. Wear it to lift your love life. Orange is a very high energy colour imparting boldness and distinction. Is about being different. Like red and yellow, orange is stimulating. It is an antidepressant and also stimulates the mind. Anyone with a desire to sharpen and add focus and purpose to their life can do with a little orange. ( It is potent, do not add too much)
Green
Green is relaxing and tranquil to the eyes. It reduces stress and brings a feeling of tranquility. It presents natural healing and balance. Wear it to inspire harmony in others and restore your energy. It is the second most popular color. Green is symbolic of faithfulness and unity and hope. It is quick to help others even at their own expense. It represents dependability and tactfulness.
Pink
The colour pink is trendy. Its a girly color and is a symbol of innocence and beauty. Pink has a soothing effect. It also speaks of pure love. It is a romantic color, while red is hot and passionate. It also is bright, vibrant, a strong and healthy color.
Blue
Blue relaxes muscles, lowers blood pressure and was found to have a calming effect on hyperactive children. Blue causes a slight psychological change which results in people feeling less hungry. I don’t think you could call it a weight loss program though. Blue is also regarded to be effective for increasing wisdom energy. It is the color of peace, tranquility and is excellent in increasing spiritual meditation and healing.
Purple
Purple balances the mind, brings serenity and combats fear. It’s connected with psychic powers and helps wake up that aspect. Its also the colour that speaks of royalty. Purple stands out in a crowd.
In conclusion; consider the colours you are wearing – maybe you can create the mood you want to reflect. The chose is yours!
Resource Box:
Lynn Zingel is the author and editor of http://www.icando.co.nz. Here you will find words of http://www.icando.co.nz/ encouragement, inspiration, and challenge to change/ whatever you focus your mind upon
Saturday, August 01, 2009
Tongue twisters
Tongue Twisters are great for your tongue-twisting exercise. Below are some for you to try.
I wish to wish the wish you wish to wish, but if you wish the wish the witch wishes, I won't wish the wish you wish to wish.
I see a sea down by the seashore.
But which sea do you see down by the seashore?
If you notice this notice,
you will notice that this notice is not worth noticing.
If you understand, say ""understand"".
If you don't understand, say ""don't understand"".
But if you understand and say ""don't understand"".
how do I understand that you understand. Understand!?
Love's a feeling you feel when you feel
you're going to feel the feeling you've never felt before.
If coloured caterpillars could change their colours constantly could they keep their coloured coat coloured properly?
How may saws could a see-saw saw if a see-saw could saw saws?
A fly and flea flew into a flue,
said the fly to the flea 'what shall we do?'
'let us fly' said the flea
said the fly 'shall we flee'
so they flew through a flaw in the flue.
If Kantie can tie a tie and untie a tie,
why can't I tie a tie and untie a tie like Kantie can.
Fresh fried fish,
Fish fresh fried,
Fried fish fresh,
Fish fried fresh.
Peter Piper picked a peck of pickled peppers.
A peck of pickled peppers Peter Piper picked.
If Peter Piper picked a peck of pickled peppers,
Where's the peck of pickled peppers Peter Piper picked?
She sells seashells by the seashore.
The shells she sells are surely seashells.
So if she sells shells on the seashore,
I'm sure she sells seashore shells.
You can't can cans as well as a canner cans for the cans a canner cans are the best cans.
I wish to wish the wish you wish to wish, but if you wish the wish the witch wishes, I won't wish the wish you wish to wish.
I see a sea down by the seashore.
But which sea do you see down by the seashore?
If you notice this notice,
you will notice that this notice is not worth noticing.
If you understand, say ""understand"".
If you don't understand, say ""don't understand"".
But if you understand and say ""don't understand"".
how do I understand that you understand. Understand!?
Love's a feeling you feel when you feel
you're going to feel the feeling you've never felt before.
If coloured caterpillars could change their colours constantly could they keep their coloured coat coloured properly?
How may saws could a see-saw saw if a see-saw could saw saws?
A fly and flea flew into a flue,
said the fly to the flea 'what shall we do?'
