Stock Market Zen

Movin' On Up

2012-01-27T13:11:00.000-06:00

Thanks to Lemuel Craft

We are crazy! My husband just took a job in Texas. Let me explain something to you. We are from Georgia. We both grew up in Georgia. Our families all live in Georgia. Our friends and church are in Georgia. Nobody in our family has ever lived outside of our town, let alone state. So why the move, you ask? We wanted an adventure. Why not try something new before we have kids? If we hate it, we can always move back in a year or so. Since we know nothing about San Antonio, except that’s where Eva Longoria is from (love her!), I mostly relied on google for all of our decisions. For instance, I googled san antonio texas and actually found a security system provider for our new house. I spent countless hours googling and researching the best neighborhoods to live in and the best companies to use for utilities. It was hard, but worth it. We are all settled in now and really enjoying a different way of life: a Texas way of life. No matter what though, we’ll always be Georgia peaches at heart.

Ulta is the Top Performing Chicago-Area Stock for 2011

2012-01-27T12:58:00.001-06:00

The Chicago Tribune recently had an article listing the best-performing 2011 stocks among Chicago area-based companies.

The number 1 performing stock was Ulta Salon, Cosmetics, and Fragrance, Inc. (ULTA). The stock was up 91% in 2011.

Ulta has been called the "Best Buy" of the beauty market. It offers one-stop shopping for cosmetics at every price range, as well as a full-service hair salon.

It is a classic example of a growth stock.

On one hand, some analysts feel it could sell off this year because it trades at 32 times estimated earnings. Also, they may face competition as Walgreens and CVS increase their beauty product offerings, and from women shopping online.

On the other hand, the reason for their success is the fundamental shift of women going from malls to strip malls. Most high-end beauty products used to be bought from department stores. Now, women like the convenience of being able to drive up to an Ulta in a strip mall and find all products in one place.

As a result, Ulta is growing at a fast pace. They currently have 449 stores, and have room to expand - especially on the East Coast and Northwest. They plan to increase their number of stores by 15 - 20% a year until they reach 1,000 stores.

At the same time, they recently experienced a 12.6% increase in sales open at least one year.

In addition, since their stores average 10,000 square feet, they are experimenting with launching 300 square foot stores inside devoted to men's skin care and grooming products.

You can look to buy it on a drop for a GAARP play (Growth at a reasonable price) or buy it now as a growth play. Either way, you could then manage it with the "Stock Trading Riches" system to play the fluctuations, and pump money out to enhance your return, while reducing your risk/cost basis.

Seven Year Return on My "Stock Trading Riches" Portfolio

2012-01-03T22:29:00.000-06:00

For the past 7 years (2005-2011), I have exclusively used my Stock Trading Riches system to manage my portfolio.

While I lagged the market in 2011, I have beaten the S&P 500 over those 7 years:

Year, Me, S&P 500

2005, +13%, +4.91%

2006, +14%, +15.79%

2007, +22%, +5.49%

2008, -40%, -38.49%

2009, +44%, +23.5%

2010, +22%, +13%

2011, -5%, 2.11%

My portfolio has had a cumulative seven-year return of +57.38% vs. +12.32% for the S&P500.

A Successful Niche Business Specializing in Laptop Carts

2012-01-03T00:26:00.000-06:00

As a regular subject in my blog, I like to describe on-line businesses that successfully focus on interesting niches. I believe that the key to success for a small business (both online and off) is to specialize in one area where you can be an expert - and command a higher value.

Today, I'm writing about eLapTopCarts.com, which specializes in selling laptop carts.

Computer accessory websites which sell hundreds of different products, such as cables, are a dime a dozen. Their product offerings are generic, and they provide no value-added service. Thus, all they can compete on is price, and they basically make nickles and dimes from their sales.

eLapTopCarts.com doesn't bother with the $2 cables. Instead, they focus on being the specialist for those businesses that need a laptop cart or other secured laptop storage solution. They even promote their expert customer service on their website's home page.

Thus, eLapTopCarts.com aren't competing as a commodity with regular computer accessory websites - even those that carry a few laptop carts. Instead, they have positioned themselves as value-added experts when it comes to laptop storage and protection. That is all they do and, thus, they carry the widest selection of products in this category, and have a lot of value-added knowledge to assist their customers.

Finished The Yearly Rebalancing of My Portfolio

2011-12-28T00:20:00.001-06:00

Today I finished rebalancing my portfolio, as required by the Stock Trading Riches system. This involved buying or selling each stock that was under or over my constant value target by at least 10% - so that each stock position was now at the constant value.

This year, I did it in two parts: sales last Friday and the buys today. This was because I now keep the majority of the cash portion of my portfolio invested in a no-load short-term bond fund.

After selling the gainers, I then calculated how much more money I would need to complete the buys, and then placed a sell order for the mutual fund on Friday. Today, the mutual fund sale proceeds were in my account, and I used them to complete the buys.

Finding the Right Credit Card For Your Needs

2011-12-23T00:34:00.000-06:00

It can become hard to choose between credit cards because there are just so many options out there. You have choices such as annual fees vs. higher percentages, cash back, airline miles, branded cards, etc.

This is where sites like FinanceGlobe.com are important. This site has specialized sections devoted to credit card information, credit card reviews, and ratings.

Then, if you decide on a credit card you want, you can even apply for a credit card right from the site - saving you time and effort.

The Importance of Stock Market Capitalization For Building A Diversified Portfolio

2011-12-23T00:24:00.001-06:00

Stocks can be separated into 4 groups, according to their market capitalization:

1. micro caps - below $300 million

2. small caps - between $300 million and $1 billion

3. mid caps - between $1 billion and $5 billion

4. large caps - over $5 billion

I talk in more detail about market cap analysis in my book Stock Trading Riches because it's important for investors to allocate their portfolios among all market caps to provide diversification, avoid cyclical returns, and take advantage of "regression to the mean" (e.g. one market cap segment outperforms another, but then they converge).
Market cap is calculated by multiplying the number of shares outstanding by the share price. For example, if stock ABC issued 6 million shares, and the price of each share is $6, then ABC has a market capitalization of $36 million.

In general, micro caps are new companies that are just hitting their stride. Small caps tend to have their infrastructure in place and are in growth mode. Mid caps are big regional or national companies. Large caps tend to be established multinational corporations.

Stocks within each market cap share important characteristics in the areas such as growth rate, risk, dividends, visibility, and international exposure.

A Specialized Investment Bank for Chemical Related Companies

2011-12-15T01:12:00.000-06:00

Today I came across another example of a niche business - where you keep things simple, small, and focused, while being viewed as an expert and commanding higher margins.

It was a niche chemical investment banking firm called the Valence Group.

Normally, we think of investment banking as a business dominated by a few large Wall Street players. But, there are plenty of opportunities for smaller firms that specialize in a certain industry. In this way, they are sought after because, while they don't have the name and reputation of a large firm, they make up for it by knowing the nuances and leverages that come with having inside knowledge and experience.

Being an expert in a certain industry or type of company is especially valuable in tasks such as chemical m&a advisory. In fact, industrial expertise is so important and valuable in mergers and acquisitions that a "judo" move occurs. Instead of being opposed by the force of a Wall Street giant, the Valence Group is asked to partner with them in chemical mergers and acquisitions deals, and thus gets to tap into their power and reputation.

Successful Traders and Investors Keep Their Emotions in Check

2011-12-15T00:56:00.000-06:00

To succeed while trading the stock market, you need to be able to control your emotions. You can't become angry or fearful when you are on a losing streak. Alternatively, you can't become euphoric or greedy when you are winning.

Individual stocks, the stock market itself, and trading systems all run on cycles. They will enter money-making modes some of the time and then, without warning, switch.

The only thing we can predict 100% is that, whatever the current state of the market, it will eventually switch, and then eventually return.

If you jump out of the market when it is down, there is a good chance that you will miss the rebound. Similarly, if the market has been strong for a long time, and has reached fantastic heights, you can't become greedy and buy a lot, because the market may fall.

To keep myself from trading impulsively on emotion (and losing), I developed a simple trading plan that lightens my positions as they reach high levels, and starts scaling in as my positions go down.

As a result, I built up my positions at good prices, and scale out as the market goes higher.

Why Specialized Options Brokers Can Be Better for Options Traders than General Stock Brokerages

2011-12-11T23:57:00.000-06:00

A pure option broker called MyTrack.com offers a big advantage to their customers (options traders) over larger brokerage firms who offer options as a sideline to mainstream stock, bond, and fund investing.

They use their expertise and accumulated years of data to offer analysis and convenient order placement for complex options trade and spreads.

For example, they are the best online options broker at offering automated routines for placing complex options spreads such as butterflies, condors, etc.

Also, because options trades are short term and require active monitoring, MyTrack.com's trading interface is non-browser and was designed for both computer and mobile device access.

Many other options trading software don't offer options traders tools and user interfaces that differ much from their standard stock trading screens.

Stock Trading is Like Football - They Both Require Patience

2011-12-09T00:23:00.001-06:00

When I was younger, and played the early versions of electronic football, I almost always went on fourth down - even from my own side of the field. I wanted to score quickly and often, and rack up points. What usually happened, however, was that I was stopped and ended up losing the game because the opponent always had better field position.

Now, being older and wiser, I always root for the Bears (my hometown team from Chicago) to play safe and conservatively. I would never think about going on fourth down unless it was late in the game and my team was behind. Also, when my team is looking at long 3rd downs (such as 3rd and 15), I don't automatically expect them to try a long pass. I'm ok with them gaining a little yardage, punting it away, and waiting until the next possession.

Similarly, you have to be patent when stock trading. When I was younger, I wanted to see success right away. I ended up losing a lot because I day traded and used futures, options, and margin trading to leverage my way to success.

My profits went up (and my stress down) when I stopped trying to make quick profits. Instead, like football, I started playing safely and conservatively.

Since day trading left me stressed with no edge, I switched to long term trading, which I found suited my personality much better. I also stopped using margin, futures, and options because they masked my edge. They left me dependent on short term luck to avoid margin calls.

I realized that one of the reasons I was impatient to day trade and make profits was that I didn't trust longer term trading systems. So, I took a few years off trading and did nothing but system design and testing until I proved to myself that my long term trading system had an edge.

I designed the system to suit my personality and needs. I then became passionate and excited about trading my system and knew that I would make money over the long term - even if I could not see profits in the short term.

Interesting Sub-Niche Business Within The Niche of Foreign Exchange

2011-12-08T23:21:00.000-06:00

As a regular subject in my blog, I like to describe on-line businesses that operate in interesting niches.

Today, I'm writing about a foreign currency exchange called foreign-currency-uk.com.

Instead of operating like a normal, "dime a dozen" currency exchange, which coverts any major currencies, and depends on volumes of activity, this company has positioned itself as a higher margin consulting service with higher margins.

They provide currency exchange and international money transfer services only into British Pounds and specialize in helping individuals buying real estate in the U.K., as well as businesses that regularly transfer money to the United Kingdom.

By specializing in only this one currency and country, they can focus on becoming a deep expert on all applicable laws, method of operations, and tricks of the trade for Pound conversion. This company can then offer value-added service to its customers to distinguish it from a regular currency exchange.

Successful Investing is Not Just About Good Stock Picking - You Also Need to Buy Low and Sell High

2011-12-08T00:23:00.002-06:00

If you want your portfolio to beat the market over time (generating a better return with less risk), then picking good stocks is just part of the answer. In fact, you don't need to hit home runs by picking the next potential Microsoft or Apple.

You need a trading system that buys low and sells high (Looking for chart patterns is not a way to do it).

Here are 3 reliable ways:

1. Identify a stock that is about to undergo a dramatic shift. This goes beyond studying fundamental data to find good companies. You are also trying to time big moves up or down. This is the hard way to trade because, not only do you need to study the facts, but you have to figure out how the market will respond - not an easy task.

2. Evaluate the stock like a business. You calculate the intrinsic per share value of the company, and compare it to the stock price. Buy when a good company is under valued and sell when the company is overvalued. This is the system that Warren Buffett uses. It requires you to possess a high degree of financial and business knowledge. You also must spend a lot of time doing research. Unless you have an MBA and/or a background as an analyst, it is hard to really get a good edge.

3. Have an automated formula that scales in and out of stocks. This is the method that I use for trading, and I believe it is superior because anyone can use it. You don't need a lot of financial knowledge and time spent in research - only the discipline to stick with the plan.

With this method, you always have a base position in a good company, and increase or decrease the size of your position, depending on the change in the current stock price. Because you are not making a few large trades, errors caused by buying too high or selling too low are self corrected over time.

Opportunities in Bankruptcy

2011-12-06T20:37:00.000-06:00

These days, with the bad economy and aftermath of the housing crash, a lot of people are having trouble paying their bills and the bankruptcy rate has sourced.

As a silver lining, this has generated employment opportunities for people who can handle bankruptcies, as well as credit counseling.

A website called StartFreshToday.com is taking advantage of this need for bankruptcy and credit counseling courses.

They teach a bankruptcy class online - a lot of their students are lawyers interested in bankruptcy and people interesting in getting becoming certified credit counselors.

Their online bankruptcy course also attracts people who are interested in learning about the process - possibly people who have credit problems and just want to learn how to help themselves.

The Scaling Flaw That Affects Trading from Chart Patterns

2011-12-06T20:31:00.000-06:00

Many traders use charts of past prices to trade stocks. They feel that, if the chart makes certain patterns, it can predict what the stock is likely to do in the near future.

One of the problems with chart reading is that pattern recognition is fairly subjective (the human brain likes to organize random data into pictures). One trader may see a pattern where another one doesn't. This makes charting-based trading systems hard to test.

However, studies that have been done using objective definitions of patterns consistently detect no trading advantage. They show that trading on chart patterns are equivalent to buying randomly.

I think that another flaw of chart based systems, which nobody really talks about, is scaling. Chart scaling, in my opinion, is the reason that patterns looks so seductive and accurate in hindsight.

Traders develop patterns by studying charts of big moves that have already occurred. They frequently "see" consolidations and patterns before the big moves.

For example, one pattern is called sideways consolidation - where the market trades almost horizontally in a narrow range. Then, prices eventually "breakout" and make a big up or down move.

The problem is that, after a market's range has expanded, the scaling of the chart changes as well. This scale change smooths out the movements that occurred prior to the big move, and creates the sideways consolidation. Prior to the big move, traders would not have seen the sideways consolidation, because the chart scale would have been different.

Let's assume that the market moved in a range between 10 and 20 for 6 months. The chart would be scaled from 10 to 20, and the chart will show lots of peaks and valleys. After the market moves to 85, the chart now reflects a range from 10 to 85. This compresses the peaks and valleys between 10 and 20. The result is that the 6 months before the move looks like a sideways consolidation pattern.

Unfortunately, you can't trade on patterns that occur after the move.

This is why my trading system does not use charts - only prices. Numbers are objective, and not open to interpretation. I only use charts to find prices for stocks I want to back test using my spreadsheet.

Just In Time For Black Friday and Cyber Monday: Ways to Avoid Identify Theft When Shopping Online

2011-11-25T00:29:00.000-06:00

This Thanksgiving weekend, and continuing until Christmas, millions of people will be shopping - both in person and (increasingly) online.

Here are some tips to protect your identity when shopping online:

1. Proactively monitor your information - consider signing up with an identity theft protection service such as IdentityHawk.

2. Avoid using debit cards. If your credit card is stolen, your liability is capped at $50. However, if someone steals your debit card and drains your bank account, you are only liable up to $50 if you catch it within 2 days. Between 2 - 60 days, your liability is $500. After 60 days, your liability is unlimited.

3. Regularly monitor your credit card statements for fraud. Another good idea is to reserve only one credit card for online purchases.

4. Never use a public computer or public Wi-Fi to shop.

5. Don't pay at sites like eBay with wire transfers. Use a credit card.

6. When shopping, don't click on links in an unsolicited email.

7. Be careful when using shortened URLs from sites like Twitter. Make sure they take you to legitimate sites.

8. When buying from sites like eBay, don't use an unfamiliar escrow service without checking them out.

9. Don't buy from unknown websites that rank high on general search engines. Many of these belong to identity thieves and hackers. Instead, try to search for products on known merchant sites (like Amazon.com or Target.com) or on price-comparison sites (like Shopzilla.com or Price Grabber).

"Stock Trading Riches" Spreadsheet

2011-11-25T00:18:00.000-06:00

Yesterday, I received an email from a "Stock Trading Riches" reader who had a question about the spreadsheet (it is a free download for people who buy the book, in either format - paperback or kindle).

His spreadsheet question was:

In the "number of shares" column I notice that you are checking for a 10% price change between the current years price and the previous years price. This is ok in Year 1 and Year 2 but in the longer term you are not comparing the current years price to the initial Year 1 price. So what could happen is you could have a steady increase/decrease of less than 10% every year over a number of years (cumulatively > than 10% over a number of years) but none of them will trigger any selling/buying as the price is being compared to the prior year. Was the sheet deliberately designed this way?

My answer was:

What the basic system does in real life is only rebalance if the stock has moved 10% or more from the last time it was rebalanced. So, the spreadsheet should actually not compare the current and previous values, or the current and first. Instead, it should compare the current value with the last value where a rebalance occurred.

I don't know how to do that in Excel. So, I put the 10% check between the current and previous row just in case a value isn't 10% apart. But the best way to use the spreadsheet is to manually exclude prices less than 10%.

So, if the monthly prices were 100, 99, 95, 97, 85,... you would put in 100, 85 in the spreadsheet.

Are Debt Collectors Hounding You? Know Your Rights

2011-11-18T23:46:00.001-06:00

During this financial downturn, a lot of people have lost their jobs and are having trouble paying their bills. Many of the businesses they they owe money to will turn their claims over to a debt collection service.

Debt collection agencies specialize in recovering debts. Since they depend on getting people to pay, it is an industry that is ripe for abuse. Many of these agencies employ aggressive individuals with telemarketing skills.

It's important for people to know their rights and debt collection laws. Most states have laws limiting how aggressive collection callers can get.

It's bad enough to receive a call from someone trying to sell you a product, but it's much worse when you are already worried about your finances and expenses. Some of these debt collectors abuse callers by preying on the worry - hounding and abusing people with threats to embarrass them by calling their friends, family, and neighbors.

If you get hounded by an aggressive debt collector, you may want to report it and/or contact an attorney.

The Best Trading Systems Are Beautiful and Simple

2011-11-18T23:39:00.001-06:00

The best trading systems are simple and minimally beautiful - at most, they only use a handful of indicators or formulas, and they implement a simple model of the market.

They don't aim to explain market behavior rigorously and precisely like an economist - instead, the model aims at robustness, where it lets you manage your risk appetite and set the odds in your favor.

The purpose is to give you an edge - like the house has in a casino game. It won't win every trade, but it will have a positive expectation where, over time, you can expect to make more money than you lose, thus letting you build your account over time.

If a trader attempts to develop a complex system that could win every trade, then that is a set-up for failure. As systems get more complex, they have more moving parts - which results in unpredictable interactions and bugs that will eventually cause your system to blow up and suffer heavy losses.

With a simple system, your ego may not be satisfied - it will tell you that you are smart enough to come up with something more accurate, so you will lose less trades - but your bottom line account balance will benefit.

Secured Data Sites For Sharing Confidential Financial Data

2011-11-16T00:03:00.001-06:00

I'm always interested in specialized niche businesses that are successful by doing one thing really well - something that the general public probably doesn't even realize is a genuine need.

Recently, I came across a specialized business which is related to trading and Wall Street.

The business is called Merril DataSite, and they provide Merrill Virtual Data Rooms for capital market / financing functions such as mergers and acquisitions (M&A) activities, business ownership transfers, bankruptcies, restructurings, licensing activities, etc.

Basically, their data sites are useful for any firms that are involved in complex business, financial, and/or legal processes that involve sharing highly confidential documents (such as acquisition due diligence) between groups of financial analysts, lawyers, and / or accountants.

A secure data site process can insure that the documents stay protected from outsiders by limiting access to only authorized individuals, and keeping track of checkouts and revisions.

In an interesting extension of their business, a division of Merrill provides document translation services and language translation services for international clients.

Why I Renamed My Blog To "Stock Market Zen"

2011-11-15T23:51:00.002-06:00

Today, I renamed my blog from "Simple Trading System" to "Stock Market Zen" (however, the URL will stay the same).

I did this because I think that "Stock Market Zen" better reflects my philosophy and approach to the stock market and investing.

The old title described my system accurately, but very generically. A lot of trading systems can be simple - but many of them don't rely on concentrating on the present moment, and relying on the last price instead of a moving average or chart.

Saving for Baby

2011-11-11T22:12:00.000-06:00

The Author of this post is Cheryl Martinez

My husband and I have started saving up money and it’s actually for a really exciting reason – it turns out we’re expecting our first baby! It was unplanned but it’s fine because we’re both getting up there in our 20s anyway and I knew we’d want to have one soon – my mother’s been bugging me since the day we got married. I love that there are so many cute things to buy but boy are they expensive. I actually went online to look at Reliant Energy options in Argyl to save us some money and we traded in the SUV for something more gas practical. I’ve been picking up extra shifts at the diner, too, so that’s nice and I love that I can help out my family! There’s nothing like being the mother of the house and right now that’s all I’m looking forward to. I feel like if I can help out even a little bit then I’m pulling my weight when it comes to this family and that feels good!

How To Use "Stock Trading Riches"

2011-11-11T22:10:00.000-06:00

I hope that my book helps you build a trading system that suits your risk-reward level.

I have exclusively used the basic Stock Trading Riches system on my portfolio for the last 6 years, and I have beaten the S&P 500 over those 6 years:

Year, Me, S&P 500

2005, +13%, +4.91%

2006, +14%, +15.79%

2007, +22%, +5.49%

2008, -40%, -38.49%

2009, +44%, +23.5%

2010, +22%, +13%

My portfolio had a cumulative six-year return of +65.66% vs. +10% for the S&P500.

Of course, my system is flexible and you can use the book's section on rule variations to customize the system. For example, you can increase or decrease the maximum cash percentage at the portfolio level from the basic 30%. You could implement the position growth rule, or the stop loss rule, you could change the rebalance frequency, or experiment with percent triggers.

You can back-test these variations on paper with various stocks and see if they improve the system in ways that make you more comfortable.

Small Online Business That Capitalizes on Tax Code Changes

2011-11-11T14:12:00.001-06:00

I like small internet businesses that succeed by finding a simple need, and then filling it.

In this case, because the U.S. tax codes are so complex, and change so much, the website I'm spotlighting (FastForwardAcademy.com) found a need for tax professionals who want to continue their education and become certified in tax preparation.

They dedicated to providing enrolled agent continuing education to help pass certification tests.

FastForwardAcademy provides study guides, practice tests, and other study material for passing the enrolled agent cpe examination to become IRS certified.

Accountants and other tax professionals are willing to study for and pass the ea cpe exam
because the enrolled agent certification will let them stand out from the competition.