'let us fly' said the flea
said the fly 'shall we flee'
so they flew through a flaw in the flue.
If Kantie can tie a tie and untie a tie,
why can't I tie a tie and untie a tie like Kantie can.
Fresh fried fish,
Fish fresh fried,
Fried fish fresh,
Fish fried fresh.
Peter Piper picked a peck of pickled peppers.
A peck of pickled peppers Peter Piper picked.
If Peter Piper picked a peck of pickled peppers,
Where's the peck of pickled peppers Peter Piper picked?
She sells seashells by the seashore.
The shells she sells are surely seashells.
So if she sells shells on the seashore,
I'm sure she sells seashore shells.
You can't can cans as well as a canner cans for the cans a canner cans are the best cans.
Sunday, June 28, 2009
Five Fatal Flaws of Trading
Posted: 26 Jun 2009 03:03 PM PDT
By Jeffrey Kennedy
Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit – and more importantly, do it consistently. How do they do that?
That’s an age-old question. While there is no magic formula, one of Elliott Wave International’s senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don’t claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person’s life. Maybe you’ll find one in Jeffrey’s take on trading? We sincerely hope so.
The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report
How to Use Bar Patterns to Spot Trade Setups, free.
Why Do Traders Lose?
If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.
Which brings us to the question: Why do traders lose? Or maybe we should ask, ‘How do you stop the Hand?’ Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.
Fatal Flaw No. 1 – Lack of Methodology
If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.
How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.
Fatal Flaw No. 2 – Lack of Discipline
When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.
Fatal Flaw No. 3 – Unrealistic Expectations
Between you and me, nothing makes me angrier than those commercials that say something like, “…$5,000 properly positioned in Natural Gas can give you returns of over $40,000…” Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.
Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.
For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report,
How to Use Bar Patterns to Spot Trade Setups, free.
Fatal Flaw No. 4 – Lack of Patience
The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.
That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.
All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.
How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month … I promise.
I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: ‘Aim small, miss small.’ I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small.”
Fatal Flaw No. 5 – Lack of Money Management
The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.
Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% - 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.
Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).
To overcome this fatal flaw, let me expand on the logic from the ‘aim small, miss small’ movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.
Break the Hand’s Grip
Trading successfully is not easy. It’s hard work … damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.
For more information on trading successfully, visit Elliott Wave International to download Jeffrey Kennedy’s free report, How to Use Bar Patterns to Spot Trade Setups.
Jeffrey Kennedy is the Chief Commodity Analyst at Elliott Wave International (EWI). With more than 15 years of experience as a technical analyst, he writes and edits Futures Junctures, EWI’s premier commodity forecasting package.
If you liked this, also check out: How to Fail as a Trader in 10 Easy Steps
discipline, Elliott Wave, EWI, expectations, free, Jeffrey Kennedy, methodology, money management, patience, trading
By Jeffrey Kennedy
Close to ninety percent of all traders lose money. The remaining ten percent somehow manage to either break even or even turn a profit – and more importantly, do it consistently. How do they do that?
That’s an age-old question. While there is no magic formula, one of Elliott Wave International’s senior instructors Jeffrey Kennedy has identified five fundamental flaws that, in his opinion, stop most traders from being consistently successful. We don’t claim to have found The Holy Grail of trading here, but sometimes a single idea can change a person’s life. Maybe you’ll find one in Jeffrey’s take on trading? We sincerely hope so.
The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report
How to Use Bar Patterns to Spot Trade Setups, free.
Why Do Traders Lose?
If you’ve been trading for a long time, you no doubt have felt that a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to prevent that invisible hand from depleting your trading account funds.
Which brings us to the question: Why do traders lose? Or maybe we should ask, ‘How do you stop the Hand?’ Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the Hand is proportional to how well you understand and overcome the Five Fatal Flaws of trading. For each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.
Fatal Flaw No. 1 – Lack of Methodology
If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.