The Return of Dividends

2011-11-11T13:53:00.001-06:00

When I was a short term trader, dividends did not mean anything to me.

When I switched to long term trading, I not only eliminated stress and reduced expenses, but I started to enjoy seeing the dividends depositing into my account like a cash register. Cha-ching!!

Historically, dividends were a big component in the total return of stocks.

Then, in the 1990's, they became only a small component of the total return, and dividends were out of favor. We were in a raging bull market, and companies were pressured to favor growth over dividends.

Investors were hypnotized by the bubble and said: "Why should companies give out dividends (which were fully taxed) rather than invest that money in growing their market share, buying back stock, or buying the stock of other high-flying companies?"

Then, the Dot Com Crash happened, Bush cut the dividend tax in half, and investors pressured companies to pay out dividends.

Since the market has been choppy for the last decade, dividends have returned to their historical place as a big part of investors' total return.

Small Business Bookkeeping In The Cloud

2011-11-10T17:35:00.000-06:00

Most of the "cloud" applications I hear about are aimed at individuals or large companies. Also, the applications tend to be in areas such as sales, marketing, or storage.

But, recently, I read about a company called Outright.com that offers online accounting and bookkeeping software for small businesses.

I think we will see many more small business and financial applications in the cloud because it's a win-win situation for both the vendor and the customer.

For the vendor, they save on the costs of packaging and distributing their software, as well as customer support issues due to installations and customers with different versions of the software.

For small business customers, they don't have to deal with installation, hardware, and operating system requirements. They will always have access to the latest versions and patches. Finally, they can depend on the vendor for security, backups, etc. which would consume a lot of resources at a small company.

"Stock Trading Riches" is now available in Kindle format on Amazon.com

2011-11-10T13:29:00.001-06:00

My book "Stock Trading Riches" is now available in Kindle format on Amazon.com.

Since this is a new format, it's priced for now at $2.99.

They did a good job in the conversion - I saw that the stock tables and programming scripts display well, and the links are click-able.

You don't need to own a Kindle to buy this edition. You can download free readers for PC's, Mac's, iPads, etc.

People Can Make Money In Any Market

2011-11-06T00:32:00.000-05:00

People can find a way to make money in any market - bull, bear, or trend-less.

For example, I have averaged 8%/year in the stock market from 2005 - 2010, a time when the index and most funds lost money. How was I able to do this? Because I had a good trading system, and the discipline to stick with it.

Similarly, most people have written off the housing market the last few years, but there are people who have made money. They had the flexibility to adapt to a changing marketplace. For example, successful real estate investors in places like San Diego switched from outbidding for properties and flipping them to patiently scooping up foreclosures in San Diego, fixing them, and then renting them out or selling them for a reasonable rate of return.

How To Understand My Method for Trading Stocks

2011-11-06T00:22:00.000-05:00

I made a break-through when I shifted my mind-set from digital thinking to analog.

A digital system has two values (i.e. yes or no), while an analog system has a range of values. For example, a computer memory bit can only be off or on, but your oven can be set to a range of temperatures.

Normally, we trade digitally. After we buy a stock, we either hold it or sell it. So, for the trade to make us money, we only have one chance to buy the stock correctly, and then one chance to sell it correctly.

My Stock Trading Riches system is analog. After you initially buy into each stock, fund, or ETF, the constant value rebalancing formula automatically uses feedback to adjust each position (once a year under the basic rules) - buying and selling portions of your holdings. It works like a self-correcting gyro control in a torpedo.

At the portfolio level, the system uses constant ratio rebalancing to add new positions whenever excess cash builds up.

As a result, we are never trying to predict where the market it going. We profit from volatility while having a robust portfolio that can tolerate a few companies going bankrupt. No single company puts the portfolio at risk.

Successful Websites Have A Specific Focus

2011-11-06T00:09:00.001-05:00

The web has matured to where it is really hard to successfully create a general site for the masses.

Instead, successful websites today are opportunistic - they spot a specific need and fill it. The whole design is focused around this goal.

One successful site with a clever focus is the website for Blue Sky Scrubs, which make http://www.blueskyscrubs.com/categories/Scrubs/Scrubs-for-Women/.

Because Blue Sky Scrubs keeps its merchandise selection simple and specialized, their website is clutter-free, well organized, and easy to navigate.

It becomes a snap for visitors to look up whatever types of scrubs clothing they are interested in.

Bought two small cap stocks: APKT and JOBS

2011-11-02T17:21:00.001-05:00

On Monday, I bought two small cap stocks: ACME Packet (APKT) and 51Job (JOBS).

As I mention in the market cap section of my book, I try to balance my portfolio across market caps, since companies in the different caps have different risk / reward profiles, and the caps themselves follow different cycles.

APKT specializes in session border controllers (SBCs), which provide control and security at the edges of IP networks that carry voice, video, and multimedia traffic.

This is a fast growing company, but volatile stock with quartely fluctuations. The stock was up 104% in 2010, but I bought it now because it fell 50% after it missed it's third quarter estimate (due to a large order slipping into the fourth quarter).

I don't mind volatility, of course, since I will manage the position through my stock trading riches system.

51Job, based in Shanghai, is the human resources market leader in China. They provide recruiting, payroll processing, and training to companies across 25 cities in China. The stock fell into the $40's after a peak of $70. They have $10/share in cash. According to small cap guru Jim Oberweis, the stock trades for 15 times his 2012 earnings estimate, and has expected earnings growth of 55%.

When Buying A Stock, Invest in Management

2011-11-02T16:58:00.002-05:00

The Oct. 10 issue of Forbes had an interview with billionaire growth fund manager Ron Baron.

He listed 4 criteria for investing in a new company. He said many others look at the first three, so the fourth one is especially important:

1. The business must have growth opportunities.

2. The business must be appropriately financed.

3. There should be a competitive advantage (i.e. barrier to others from competing with them).

4. There needs to be a trustworthy leader that inspires people to follow them - who will invest in the business, even if it hurts the short term bottom line.

The example he gave was Ralph Lauren. His European franchisee was doing poorly, and Lauren realized that Europe was the next big market. He had to pay such a high price to acquire the franchisee, that it diluted the stock. In the long run, however, the move paid off.

More Halloween Fun

2011-10-31T08:04:00.001-05:00

Ben and Jerry's Halloween interactive website:

http://www.benjerry.com/halloween/

Happy Halloween!

2011-10-31T00:43:00.002-05:00

I publish this link on my blogs every year at Halloween time, it's pretty cool:

http://ak.imgag.com/imgag/product/preview/flash/bws8Shell.swf?ihost=http%3A%2F%2Fak.imgag.com%2Fimgag&brandldrPath=%2Fproduct%2Ffull%2Fel%2F&cardNum=%2Fproduct%2Ffull%2Fap%2F3125133%2Fgraphic1

Small Companies That Provide Business Support Services to Other Small Businesses

2011-10-24T00:10:00.000-05:00

One group of business that I believe are overlooked are small companies that support other small businesses.

For example, many very small businesses can't afford to lease or purchase credit card processing services or POS systems from larger vendors. Instead, they have to turn to small businesses that provide more scaled down and affordable versions.

This is why economic conditions, public policies, etc. that hurt or help one or two types of businesses can cause a positive or negative cycle that affect other small businesses.

In other words, the local business community in any one area is like an eco-system, such as a pond or ocean, where there is a balance and interdependency among businesses.

Learn To Relax and Not Panic In Volatile Stock Markets

2011-10-12T23:56:00.000-05:00

In a wild, see-saw market like we've seen in the last few weeks, it is common for regular people to become worried and confused. In fact, even many professional traders are probably stressed out.

The thing is, there is never any reason to really worry - as long as you don't have to cash out the whole account in the next 5 years and you aren't trading with leverage.

Instead, there are only two things to know: stocks fluctuate, and fluctuations allow you to boost your return by buying low and selling high. When a stock you own goes down, buy some more. If a stock you own goes up, sell into the rise to generate your return.

In fact, buying into declines and selling into rises is the best way to trade - it does not require hindsight, luck, special knowledge or hours of research.

My book stock trading riches gives a complete trading system that follows this strategy. It also provides information on portfolio building, diversification, and choosing stocks and funds.

Even Investment Bankers Can Benefit From Niche Specializations

2011-09-14T00:46:00.000-05:00

Today I came across another example of the benefits of keeping your business's focus simple and small.

It is a niche chemical investment banking firm called the Valence Group.

Normally, we think of investment banking as a business dominated by a few large Wall Street players. But, there are plenty of opportunities for smaller firms that specialize in a certain industry. In this way, they are sought after because, while they don't have the name and reputation of a large firm, they make up for it by knowing the nuances and leverages that come with having inside knowledge and experience.

Being an expert in a certain industry or type of company is especially valuable in tasks such as chemical m&a advisory. In fact, industrial expertise is so important and valuable in mergers and acquisitions that a "judo" move occurs. Instead of being opposed by the force of a Wall Street giant, the Valence Group is asked to partner with them in chemical mergers and acquisitions deals, and thus gets to tap into their power and reputation.

Why Do I Write About Simplicity, Zen, and Taoism on A Financial Blog?

2011-09-13T23:48:00.000-05:00

It might seem strange that someone who likes simplicity and Eastern philosophy would write about them on a business/financial blog.

After all, doesn't business have to do with serious, bottom line math? Isn't Zen and Taoism associated with '60's style hippies and non-capitalist, non profit peace and love?

Actually, Eastern philosophy and thought is rooted in the everyday world - in mundane matters such as commerce. Eastern religions such as Buddhism do not see worship as something you only do once a week in a church or temple. Instead, you "worship" and server the Universe through your daily life and work.

Personally, I feel that any success I have achieved has been because of my passion for simplicity, minimalism, zen, and Taoism. Incorporating elements from each of them into my way of thinking was as valuable (if not more) than any computer, mathematical, or financial training I've ever had.

I've learned the power of "The Middle Way" (rather than sticking to an extreme viewpoint), analog thinking (as opposed to win/lose zero sum games), present moment awareness, the power of concentration, and "resetting" or letting go.

Example of A Niche Business - Foreign Exchange Mitigation

2011-09-11T00:34:00.000-05:00

As a regular subject in my blog, I like to describe on-line businesses that operate in interesting niches.

Today, I'm writing about a currency broker called foreign-currency-uk.com.

Instead of operating like a normal, "dime a dozen" currency exchange, which coverts any major currencies, and depends on volumes of activity, this company has positioned itself as a higher margin consulting service with higher margins.

They provide foreign currency exchange only into British Pounds and specialize in helping individuals buying real estate in the U.K., as well as businesses that regularly make international money transfers to the United Kingdom.

By specializing in only this one currency and country, they can focus on becoming a deep expert on all applicable laws, method of operations, and tricks of the trade for Pound conversion. This company can then offer value-added service to its customers to distinguish it from a regular currency exchange.

Gambler's Fallacy Part 1 - Casinos

2011-09-11T00:14:00.001-05:00

The "gambler's fallacy" occurs in games of chance when a streak of one type of result happens, and the gambler then bets on the reverse. For example, supposed you were betting on coin flips and you waited until 10 heads in a row came up. You then bet on tails, because it's "due" to come up.

This is a fallacy because each flip in independent of one another. The chance of a tail coming up after 10 heads is still 50%. This same line of thinking is false in casino games such as baccarat or roulette. If a long string of black occurs, red is not more likely to come up.

Some gamblers will argue that, if there is no regression to the mean, how can the long term odds (50% in a coin toss) be so stable? In other words, say 100 tails in a row come up, how can the results regress back to 50/50 without a long streak of heads?

But you don't need a run of the other result. Suppose 100 tails in a row came up. If, as an example, the next 1000 flips alternate between head and tail, then the results become 600 tails, 500 heads. The odds have regressed toward the normal 50-50 without a corresponding run of heads.

Niche Specialization Thinking Can Help options brokers and Their Clients

2011-09-03T23:13:00.000-05:00

Most entrepreneurs and small businesses operate inside a niche. They can't operate and diversify across different markets like large companies, but they fail to really take advantage of being "limited" to one area.

"Niche specialization thinking" is a term I use to describe those who do take advantage. They realize that single tasking, and focusing on one small area, allows them to achieve advantages of depth.

I saw an example of such a business in an option broker called MyTrack.com.

Most options brokers do not realize that they can use their years of experience and knowledge to offer a big advantage to their customers (options traders) over larger brokerage firms who offer options as a sideline to mainstream stock, bond, and fund investing.

MyTrack.com, on the other hand, used their expertise and accumulated years of data to offer analysis and convenient order placement for complex options trade and spreads.

For example, they are the only options trading broker that I know of that designed automated routines for easily placing complex options spreads such as butterflies, condors, etc.

Also, because options trades are short term and require active monitoring, MyTrack.com's trading interface is non-browser and was designed for both computer and mobile device access.

Many other options trading brokerage houses don't offer options traders tools and user interfaces that differ much from their standard stock trading screens.

The 401k Backlash

2011-09-03T22:09:00.000-05:00

In the last year or so, I have seen a lot of articles bashing the 401k.

This is interesting because the 401k seemed to be sacrosanct. All through the 1990's and into the 2000's, financial planners and the financial media drilled into our heads about how important it was to save for retirement, and a 401k was great because you "paid yourself first", got the power of tax deferral and, perhaps, got a company match.

But, many 401k plans have drawbacks - the main ones being that the fund choices tend to be poor. This is because the funds don't have to sell themselves to the individual investors. Instead, they just have to sell themselves to the investors' employers.

For the employers, their money and retirement are not on the line, and administering the company's 401k plan is not a core function of the business.

Personally, I think that you should only use a 401k plan if your company matches - and then only put in enough to get the maximum match.

You are better off putting the rest of your investments into Roth IRAs and/or taxable accounts where you can get long term capital gains - which can be canceled through capital loss harvesting (which is explained on page 28 of my book Stock Trading Riches).

Online Bankruptcy Courses

2011-09-03T01:04:00.000-05:00

These days, with the bad economy and aftermath of the housing crash, a lot of people are having trouble paying their bills and the bankruptcy rate has sourced.

As a silver lining, this has generated employment opportunities for people who can handle bankruptcies, as well as credit counseling.

A website called StartFreshToday.com is taking advantage of this need for bankruptcy and credit counseling courses.

They teach a bankruptcy class online - a lot of their students are lawyers interested in bankruptcy and people interesting in getting becoming certified credit counselors.

The online bankruptcy course also attracts people who are interested in learning about the process - possibly people who have credit problems and just want to learn how to help themselves.

Steve Jobs Stepping Down From Apple - Sad End of an Era

2011-09-02T23:27:00.002-05:00

Last week, Steve Jobs announced that he was stepping down as CEO of Apple Computer.

I felt sad when I heard the news because of his recent history of pancreatic cancer and having a liver transplant. If he stays alive, and can contribute as chairman of Apple, then it is ok. But, I'm worried that he might be terminal. I hope I'm wrong.

Apple ran into trouble after Jobs left the first time. But, because of that experience, I have heard that Jobs has gone out of his way to imprint his philosophy into the company.

I really admire Steve Jobs - he has two great qualities for success:

1. He can anticipate what people will want.

2. He practices zen minimalist design - The key isn't what the device does, it's what it doesn't do.

This last quality is especially at risk, now that Jobs has stepped down. It's hard to consistently exercise restraint, and push back on engineers, sales people, and marketers who want to cram in the latest and greatest features found in competitor's products.

Apple under Jobs didn't invent the mp3 music player or the smart phone - but they conquered these markets by concentrating on a few essential requirements and perfected them. These self-imposed limits benefited the consumer by making the devices simple and robust to operate.

Apple's products compared to the competitors' are like haiku vs. serious prose. They touch you like a light breeze and then leave you free, instead of enveloping you.

There's no straining or effort required to integrate Apple's products into your life.

Useful Information Site for Credit Cards

2011-08-22T00:54:00.000-05:00

When it comes to credit cards, there are plenty of options - a whole matrix of annual fees vs. higher percentages, cash back, airline miles, branded, etc.

It can be hard to research which one is right for you.

The nice thing is that there are sites like FinanceGlobe.com, which has specialized sections devoted to credit card information, credit card reviews, and ratings.

Then, if you decide on a credit card you want, you can even apply for a credit card right from the site - saving you time and effort.

Books, DVDs, Courses, and Seminars - Use Them Up Before Buying More!

2011-08-22T00:48:00.002-05:00

Back in 2008, Marketing expert Ed Rivis had a good post about self-improvement materials. He was looking at internet marketing, but this applies to programs in other fields - including investing, sales, and self-help / motivation.

He cautions against investing in more ebooks, courses, and seminars (including his own) until you have fully studied and implemented everything you can out of your existing materials.

This is very good advice. Most people, including me (and, according to Ed, himself), have been guilty of buying an Ebook and course, but then failing to follow through. We have a lot of info on our hard drives and shelves, but have not really taken advantage of it.

It feels comfortable and safe to go from course to course. They entertain us and make us feel as if we are progressing. However, watching a succession of DVDs doesn't make you an expert house flipper. To do that, you need to stop watching, get out of your comfort zone, and actually flip a house.

"Stock Trading Riches" Chapters

2011-08-22T00:31:00.002-05:00

Here are some of the chapter titles from my book "Stock Trading Riches":

My Simple Trading System

Optional Ideas for Customizing The System

Zen and the Art of Speculation

The Hidden Dangers of Investing Too Conservatively

7 Stock Market Secrets for New Investors

Divorce of A Trader - The Perils of Leverage

Why Stocks Are Better Than Mutual Funds

Exchange Traded Fund (ETF) Investment Success - Stick to the Basics!

Combining Fundamental and Technical Analysis for Stock Trading

How to Invest in an Era of High-Inflation and a Weak US Dollar

Deflation and Stock Picking

How Markets React to News and Reports

The Problem With Trading From Charts - The Secret Flaw Technical Analysts Never Talk About

Evaluating Trading Systems Critically - Be Wary of the Well-Placed Example

How to Select IPOs That Are Ready To Explode

Stock Market Cap Analysis - Secrets for Building a Diversified Portfolio

6 Unconventional Metrics for Stock Picking

Bonus 2009 Updates

Bonus Awk, Perl, and Excel Scripts

Changing How People Borrow Money

2011-08-21T00:56:00.002-05:00

The internet is home to a lot of different companies looking to disrupt normal business processes.

One of them, eLoanPersonal, is looking to change how individuals borrow money. They want to position themselves as an alternative to people tapping their credit cards or going through the hassle of applying for a bank loan.

They offer Personal loans with no credit check, payday loans, and Personal loan for poor credit through a quick application and approval process.

Even their website design reflects an easy, hassle - free experience. It is a very minimalist, clutter-free website, with large type - written in a short, simple and easy to understand style.

Don't Be Worried About The Turbulence in The Stock Market

2011-08-21T00:31:00.001-05:00

Simplicity and Focus in Designing Successful Websites

2011-08-13T01:29:00.002-05:00

A key way to succeed in mathematical and technical disciplines such as designing websites is to apply simplicity and focus.

The web has matured to where it is really hard to successfully create a general site for the masses.

Successful websites today are opportunistic - they spot a specific need and fill it.

One successful site with a clever focus is the website for Blue Sky Scrubs, which make http://www.blueskyscrubs.com/categories/Scrubs/Scrubs-for-Women/.

Because Blue Sky Scrubs keeps its merchandise selection simple and specialized, their website clutter free, well organized, and easy to navigate.

It becomes a snap for visitors to look up whatever types of scrubs clothing they are interested in.

The Threat Right Now is Deflation - Not Inflation!

2011-08-11T14:44:00.003-05:00

Too many people are preaching a gloom / doom scenario where the Chinese (and others) reject U.S. bonds because of the debt, we have to raise interest rates, and suffer hyperinflation.

That is just a fantasy at this point.

Since the "downgrade", investors have been piling into treasuries - S&P's view was completely rejected. U.S. bonds are still considered the safest and most liquid investment. There are no other options. Swiss bonds are considered safe, but their market is not nearly large enough.

Right now, we are more in danger of deflation than inflation. There is currently a liquidity trap. Companies are awash in money, but not spending. So there is no demand.

Proof: Bank of New York just started charging negative interest on large cash deposits. Any return the bank can get by investing its balances in overnight / short term paper can't even cover the insurance / overhead of holding deposits!

Even though everyone wants the debt burden eased and don't want any more government stimulus, that might end up being the only course of action. The Fed can't cut interest rates any further. Companies have money, but there is not enough demand for goods/services. Cutting government spending right now will reduce demand. The time to reduce the deficit by spending cuts will be after the economy recovers out of recession.

The S&P Downgrade of U.S. Debt is Over-hyped

2011-08-09T14:37:00.002-05:00

The news media has been making a big deal about the S&P downgrade:

1. The republican candidates are trying to take advantage of it.

2. Yesterday's stock market decline was blamed on the downgrade.

3. CNN had a psychologist on about how people's esteem would be affected.

4. Someone on TV said in 20 years, we will ask "where were you when the U.S. was downgraded?"

The truth, as Paul Krugman has stated on his blog, is that a tarnished ratings firm was quick to downgrade the U.S. - possibly for political reasons, since they botched the numbers.

The downgrade isn't justified because AAA rated countries like France have more debt per GDP and, because borrowing costs are so low, the U.S, could take on another $1 trillion of debt and future debt servicing cost growth would be negligible (0.07% GDP).

On Monday, the market rejected the downgrade because treasury bonds went up. No matter what S&P says, the world knows that U.S. treasuries are the safest and most liquid investment.

Hawaii: How The Internet Makes You A Local

2011-08-07T23:56:00.000-05:00

I went to Hawaii 9 years ago for my honeymoon.

We spent two weeks in the Islands - one week on Kauai, and one week on Maui. After wards, I felt like moving there permanently.

At the least, I figured we would go back there every few years. Well, it's been almost 10 years now. I still would like to go back. Of course, this time, it won't just be my wife and I - we will also go with our two sons.

However, while I haven't actually been able to visit, the internet can make me feel like I was there. I can visit the website of the local newspaper and look at houses for sale at a Hawaii Realtor website.

In fact, you can do this with any place. Using the internet, you can view local maps and the websites of local businesses and towns. This can allow you to learn about the place and /or re-live memories.

Unions Alone Aren't To Blame For The Fiscal Mess of Our Cities and States

2011-08-03T23:39:00.002-05:00

I read an article yesterday about Central Falls, Rhode Island filing for bankruptcy.

A lot of the comments were blaming the unions, and how they have unsustainable benefits and pensions.

I made a comment that the issue can't be entirely blamed on the unions:

To be fair, unions aren't the sole cause of the fiscal problems happening in our cities and states. In many cases, the contracts signed decades ago would have been affordable if the politicians had made the required contributions when they were due, so the amounts would have compounded. (For investment success, "time in the markets" is more important than "timing the markets".)