How to overcome this fatal flaw? Answer: Write down your methodology. Define in writing what your analytical tools are and, more importantly, how you use them. It doesn’t matter whether you use the Wave Principle, Point and Figure charts, Stochastics, RSI or a combination of all of the above. What does matter is that you actually take the effort to define it (i.e., what constitutes a buy, a sell, your trailing stop and instructions on exiting a position). And the best hint I can give you regarding developing a defined trading methodology is this: If you can’t fit it on the back of a business card, it’s probably too complicated.
Fatal Flaw No. 2 – Lack of Discipline
When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the second fatal flaw. If the way you view a price chart or evaluate a potential trade setup is different from how you did it a month ago, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified. The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.
Fatal Flaw No. 3 – Unrealistic Expectations
Between you and me, nothing makes me angrier than those commercials that say something like, “…$5,000 properly positioned in Natural Gas can give you returns of over $40,000…” Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. In addition, they help to create the third fatal flaw: Unrealistic Expectations.
Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. In my opinion, the goal for every trader their first year out should be not to lose money. In other words, shoot for a 0% return your first year. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them – and achieve them – you will fend off the Hand.
For a limited time, Elliott Wave International is offering Jeffrey Kennedy’s report,
How to Use Bar Patterns to Spot Trade Setups, free.
Fatal Flaw No. 4 – Lack of Patience
The fourth finger of the invisible hand that robs your trading account is Lack of Patience. I forget where, but I once read that markets trend only 20% of the time, and, from my experience, I would say that this is an accurate statement. So think about it, the other 80% of the time the markets are not trending in one clear direction.
That may explain why I believe that for any given time frame, there are only two or three really good trading opportunities. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.
All too often, because trading is inherently exciting (and anything involving money usually is exciting), it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.
How do you overcome this lack of patience? The advice I have found to be most valuable is to remind yourself that every week, there is another trade-of-the-year. In other words, don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month … I promise.
I remember a line from a movie (either Sergeant York with Gary Cooper or The Patriot with Mel Gibson) in which one character gives advice to another on how to shoot a rifle: ‘Aim small, miss small.’ I offer the same advice in this new context. To aim small requires patience. So be patient, and you’ll miss small.”
Fatal Flaw No. 5 – Lack of Money Management
The final fatal flaw to overcome as a trader is a Lack of Money Management, and this topic deserves more than just a few paragraphs, because money management encompasses risk/reward analysis, probability of success and failure, protective stops and so much more. Even so, I would like to address the subject of money management with a focus on risk as a function of portfolio size.
Now the big boys (i.e., the professional traders) tend to limit their risk on any given position to 1% - 3% of their portfolio. If we apply this rule to ourselves, then for every $5,000 we have in our trading account, we can risk only $50-$150 on any given trade. Stocks might be a little different, but a $50 stop in Corn, which is one point, is simply too tight a stop, especially when the 10-day average trading range in Corn recently has been more than 10 points. A more plausible stop might be five points or 10, in which case, depending on what percentage of your total portfolio you want to risk, you would need an account size between $15,000 and $50,000.
Simply put, I believe that many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).
To overcome this fatal flaw, let me expand on the logic from the ‘aim small, miss small’ movie line. If you have a small trading account, then trade small. You can accomplish this by trading fewer contracts, or trading e-mini contracts or even stocks. Bottom line, on your way to becoming a consistently successful trader, you must realize that one key is longevity. If your risk on any given position is relatively small, then you can weather the rough spots. Conversely, if you risk 25% of your portfolio on each trade, after four consecutive losers, you’re out all together.
Break the Hand’s Grip
Trading successfully is not easy. It’s hard work … damn hard. And if anyone leads you to believe otherwise, run the other way, and fast. But this hard work can be rewarding, above-average gains are possible and the sense of satisfaction one feels after a few nice trades is absolutely priceless. To get to that point, though, you must first break the fingers of the Hand that is holding you back and stealing money from your trading account. I can guarantee that if you attend to the five fatal flaws I’ve outlined, you won’t be caught red-handed stealing from your own account.