Instead, they skipped payments and used the money for other entitlements to buy votes. Then, they turned over management of the funds to the investment managers with the best political connections, and let them take investment risks to make up for the missing or late contributions. Instead, this resulted in investment losses and under-performing the markets. Anyone remember the rare coin investing fiasco from Ohio?

Here in Illinois, the lawmakers not only didn't make required contributions, but they kept changing the pension formulas - against the advice of their own actuaries. Now we have a big unfunded pension liability.

Avoid Credit Cards to Control Spending

2011-07-31T01:22:00.000-05:00

In the current difficult economic climate, it has become more important than ever to keep a close track on spending. While credit cards are a convenient option, they often make it seem like we have more money than we do, and in the long run can cause more problems than they solve as interest charges mount up.

One solution is to pay for everything with cash, but that can be inconvenient, and it isn't always a good idea to carry large quantities of cash on shopping trips.

Checks or debit cards tied to checking accounts help limit spending, but also carry the risk of overdraft fees. With banks fighting for every penny of profit they can manage, many have increased overdraft fees, hoping to profit off or your overspending. With a debit card in particular, it is all too easy to forget to subtract purchases from the checking account, or to overestimate available funds.

A relatively easy way to avoid all of these issues is to use a prepaid Green Dot Credit Card. These cards work just like a credit card, and are accepted in nearly all retail outlets.

Rather than drawing funds directly from a checking account, as most traditional debit cards do, the prepaid debit card is funded ahead of time with a certain amount of money. So if you want to spend no more than two hundred dollars on holiday shopping, for example, fund the card with that amount of money. When the limit is reached, the card is no longer usable until more funds are added to.

A good choice for a prepaid debit card is My Green Dot.

Prepaid cards are also popular options for teens, providing a young adult with the experience of budgeting along with the independence to spend money without checking with mom or dad. Parents maintain control though, by limiting the amount of money for which the card is funded.

A prepaid debit card helps you stay within your chosen budget, and eliminates the danger of overdraft fees or high interest rates charged to a credit card. With a prepaid debit card, you can have the ease and convenience of a credit card or regular debit card without risk of overspending.

Art of the Down Sale

2011-07-31T01:16:00.002-05:00

A few years ago, Money Ning had a good post about how restaurants and businesses try to up sell us - for example, by a waitress suggesting wine with our meal.

Back in 2008, I experienced the opposite - one of those rare cases of a down-sell!

It made me feel good!

We had domestic service with Dish Network, and my wife wanted to add an international channel.

I called up to add it, and the guy told me I had to get a second satellite dish for $56.

Somehow we got disconnected (turned out to be lucky for me) and I called back and spoke to a woman.

She told me that, instead of paying $56 for a second dish, they now have a “super dish” that can take the place of both the international and domestic dishes. I could get my domestic dish swapped for this one for free.

So, now, instead of having to pay $56 and having 2 dishes wired up together on the side of my house, I’ll pay nothing, and have only one dish to worry about!

See how powerful the down sell (suggesting ways to save your customer money) can be! Here, I now had a good experience with Dish Network and I'm telling everybody about it.

Walmart and Green Dot Cards

2011-07-31T01:11:00.000-05:00

Recently, I wrote about the new re-loadable prepaid Green Dot Cards. I just found out that one place to buy and reload them is at your nearest Walmart.

They have embraced this new refillable debit card, and carry their own branded version. I think they realized that it is a good financial tool for lower income or frugal people, who make up a large segment of their customers.

The Green Dot Card fills a void between cash, regular debit cards, and credit cards:

1. Unlike a credit card, you are paying with your own money - like regular debit cards and cash.

2. Unlike traditional debit cards, it's not linked to your checking account, s nobody can steal all your money.

3. It is safer than cash. If your card is lost or stolen, you can report it and get your balance moved to a new card.

Don't Underestimate Small Flows of Passive Income

2011-07-31T01:01:00.000-05:00

Monevator is a motivational blog for armchair investors.

It has a good article on Why a little passive income from a side project is worth a lot more than you think.

If your project "only" makes you $5 a day, that is $1,865 per year. But, at an
interest rate of 3%, this is like having more than $60,000 in the bank!

If you create a "set it and forget it" project, and it only trickles in a little bit of money, don't be discouraged. Just work on setting up more of them.

Bad Credit? How To Rebuild Your Credit History

2011-07-30T01:10:00.000-05:00

Did you know that, even if you have bad credit, it may be possible for you to rebuild your credit history and reputation?

There are companies, such as My Green Dot, that issue prepaid, re-loadable credit cards. These prepaid cards will allow you to build discipline, and get used to using cards like cash - only buying what you can afford now.

After building your confidence with My Green Dot, the next step would be a cash advance line of credit. The issuer would probably require you to deposit a certain percentage of the credit line.

The key would be to use some of the advance every month for necessary expenses, and promptly pay off your balances. As you build a history of successful repayments with the issuer, they should slowly wean you towards an unsecured credit line. Your credit report and score will also start to look better.

San Francisco Bridge and Outsourcing: Is 6% Worth it?

2011-07-30T00:42:00.001-05:00

California is replacing the San Francisco - Oakland Bay Bridge. It sounds like the type of large public works project that will provide needed jobs to Americans.

However, it is keeping hundreds of Chinese workers employed. To save money, California outsourced the construction of the bridge to China. The bridge pieces will be shipped to the U.S., and assembled by Americans.

California is risking criticism in three ways:

1. They outsourced jobs.

2. If there are any problems - especially fatal accidents - they will be accused of overlooking China's reputation for poor quality and cutting corners. Not to mention the possibility of damage from overseas shipping and the need to meet strong earthquake standards.

3. According to this New York Times article, in order to not buy American, they gave up federal funds.

Were these risks worth taking? Well, according to this article, the project will cost $7.2 billion, and they expect to save $400 million from having the Chinese do so much work.

That means that the total cost to get the bridge built completely by Americans would have cost $7.6 billion. Thus, California saved about 5.5%

To me, saving only about 6% is not enough compensation for risking quality, safety, earthquake standards, and not employing Americans.

Safer Alternative To Cash

2011-07-29T17:58:00.000-05:00

Carrying around a lot of cash can be dangerous. You may attract a thief or robber, or you could simply lose the money. What if your wallet fell out of your purse or pocket?

One alternative would be to use a regular credit card. But, people with debt or bad credit may not be able to get a credit card. Also, some people avoid credit cards because they don't want to carry a balance and pay high interest rates.

But there is another option: you can use a Green Dot Credit Card - a prepaid, re-loadable card that can be used anywhere a regular Visa/Mastercard is used.

A Green Dot Credit Card has an advantage over regular debit cards that are tied to a bank account because you can control the amount on the card. This way, you can't spend all the money in your account. Your account also can't be emptied if someone gets hold of your card number. This means that the card can give you peace of mind when making online purchases.

This type of prepaid card can help people repair bad credit histories or bankruptcy because, after you use it for a period of time, it can demonstrate to banks that you can budget your money. It might lead to them issuing you a secured credit card, which can start to rebuild your credit history and move you closer to getting a regular credit card.

Platinum Coins and Covered Call Writing: Two Interesting Ideas For Side Stepping the Debt Ceiling

2011-07-29T17:13:00.001-05:00

Today, in his "New York Times" blog, Nobel Prize - winning economist Paul Krugman had a post entitled Lawyers, Coins, and Money, which mentions 2 interesting ideas that the Obama administration could use to avoid a default:

1. There is a statutory limit to the amount of printed dollars that can be in circulation at any one time, but a little known loophole lets the treasury mint platinum coins of any denomination. So, the treasury could create two $1 trillion dollar coins, deposit them in its federal reserve account, and write checks against it.

2. The government could write a call option that allows the purchaser the right (but not obligation) to buy federal government property. This option could be set to expire in 90 days and sold to the Federal Reserve for $2 trillion.

Frugal Cell Phone Solutions

2011-07-29T09:52:00.001-05:00

This is a Sponsored post written by me on behalf of Straight Talk for SocialSpark. All opinions are 100% mine.

Ben Franklin said that "a penny saved is a penny earned", but it is actually more than that. Because of taxes, you need to earn more than a penny to net a penny - so saving as much as you can (without feeling deprived) can help your bottom line for years to come.

Being frugal is defensive - it will help you survive layoffs, bad economies, and retirement.

One area that people can painlessly save money in is cell phone use. There is absolutely no reason to get locked into an expensive long term plan from a cell phone carrier. These carriers keep you from jumping to a cheaper plan by charging expensive early termination fees. They also have hidden costs such as activation.

Hook, line and sinker

As an alternative, you could look into Straight Talk. They offer pay-as-you-go monthly plans that don't tie you down with contracts and hidden fees - such as activation or termination.

real Straight Talk customer

For only $45 per month, you can enjoy unlimited voice, text, and web browsing. Also, you won't skimp out when it comes to the phone and it's features: You can get a fully functioning smartphone (GPS, mp3 player, camera, etc) from a leading manufacturer such as Kyocera or LG.

everything you need

L-1 Identity Solutions (ID) - Another Real Life "Stock Trading Riches" Trade

2011-07-28T23:49:00.003-05:00

On April 23, 2007 (my birthday by coincidence), I bought 101 shares of L-1 Identity Solutions (ID) at $19.61. L-1 makes biometric security products (retinal scanners, etc.) for government agencies, border control, courts, corporations, etc.

On July 25, ID was acquired in an all cash deal for $12/share. Thus, buy and hold yielded -39% for the last 4 years.

However, I managed the position with the Stock Trading Riches system. The formula had me do the following additional transactions:

12/29/2008 buy 230 shares at $6.04

6/4/2009 sell 107 shares at $8.91

12/22/2009 buy 89 shares at $6.40

12/28/2010 sell 145 shares at $11.90

I ended up with a +$18.6% return for 4 years. This is an annualized return of 4.4% - not bad considering that, in hindsight, I bought the stock too high.

This was another example of how my Stock Trading Riches system self-corrects your positions over time.

Frugal Cell Phone Solutions

2011-07-28T19:01:00.001-05:00

This is a Sponsored post written by me on behalf of Straight Talk for SocialSpark. All opinions are 100% mine.

Being frugal is defensive - it will help you survive layoffs, bad economies, and retirement.

Hook, line and sinker

As an alternative, you could look into Straight Talk. They offer pay-as-you-go monthly plans that don't tie you down with contracts and hidden fees - such as activation or termination.

real Straight Talk customer

everything you need

Using Debit Cards To Control Spending

2011-07-28T00:32:00.000-05:00

In the current difficult economic climate, it has become more important than ever to keep a close track on spending. While credit cards are a convenient option, they often make it seem like we have more money than we do, and in the long run can cause more problems than they solve as interest charges mount up.

One solution is to pay for everything with cash, but that can be inconvenient, and it isn't always a good idea to carry large quantities of cash on shopping trips.

Checks or debit cards tied to checking accounts help limit spending, but also carry the risk of overdraft fees. With banks fighting for every penny of profit they can manage, many have increased overdraft fees, hoping to profit off or your overspending. With a debit card in particular, it is all too easy to forget to subtract purchases from the checking account, or to overestimate available funds.

A relatively easy way to avoid all of these issues is to use a prepaid debit card. These cards work just like a credit card, and are accepted in nearly all retail outlets.

Rather than drawing funds directly from a checking account, as most traditional debit cards do, the prepaid debit card is funded ahead of time with a certain amount of money. So if you want to spend no more than two hundred dollars on holiday shopping, for example, fund the card with that amount of money. When the limit is reached, the card is no longer usable until more funds are added to.

A good choice for a prepaid debit card is My Green Dot, from MoneyPak.com

Prepaid cards are also popular options for teens, providing a young adult with the experience of budgeting along with the independence to spend money without checking with mom or dad. Parents maintain control though, by limiting the amount of money for which the card is funded.

A prepaid debit card helps you stay within your chosen budget, and eliminates the danger of overdraft fees or high interest rates charged to a credit card. With a prepaid debit card, you can have the ease and convenience of a credit card or regular debit card without risk of overspending.

How The Debt Ceiling Debate Could Affect Interest Rates

2011-07-28T00:22:00.000-05:00

At the end of the day, after they make points with their followers, I believe democrats and republicans will compromise and raise the debt ceiling.

However, all the current arguments, posturing, and waiting until the last minute has not given confidence to either consumers or the debt rating agencies.

The ratings agencies are quick to downgrade these days, because they are on the defensive about their role in the financial crisis. Critics said that they turned a blind eye to risk.

There is a chance that, even with an agreement to avoid default, at least one ratings agency may downgrade U.S. debt.

How would a downgrade affect ordinary people like you or me?

First, the interest rates that the U.S. must pay would go up. This would make interest on the national debt an even higher component of government spending. Secondly, the treasury rates are used to set all other interest rates. If the treasury rate increases, so would all mortgages, car loans, etc.

Advertising in the Age of Social Media

2011-07-27T23:45:00.000-05:00

The qualities I admire (like simplicity and focus) are now actually crucial for advertising and marketing on the internet. I read about an Advertising Agency that practices this with their clients.

They market themselves as an agency that was created in the digital age - so they are not tied to traditional ways of doing advertising. Even their website is designed around focused simplicity, rather than using fancy graphics.

In the old days, there were only a few TV channels. TV, radio, and newspapers did not have to compete with internet surfing, podcasts, or interactive online games. People had longer attention spans. You could advertise in the mass media and reach a lot of people. You wanted general campaigns that used a lot of flash.

Now, audiences are fragmented because specialized cable channels and websites cannibalize each other. Instead of trying to reach a lot of people with a mainstream commercial, the best way to reach people is to create targeted commercials and run them in these different niche media outlets - including social media.

Also digital media is now interactive, and gives advertisers the tools to track the effectiveness of campaigns.

In this new environment, if you use a standard Advertising Agency that uses the old techniques, your advertising won't be as effective as it could be. For example, you would not want your agency to create bland, generic advertisements that are not targeted to anyone in particular, and then try to run them on different channels.

Instead, this ad agency would probably create an ad that appeals, for example, to fans of cooking shows and run that on the cooking channels. They could create another commercial for home and garden channels, etc.

The ads would be designed to go viral through social media.

This particular agency would also use online tools to track traffic and conversions for online advertising.

How Can Two Unrelated Businesses Cross Promote Each Other?

2011-07-27T23:41:00.000-05:00

Internet Marketing expert James Brausch "retired" to South and Central America, but he consulted with some brick and mortar businesses there and he advised two of them - a taco restaurant and a spa - to cross promote each other.

He had the taco restaurant give out, with each purchase, a coupon good for a free 10 minute back massage. He had the spa give out to each paid customer a coupon for a free burrito.

These coupons were not announced before hand, so customers did not know that they would receive them until after purchase. By only giving out coupons to paid customers, he increased the chance that, when the customer used the free coupon, he would be more inclined to purchase from the other business.

Another Sign The U.S. Tax Code is So Complex - Continuing Education Exams For Tax Preparers

2011-07-24T18:40:00.001-05:00

The tax code is so complex that CPAs and lawyers can build a career just specializing in taxation.

In fact I recently found a website that is dedicated to providing enrolled continuing education to help pass certification tests. I like small internet businesses that succeed by finding a simple need, and then filling it.

In this case, the website (FastForwardAcademy.com) found a need for tax professionals who want to continue their education and become certified in tax preparation.

They provide study guides, practice tests, and other study material for passing the enrolled agent examination to become IRS certified.

Accountants and other tax professionals are willing to study for and pass the ea exam
because the enrolled agent certification will let them stand out from the competition.

I'm On Fox Business

2011-07-19T23:42:00.000-05:00

I was interviewed for a personal finance article on FoxBusiness.com which featured Five Smart Money Lessons From Reality TV. They even mentioned my book "Stock Trading Riches".

They wanted financial experts to describe financial lessons that one can learn from reality TV shows. They used my example of "The Biggest Loser" - where people can learn that, like losing weight, controlling debt and making wise financial choices are skills that improve slowly and steadily. Don't get discouraged if you find it hard to make instant progress.

Securing Virtual Data For Financial Transactions

2011-07-11T16:31:00.000-05:00

I'm always interested in specialized niche businesses that are successful by doing one thing really well - something that the general public probably doesn't even realize is a genuine need.

Recently, I came across a specialized business which is related to trading and Wall Street.

The business is called Merril DataSite, and they provide online data rooms for capital market / financing functions such as mergers and acquisitions (M&A) activities, business ownership transfers, bankruptcies, restructurings, licensing activities, etc.

Basically, their data sites are useful for any firms that are involved in complex business, financial, and/or legal processes that involve sharing highly confidential documents (such as acquisition due diligence) between groups of financial analysts, lawyers, and / or accountants.

A secure data site process can insure that the documents stay protected from outsiders by limiting access to only authorized individuals, and keeping track of checkouts and revisions.

In an interesting, and natural, extension of their business, a division of Merril provides document localization services for international clients.

Should Your Retirement Account(s) Be Invested in Gold?

2011-06-30T11:02:00.000-05:00

How does the idea of a gold IRA or gold 401k sound?

These days, a lot of people are buying gold - pushing it to record highs - because they are worried about inflation, U.S. debt, and the soundness of the U.S. dollar. People are spooked that the dollar is weak versus other currencies, and that grains, commodities, oil, and metals are soaring to new price highs.

Fixed deposits (CDs, savings accounts, treasuries, etc.) are paying almost no interest, and many people are still wary of the stock market.

It's no surprise, therefore, that there is interest in investing retirement assets in gold. People want their retirement assets protected from loss and inflation. Rightly or wrongly, they trust gold to accomplish these tasks.

An online company called GoldCoinsGain.com is glad to help them. They can set up IRA gold and 401k gold accounts. They can even handle gold TRA transfers.

Trading With Charts and Technical Analysis Is A Good Way To Go Broke!

2011-06-30T10:26:00.003-05:00

Every day, thousands of people decide that they want to "trade stocks and make millions". Unfortunately, there are no shortage of snake oil salesmen willing to encourage them, and sell books, and fancy technical indicator and charting software.

The truth is that if you approach the stock market with a small amount of capital, and expect to get rich quickly, you are setting yourself up for failure:

1. You might gamble a large percentage of your money on one or two risky trades.
2. Pay too much in expenses (commissions, fees, books, software, DVDs, seminars, etc).
3. Use technical analysis and charting.
4. Get involved in futures and options.

The stock market is a fantastic way to make your money grow and work for you, but you can't expect it to triple or quadruple a small stake. Instead, count yourself as a good trader or investor if you can reliably generate between 10 - 20% per year consistently.

Please do not buy into hype about technical analysis and charts. Now, you do need to use technical (i.e. price based) rules for deciding buy and sell points, but these are about managing risk and taking profits from positions determined through fundamental analysis. But, you need to beware of depending on charts and technical indicators to predict when stocks will go up or down.

Most of these technical indicators have been recycled and sold since the 1970's, when computers and calculators were available for the first time. "Trading gurus", who make more money from selling systems than actually trading, found they could create indicators that sometimes gave reliable signals, and then could cherry pick these examples for their sales pages.

Chart patterns and technical indicators are seductive because most people - especially successful professionals from other fields - think in an employee mentality - rather than an entrepreneurial mindset. In other words, they want a consistent paycheck and reliability. They want a boss to give them instructions. In this case, the trading guru gives them a well defined job - buy when this line crosses this, or sell if this chart pattern occurs. They don't want to think for themselves, take risks, and invent their own systems.

This is why many doctors, lawyers, and engineers make lousy traders and business owners.

I never consistently made money with traditional technical analysis. I only became consistently successful when I turned unconventional and developed my Stock Trading Riches system.

The Stock Trading Riches formula is technical, in that it works on price, and it is as easy to apply as a moving average or oscillator. But, it is not trying to predict when to buy or sell a position, or trying to predict the market. It's a tool for managing a position - lightening up when the position has increased and bulking up the position when it is down.

I found the secret to trading a stock is not to jump in and out. The key is to always hold core position and mathematically adjust the number of shares, depending on a formula.

The Value of A Good Online Broker

2011-06-30T10:21:00.002-05:00

One of the things you need to be a success at Stock Trading (besides a winning system that suits your personality) is a good Online Broker.

In today's world, there is no reason to use a full service broker that you need to call on the phone. The preferred methods for placing trades are through Online Trading and Mobile Trading. This way, your buy and sell instructions are transmitted instantly and clearly - without the possibility of mis-communication, while you hold down on commission costs.

With so many choices of online brokers, which one is the right one? The answer is the one that feels right for you. You need to feel comfortable with their execution performance, website navigation, order placement, and trading tools.

I recently learned about an online broker called First Trade Securities. Their website looks promising because it has a simple and clutter free design - exactly what you need from your broker. You want to focus on placing the trade, so the site should be in the background and work intuitively.

First Trade lets you inexpensively trade / invest in stocks, options, ETFs, mutual funds, and bonds. You can even open IRA Accounts.

Even Al Qaida is No Match For The Chicago Commodity Pits

2011-06-23T15:59:00.000-05:00

The Department of Justice said that an Al Qaida operative used $27 million to trade commodities - and lost $20 million in 8 months. The DOJ filed a lawsuit to recover the money.

This was commodities trading - which makes even the riskiest stocks look like savings bonds.

Commodities fluctuate less than stocks, but commodities contracts are insanely leveraged - which means that, even if you have a winning trading strategy, you can get wiped out by random fluctuations.

For example, with as little as a $500 deposit, you can trade one corn contract. At a recent price of $6.50 1/4 per bushel, one contract has a value of $32,512.50 (6.5025*5000). That means, using the minimum margin, a 1.5% drop in price would wipe you out.

Of course, you could deposit the full amount ($32,512.50) or even the 50% margin allowed in stocks ($16,256.25) but, in practice, nobody does this because corn prices fluctuate a lot less than a stock price.

The experienced traders in Chicago know that individual traders look at charts and, due to heavy margins, have little tolerance for fluctuations against their positions. So, market makers will buy and sell large quantities to make trends choppy, causing little traders to exit at a loss.

Accounts get depleted quickly through getting "chopped" - repeatedly buying high and selling low - "Death by a thousand cuts".

I've been a full time trader, and I've been burned enough by commodities to stick with stocks, where you can get an edge. The only ones who succeed at trading commodities are insiders whose fathers and grandfathers traded in the CME and CBOT pits.

It's OK To Splurge Once In A While

2011-06-17T23:46:00.002-05:00

I did something impulsive on Wednesday.

I took our 2002 Camry for servicing, and they gave me a 2010 rav4 (small suv) for a loaner. My son and I fell in love with it and got my wife to agree to trade the Camry for it - plus we paid maybe $12k (and an extra $1400 to upgrade to leather seats).

We have the car now, but will drop it off on Monday to get the leather seats installed (they will give us another loaner for 2 days).

This rav4 is now only the third car I've owned.

I owned my Celica for 19 years (1990-2009), so part of me feels like I'm wasting money changing the Camry when it's only 9 years old.