For more information on trading successfully, visit Elliott Wave International to download Jeffrey Kennedy’s free report, How to Use Bar Patterns to Spot Trade Setups.
Jeffrey Kennedy is the Chief Commodity Analyst at Elliott Wave International (EWI). With more than 15 years of experience as a technical analyst, he writes and edits Futures Junctures, EWI’s premier commodity forecasting package.
If you liked this, also check out: How to Fail as a Trader in 10 Easy Steps
discipline, Elliott Wave, EWI, expectations, free, Jeffrey Kennedy, methodology, money management, patience, trading
Tuesday, June 23, 2009
Must Read Quotes from Legendary Investor - Warren Buffett
Warren Buffett is the most successful investor of our time. Some of his quotes which are useful are appended below.
I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
If a business does well, the stock eventually follows.
Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.
It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.
It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it. Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases
Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years
Only when the tide goes out do you discover who’s been swimming naked.
Our favorite holding period is forever.
Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
Time is the friend of the wonderful company, the enemy of the mediocre.
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
Wide diversification is only required when investors do not understand what they are doing.
I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
If a business does well, the stock eventually follows.
Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.
It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.
It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it. Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases
Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years
Only when the tide goes out do you discover who’s been swimming naked.
Our favorite holding period is forever.
Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
Time is the friend of the wonderful company, the enemy of the mediocre.
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
Wide diversification is only required when investors do not understand what they are doing.
Sunday, May 24, 2009
The Potential Value of Keck Seng Berhad
Friday April 6, 2007
Revaluation of Keck Seng assets
By Yeow Pooi Ling
PETALING JAYA: The market has yet to fully appreciate the potential revaluation surplus of Keck Seng (M) Bhd's rich assets, especially its huge land bank in south Johor.
Main board-listed Keck Seng is involved in four core businesses – property development, hotel management, plantations and palm oil milling.
According to the company's 2005 annual report, about 10,000 acres in south Johor are still valued based on prices at the 1980s level.
The surplus from the revaluation of land, especially in Ulu Tiram, Bandar Baru Kangkar Pulai, Pasir Gudang and Tanjong Langsat, could be significant since land and property prices in south Johor have appreciated due to plans to develop the Iskandar Development Region.
In 2005, Keck Seng sold 181 acres of plantation land in Ulu Tiram to the state government for RM45.4mil, or about RM251,000 per acre, which resulted in a one-off gain of RM39.5mil.
Assuming a price of RM251,000 per acre, the total land bank in south Johor could be worth RM2.5bil, which is a surplus of RM2.3bil from the current book value.
This could enhance Keck Seng's net tangible asset (NTA) by a whopping RM9.50 per share.
The company's plantation land bank could eventually be converted for property development, which would fetch better pricing as it is close to the urban area.
Its commercial properties are also valued at below market prices. The net book value of Menara Keck Seng at Jalan Bukit Bintang, for example, was last valued at RM63.5mil, or RM240 per sq ft, in 1996.
The MAS building at Jalan Sultan Ismail was sold last year for RM130mil, or about RM481 per sq ft. Based on the same price per sq ft, Menara Keck Seng could be worth RM127mil, double its current book value.
The company also owns properties in Singapore, which were last valued in the 80s; two hotels in Canada (1997 and 2000) and another hotel in Hawaii, last valued at 2000.
Keck Seng's investment in equities is also priced at a book value lower than the current market price.
According to notes accompanying its fourth quarter results ended Dec 31, 2006, the book value of these investments amounted to RM146.7mil, but based on market value as at end-December, they were worth RM567.2mil.
Keck Seng owns 4.9 million shares in PPB Group Bhd and 2.8 million shares in Chin Teck Plantations Bhd.
When the Financial Reporting Standards 139 (FRS 139) are fully enforced, all companies including Keck Seng would have to mark-to-market their investment in equities, and state the surplus or deficit over cost as earnings or losses in the profit and loss accounts.
As a result, Keck Seng could see a surplus of RM420.5mil on its investment in equities, which could boost its NTA by RM1.74 per share.
Meanwhile, its healthy balance sheet enabled it to buy Regency Tower in Kuala Lumpur last year for RM62.5mil cash. Its net cash stood at RM189mil as at Dec 31, 2006.
Based on a conservative estimation arrived at by adding surpluses from the revaluation of Keck Seng's Johor land bank and its equity investments, the company's total NTA could reach as high as RM15 a share compared with RM4.34 currently.
However, the present share price is below the year's high of RM5.45, while other property stocks with exposure to south Johor have soared to their 52-week highs. The counter rose 22 sen to RM4.66 yesterday.
The above article is not a solicitation that you buy or sell shares in Keck Seng Berhad. You are fully responsible for your own action. You buy or sell at your own risk.
Revaluation of Keck Seng assets
By Yeow Pooi Ling
PETALING JAYA: The market has yet to fully appreciate the potential revaluation surplus of Keck Seng (M) Bhd's rich assets, especially its huge land bank in south Johor.
Main board-listed Keck Seng is involved in four core businesses – property development, hotel management, plantations and palm oil milling.
According to the company's 2005 annual report, about 10,000 acres in south Johor are still valued based on prices at the 1980s level.
The surplus from the revaluation of land, especially in Ulu Tiram, Bandar Baru Kangkar Pulai, Pasir Gudang and Tanjong Langsat, could be significant since land and property prices in south Johor have appreciated due to plans to develop the Iskandar Development Region.
In 2005, Keck Seng sold 181 acres of plantation land in Ulu Tiram to the state government for RM45.4mil, or about RM251,000 per acre, which resulted in a one-off gain of RM39.5mil.
Assuming a price of RM251,000 per acre, the total land bank in south Johor could be worth RM2.5bil, which is a surplus of RM2.3bil from the current book value.
This could enhance Keck Seng's net tangible asset (NTA) by a whopping RM9.50 per share.
The company's plantation land bank could eventually be converted for property development, which would fetch better pricing as it is close to the urban area.
Its commercial properties are also valued at below market prices. The net book value of Menara Keck Seng at Jalan Bukit Bintang, for example, was last valued at RM63.5mil, or RM240 per sq ft, in 1996.
The MAS building at Jalan Sultan Ismail was sold last year for RM130mil, or about RM481 per sq ft. Based on the same price per sq ft, Menara Keck Seng could be worth RM127mil, double its current book value.
The company also owns properties in Singapore, which were last valued in the 80s; two hotels in Canada (1997 and 2000) and another hotel in Hawaii, last valued at 2000.
Keck Seng's investment in equities is also priced at a book value lower than the current market price.
According to notes accompanying its fourth quarter results ended Dec 31, 2006, the book value of these investments amounted to RM146.7mil, but based on market value as at end-December, they were worth RM567.2mil.
Keck Seng owns 4.9 million shares in PPB Group Bhd and 2.8 million shares in Chin Teck Plantations Bhd.
When the Financial Reporting Standards 139 (FRS 139) are fully enforced, all companies including Keck Seng would have to mark-to-market their investment in equities, and state the surplus or deficit over cost as earnings or losses in the profit and loss accounts.
As a result, Keck Seng could see a surplus of RM420.5mil on its investment in equities, which could boost its NTA by RM1.74 per share.
Meanwhile, its healthy balance sheet enabled it to buy Regency Tower in Kuala Lumpur last year for RM62.5mil cash. Its net cash stood at RM189mil as at Dec 31, 2006.
Based on a conservative estimation arrived at by adding surpluses from the revaluation of Keck Seng's Johor land bank and its equity investments, the company's total NTA could reach as high as RM15 a share compared with RM4.34 currently.
However, the present share price is below the year's high of RM5.45, while other property stocks with exposure to south Johor have soared to their 52-week highs. The counter rose 22 sen to RM4.66 yesterday.
The above article is not a solicitation that you buy or sell shares in Keck Seng Berhad. You are fully responsible for your own action. You buy or sell at your own risk.
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