But, I justify the purchase for two reasons:

1. We are pretty frugal in general.

2. Life isn't always about saving money. Sometimes, it is nice to actually spend and enjoy your hard-earned money. I feel good when I drive my new car, and enjoy looking at it.

Who Is To Blame For The United State's High Level of National Debt?

2011-06-08T13:02:00.000-05:00

There is plenty of blame to go around for our present debt situation:

1. Under Bush, we cut taxes and started 2 wars - and Obama continued this while
adding another 1/2 war (air strikes on Libya). During WWII, the folks at home made sacrifices, such as rationing, etc. that made them feel connected to the war effort. While we no longer need rationing, we should have ended the tax breaks after 911 - when we went to war.

2. The bottom line cause of the financial crisis was Greenspan pumping too much money trying to lessen the effects of the dot com crash. Booms and busts are a natural cycle in capitalism, and we keep trying to use the government to smooth out the down cycles.

3. Finally, we have had historically low interest rates for the last few years. While responsible homeowners locked in low, fixed rate 30 year mortgages, the government is still mostly stuck with short term debt. We should have been issuing less short term bonds and lots of 20, 30, and even 50 year bonds.

Shop Around For Money Market Rates

2011-06-08T12:57:00.000-05:00

The government has kept interest rates low for an extended period of time in an attempt to stimulate the economy out of a recession. They are hoping that people and companies will be able to borrow money cheaply and put it to work growing businesses and jobs.

The problem with keeping interest rates low is that it hurts fixed rate investments such as CDs and money market accounts. People who put money into these types of accounts want the safety and reliability of a constant rate of return but, at the current low rates, many of these accounts are actually losing money relative to inflation.

In other words, if the account gains 0.1% for the year, but inflation was at 3%, then the account balance will lose 2.9% of its spending power.

Fortunately, even though we as individuals can't increase interest rates, we can compare money market rates online. There are a lot of money market funds that have taken a chance by avoiding having real world store fronts and advertising. Instead, these companies use the savings to offer higher interest rates and depend on word of mouth and internet searches for customers to find them.

This is a gamble that is paying off because, in recent years, a larger percentage of people are now web savvy. They are comfortable with doing the legwork to compare money market rates online, and find the companies offering better rates.

So, it's still possible to get somewhat decent money market rates if you are willing to invest a little effort.

Learning About Business by Surfing Around

2011-06-07T12:34:00.001-05:00

Sometimes it's fun to explore the internet without any plans - just following links and "googling" interesting phrases.

This morning, I started off reading an article about an American sumo wrestler who set a world record for heaviest finisher of a marathon.

One of the comments was a joke that the sumo guy would cause a shortage in Gold Bond medical powder - in other words, a joke about chafing.

I remember hearing commercials for Gold Bond years ago so, feeling nostalgic, I googled it and went to the Wikipedia site.

From there, I learned that a lot of cool products from the past - like Gold Bond, Icy Hot, Selsun Blue, etc. are made in Chattanooga Tennessee by Chattem, a 100 year old company.

The Chattem Wikipedia entry mentioned that they are a subsidiary of French drugmaker Sanofi-Aventis, which sounds very interesting. An old time Chattanooga company owned by a French drugmaker.

It makes me think of the "Beverly Hillbillies"'s Jed Clampett mingling with a French aristocrat. So, I googled the merger.

Turns out that Sanofi bought Chattem in 2009 on December 21 (my brother's birthday). They paid $1.9 billion - offering $93.50/share, which was a 34% premium over the closing price.

From an analysis point of view, it looks like it was a good deal. Chattem is in the top 10 for consumer products in the U.S. (and has a higher profit margin than leaders Johnson & Johnson and Proctor & Gamble), but they don't have much market overseas. Sanofi is losing patent protection from many drugs, and wants the stable earnings from consumer products to make up the lost income. Also, they want a sales network to sell an over-the-counter version of Allegra in the U.S.

So, it was a win-win deal for everyone.

Finally, I saw an interesting article on the Wall Street Journal that 2 French businessmen in Brussels got charged by the SEC for insider trading on the Sanofi-Chattem deal. They found out about the deal before hand, bought options (expiring on Jan 15) on Chattem stock, and sold the options right after the merger was announced for a $4.2 million profit.

So I had a fun and educational "surf session" all because of a Sumo running (actually walking) a marathon :-)

Fw: Bank of America Foreclosed on

2011-06-06T17:58:00.002-05:00

A couple who had no mortgage on their home got erroneously served with foreclosure by Bank of America. They won their case and were awarded about $2500 for lawyer fees. BofA wasn't paying, so they got a foreclosure order from court against the local branch and showed up with sheriff's deputies...

http://news.yahoo.com/s/time/20110606/us_time/httpmoneylandtimecom20110606homeownerforeclosesonbankofamericayesyouheardthatrightxidrssfullnationyahoo

"22,000 Tears" Visa Blunder - Should the U.S. Give Visas Through A Diversity Lottery?

2011-06-06T13:57:00.000-05:00

Today, Yahoo had an article about how this year's diversity lottery experienced a computer glitch and awarded 90% of the first 22,000 (out of 50,000 openings) to people who applied in the first couple of days.

These people were elated that they won, and then crushed when the State Department said they will re-run the lottery. Immigration lawyers say they should honor these 22,000 results and randomly award the remaining openings from people who applied later.

I think that, since the government messed up, they should let these 22,000 people have their visas, remove their names from the pool, and re-run the lottery fairly (picking a new 50,000 from the left over pool).

But, like usual, I find the comments on Yahoo to be just as interesting as the articles. In this case, a lot of people think the whole idea of a random lottery to be dumb.

I actually like it and posted my own comment defending it:

Immigration to the United States has been a big factor in us being the world's only super power. In fact, there are some who argue that, going forward, our biggest competitive advantage against China and India is that we welcome immigrants and new ideas.

I think the Visa lottery is a good idea because:

1. It involves a relatively small amount of visas compared to those given out by other programs, that target skilled and/or wealthy immigrants.

2. The visas from those programs end up going to immigrants from just a handful of countries.

In other word, you can't centrally plan creativity and innovation. I think we are richer if we give artists, poets, dreamers, etc. from other countries a shot at 5% of the visas, rather than letting them all go to high tech companies bringing in computer workers and engineers from India, China, etc.

From my comment, please don't get the idea that I don't like computer consultants from India. My point is that they are well-represented. But, it is in the best interests of the U.S. to distribute a small percentage of visas randomly to people from countries that are under-represented from other visa programs, to diversify the pool.

This way, we increase our chances for allowing in someone who ends up contributing to our society, but would never have had a chance competing against skilled workers.

Dog Blown Away By Tornado Makes It Back Home

2011-05-26T23:30:00.001-05:00

They found the dog on the front porch after 2 ½ weeks – he crawled back on 2 broken legs:

http://news.yahoo.com/s/yblog_thelookout/20110526/us_yblog_thelookout/dog-with-two-broken-legs-finds-owner-after-storm

Canadian Drug Site

2011-05-24T00:47:00.000-05:00

Many Americans buy their medicines in Canada. They don't have much of a choice - either because of no insurance, or because of low income.

Frequently, they have chronic conditions which means that going without medicines are not a viable option. For example, moany U.S. patients going to Canada are going to buy nexium and buy liptor.

They would rather buy medicine from a reputable pharmacy in Canada, rather than take their chances with an unlicensed, underground source from the U.S.

Fortunately, rather than having to physically travel, there is now a Canada drugs website called CanadaDrugCenter.com that lets you order drugs from Canada.

I think the website is a great idea. Americans are already traveling to Canada to buy medicine, so this website isn't trying to start a new trend. Instead, it is creating a convenient, online alternative to a real world occurrence.

Clever Examples of Long Term Strategy To Doing Business With China and Asia

2011-05-23T22:07:00.000-05:00

I read a recent article in Forbes about Peabody Energy. In 2003, when he became COO, Greg Boyce foresaw that China, with it's incredible growth rate, would switch from being a net exporter to a net importer of coal.

When he became CEO in 2005, he spun off the company's Appalachian mines and invested in Australian coal mines so he could sell to China. Since he has been CEO, the shares are up 10 fold and non-U.S. operations now provide 50% of Peabody's earnings (up from 2%).

The Forbes article mentioned 2 of Boyce's actions that really impressed me as clever, and long term strategic:

1. Before China became a net importer of coal, he laid the groundwork by opening a Beijing office and a trading desk, so he could build trust and relations.

Also, as I previously mentioned, he invested in Australian mines because Australia has more coal than they need domestically, and are close to Asia. He purposely invested in Australian mines that had access to ports, so he could keep logistic costs down.

2. The next big thing is Mongolia. In the Gobi Desert, they have the world's largest untapped deposits of metallurgical coal (better quality then the subbituminous coal found in the U.S.), and are starting to shop around development rights. Besides Peabody, lots of American, Chinese, European, and Russian companies are vying to develop these fields.

To position themselves for this opportunity, Peabody wants to have a local staff of experienced managers. So, today, they are investing in Mongolia by hiring Mongolian engineers to work in their Wyoming coal mines, and are sending Mongolian students to U.S. engineering schools.

Leave Ronald McDonald Alone!

2011-05-23T00:35:00.001-05:00

A lot of healthy eating activists are taking aim at McDonalds and asking them to retire Ronald McDonald. They think he unfairly advertises to children.

The truth is that these activists will always go after McDonalds about something. If Ronald goes away, they will target happy meals next. They just don't like McDonalds.

But McDonalds is a successful business that makes lots of money for its shareholders by giving people what they want. Who are a few activists to tell millions of Americans that you can't be trusted to pick your own restaurant, so we'll go after McDonalds to protect you?

When San Francisco banned Happy Meal toys, my wife thought that's a good thing, because my son always wants Happy Meals, and sometimes I give in. But I told her that is completely wrong. I am the parent - it is my issue if I give in to my son. Parents should not be hiding behind the government because they can't say no to their children.

Having a few "experts" deciding which business are worthy sounds like Communism and central planning. It's doomed to fail (while capitalism is very robust and adaptable) because millions of "average" minds are collectively better at determining markets than a "smart" few.

9 Ways To Avoid Online Identity Theft

2011-05-22T01:02:00.000-05:00

Identity theft is a real risk when you are surfing and shopping online. Here are 9 important ways to protect yourself:

1. Proactively monitor your information - consider signing up with an identity theft protection service such as IdentityHawk.

2. Avoid using debit cards. If your credit card is stolen, your liability is capped at $50. However, if someone steals your debit card and drains your bank account, you are only liable up to $50 if you catch it within 2 days. Between 2 - 60 days, your liability is $500. After 60 days, your liability is unlimited.

3. Regularly monitor your credit card statements for fraud. Another good idea is to reserve only one credit card for online purchases.

4. Never use a public computer or public Wi-Fi to shop.

5. Don't pay at sites like eBay with wire transfers. Use a credit card.

6. When shopping, don't click on links in an unsolicited email.

7. Be careful when using shortened URLs from sites like Twitter. Make sure they take you to legitimate sites.

8. When buying from sites like eBay, don't use an unfamiliar escrow service without checking them out.

9. Don't search for products on general search engines. Identity thieves and hackers work to get their sites ranked high on search engines. Try to search for products on known merchant sites (like Amazon.com or Target.com) or on price-comparison sites (like Shopzilla.com or Price Grabber).

Are We Headed For Runaway Inflation? Myths vs. Realities

2011-05-22T00:18:00.001-05:00

It's fashionable today to talk about the high prices of gold and oil, and how the Fed is printing so much money that we are going to have hyperinflation.

I'm skeptical, and columnist Steve Chapman, a member of the Tribune's editorial board, agrees with me. He laid out a compelling argument in a recent Chicago Tribune article - which I have paraphrased in the form of Myth vs. Reality:

Myth: The price of gold has doubled since Obama was elected, because investors want to hedge against an increasingly worthless dollar.

Reality: Gold has been in a long-term bull market - during the 8 years of the Bush Administration, the price of gold tripled while the consumer price index rose less than 3% per year.

Myth: The rise in oil and other commodities are caused by the Fed's actions.

Reality: Commodity prices are also affected by events outside the United States - in this case, strong demand from developing countries such as China.

Myth: The government understates inflation because the "core" inflation rate excludes food and energy.

Reality: Food and energy are excluded because they give a distorted picture due to volatility. The core rate is accurate. During the last decade, the core rate was up 21%, vs. 27% for the full inflation rate. General inflation can't exist without the core rate increasing. In the 1970's everything went up - not just food and energy.

The bottom line is that there is no evidence of near-term inflation. The market knows this, as indicated by the popularity of three year treasuries yielding 1%. They would not be in demand if people thought inflation would ravage it.

Finally, high inflation like the 1970's needed a wage-spiral. Higher prices resulted in higher wages, which resulted in higher costs. Today, there is no wage-spiral. Unemployment is high, and wages / salaries are stagnant.

I Bought Two REITS Today - AAT and CPT

2011-05-18T13:24:00.000-05:00

Today, I bought two REITs (Real Estate Investment Trusts).

REITs trade like stocks, and can be thought of as real estate mutual funds. In other words, instead of owning companies, they own real estate. They get special tax breaks, providing that they pass most of their earnings to shareholders. Because of this, REITs provide a lot of income.

I have always wanted to buy some REITs to diversify my portfolio, and I decided now might be a good time after reading an article in the recent edition of Forbes entitled "REIT Merger Boom is Brewing".

I bought two REITS: American Assets Trust (AAT) at $21.88 and Camden Property Trust (CPT) at $62.51.

AAT went public in January at $20.50 per share. It is a 45 year old company based in San Diego that owns a high-quality portfolio of office, residential, and retail properties on the West Coast - including California, Hawaii, and Portland OR. While the national vacancy rate is in double digits, AAT's properties in California and Hawaii are just 5% vacant.

Camden Property Trust specializes in apartment communities, is considered a buy because its stock price hasn't gained as much as bigger apartment REITs, such as Equity Residential. In fact, CPT makes an attractive takeover target for bigger REITS (like Equity) because of its large holdings in the Southwest and Southeast.

As all my positions, I plan to manage them with my Stock Trading Riches system.

Business Success Through Focus

2011-05-14T13:26:00.001-05:00

Here is another example of business that succeeds through simplicity and focus.

This online company, http://www.blueskyscrubs.com, keeps it simple, and specializes in the narrowly targeted niche of uniform scrubs - including medical lab coats, nurse uniforms, and other accessories.

Because Blue Sky Scrubs keeps its merchandise selection simple and specialized, their website clutter free, well organized, and easy to navigate.

It becomes a snap for visitors to quickly find and purchase whatever types of scrubs they are interested in.

Are Big Institutional Purchases A Bullish Sign?

2011-05-14T13:08:00.000-05:00

A friend of mine recently sent me a newsletter where the writer was bullish on gold and mentioned that the University of Texas announced that they now hold $1 billion of gold bars.

I responded that this is not necessarily a bullish sign. This is an old trick that traders use to get out profitably from large positions.

It might be the case that, having accumulated this large gold position, the university is sitting on a profit.

With a large position, they will need liquidity in the form of buyers if they want to sell some or all of the position without driving down prices.

So, now they announce the purchase to encourage people to jump in to the market, and their brokers will sell their gold to them :-)

Skype: Great Trade for Marc Andreesen

2011-05-14T10:35:00.001-05:00

This past week, Microsoft bought the internet phone company Skype for $8.5 billion. Did they overpay? Was it a good buy?

That remains to be seen. Skype continually loses money and Ebay gave up on integrating it. But, I think they may have some success if they combine Skype with Xbox and, especially, Communicator.

Many corporations (including the bank I work for) use Microsoft Communicator internally for chats. If Microsoft embeds Skype into Communicator, they could capture a big share of the voice business.

But, one thing for sure is that a big winner is Marc Andreesen (founder of Netscape) and his investment firm, Andreesen Horowitz.

Ebay bought Skype for $3.1 billion in 2005 and sold it to a group of investment firms (headed by Silver Lake and Andreesen Horowitz) for $2.8 billion in 2009.

Now, 18 months later, they sold it to Microsoft for $8.5 billion.

That's a great trade - a 204% return in a year and a half!

Buying Gold

2011-05-14T07:24:00.000-05:00

Should you buy gold?

These days, many people are buying gold bars and other forms of gold, such as coins, ingots, and bullion because gold prices are at record highs.

The government is printing a lot of money and keeping interest rates low to help the economy recover from the recession. This has a lot of people spooked that inflation will come back. The dollar is low, and grains, commodities, oil, and metals are soaring to new price highs.

So, it might not be a bad idea for individuals to diversify and invest some of their money in gold. But, many people are not sure how to do this.

Fortunately, it can be as easy to buy gold as buying stocks and bonds. One way to buy, is through a dealer such as RegalGoldCoins.com.

Recession Humor

2011-05-13T12:00:00.001-05:00

The Recession has hit everybody.....

I got a pre-declined credit card in the mail.

CEOs are now playing miniature golf.

Exxon-Mobil laid off 25 of its congressmen.

I saw a Mormon polygamist with only one wife.

If the bank returns your check marked "Insufficient Funds," you call them and ask if they meant you or them.

Angelina Jolie adopted a child from America.

Parents in Beverly Hills fired their nannies and learned their children's names.

A picture is now only worth 200 words.

The Treasure Island casino in Las Vegas is now managed by Somali pirates.

Congress says they are looking into this Bernard Madoff scandal. Oh great! The guy who made $50 billion disappear is being investigated by the people who made $1.5 trillion disappear!

And, finally...

I was so depressed last night thinking about the economy, wars, jobs, my savings, Social Security, retirement funds, etc., I called the Suicide Hotline. I got a call center in Pakistan , and when I told them I was suicidal, they got all excited and asked if I could drive a truck.

Will The Dollar Collapse?

2011-05-04T11:50:00.001-05:00

A friend of mine who lives in Zurich sent me this article and asked about my opinion of this gloomy scenario:

http://www.swissinfo.ch/eng/business/Dollar_faces_collapse.html?cid=30012940

Here is my response:

I don’t think the dollar will collapse or stop becoming the reserve currency.

It isn’t unprecedented for a first world country to have such a high level of debt during time of war, or when preventing a depression / severe recession. The U.S. is doing both.

Under these conditions, there has never been a default as long as:

1. the currency is not backed by gold,

2) a lot of the debt is held outside the country.

Also, a bubble occurs when most people think there is no problem. Right now, everyone worries that the U.S. has a debt problem – including the government. That is a bullish sign. So, I think that the debt will be eased off. Eventually the dollar will strengthen.

Businesses Should Take The Long View With Logos and Branding

2011-05-04T11:02:00.000-05:00

Many new businesses make the mistake of not hiring a professional logo design company. They are preoccupied with generating sales, and preserving cash flow.

So, instead, they try to get by with one of these alternatives:

1. They ask an artistic friend or family member to draw something up.

2. They surf the internet looking for free or inexpensive clip art.

3. They hire someone inexpensive from a free lancer web site.

The problem with these approaches is that you are not planning for the future. Once your business is stable, it will be hard to grow if potential clients view you as amateurish. There is only so much business for a one-man shop. Major clients are looking for a professional and competent looking organization.

But, with a poorly designed logo - or one that looks like every one else using clip art - you won't give off the image of a successful, professional organization that will be around for a long time. You will always look like a start-up, hungry and dependent on the next job for survival.

Some things - like branding and logos are worth spending time and money on because they will pay off down the road.

My Book "Sudoku Fun: Volume 2" Reached #76 on Amazon.com's Bestseller List for Sudoku Books

2011-05-01T00:30:00.001-05:00

My second Sudoku book, "Sudoku Fun: Volume 2" reached #76 on Amazon.com's Bestseller List for the category "Entertainment->Puzzles & Games->Sudoku".

I Bought Colgate-Palmolive and Cirrus Logic

2011-04-26T16:26:00.000-05:00

On Thursday, I bought Colgate-Palmolive (CL) at $80.70 and Cirrus Logic (CRUS) at $16.49.

Colgate-Palmolive was recently mentioned in an article on how, paradoxically, the lowest volatility stocks actually have the highest total returns over time. Over the last 20 years, CL had a beta of 0.6 (the general market is 1, so anything below 1 is less volatile) and a total annualized return of 13.5% (vs. 8.8% for the S&P 500).

Around the time of this article, CL was also a recent pick of columnist Ken Fisher. He admits that many see it as a boring stock, but he sees it "as a low-risk, big-cap growth stock". At $78, he said it was trading at 16 times his estimate of 2011 earnings, and thinks it will trade at a 25% premium over the market as the economic cycle picks up.

Cirrus Logic is a way to bet on Apple without paying the premium. CRUS makes the chips for iPads and iPhones. Asset Manager Jim Oberweis anticipates revenue growth of 70% over the next 12 months.

Remember that I don't do short term trading. I try to buy good long term stocks at good prices, and then let the stock trading riches system manage the picks.

Don't Underestimate the Importance of Logo Design for Your Business

2011-04-22T14:00:00.000-05:00

If you are starting a new business, your company's logo may be an afterthought. After all, right now you are preoccupied with generating business, and managing your cash flow.

Many companies in this situation don't hire professional Logo Designers. Instead, they tend to take the cheap and easy way:

1. They ask an artistic friend or family member to draw something up.

2. They surf the internet looking for free or inexpensive clip art.

3. They hire someone inexpensive from a free lancer web site.

The problem with these approaches is that you are not planning for the future. Once your business is stable, it will be hard to grow if potential clients view you as amateurish. There is only so much business for a one-man shop. Major clients are looking for a professional and competent looking organization.

But, with a poorly designed logo - or one that looks like every one else using clip art - you won't give off the image of a successful, professional organization that will be around for a long time. You will always look like a start-up, hungry and dependent on the next job for survival.

Some things - like branding and logos are worth spending time and money on because they will pay off down the road.

$1500 Gold and $45 Silver! The Difference Between Just Making A Prediction and Profiting From It

2011-04-22T12:40:00.006-05:00

"$1500 Gold and $45 Silver!" was the title of an email that a friend of mine sent me a couple of days ago. His email reminded me that he had predicted these prices last year.

So, I wrote him back and said:

Hopefully you were able to profit from your prediction - and have a plan for when to take profits.

Those two things separate an economist from a trader :-)

Well, it turned out that he had taken profits along the way, and saved them to reinvest in pullbacks. I told him that he could also have used my stock trading riches system. It would actually work for more than just stocks, ETFs, or mutual funds. You could use it to trade actual metals, commodities, or currencies. In fact, just about any good.

As an example, you could take $10,000 and buy $7,000 worth of gold (or silver, or oil, or tea) and keep $3,000 in a cash reserve. Once a year, if the value of the commodity has fluctuated by at least 10%, you could rebalance. Of course, the total amount, constant value, and reserve amount can be anything you want.

With a commodity, instead of strictly rebalancing, you may want to use the optional growth rule from my book. This way, the constant value would grow over time as your position went up.