Wednesday, 31 October 2012
Thursday, 20 September 2012
New Amazon Review of "Stock Trading Riches"
Posted on 09:51 by Unknown
Today, a reader posted a nice, detailed 5-star review of "Stock Trading Riches" on Amazon.com:
"I am a short term trader by heart but needed a system to manage my retirement accounts and this one certainly works very well.
I used the excel sheet provided in the book to test dozens of random stocks over the past 6 years and about 80% beat Buy and Hold over the same time period.
The results were good but I needed more proof since the market conditions of the last 6 years did not capture every possible market scenerio.
With the excel sheet , I simply created every possible market movement I could think of and still my results were very good.
This is the kind of system someone with very little investment or trading experience can pick-up and implement right away,that's how simple it is. I found that it will work for retirement accounts and trading accounts.
Many times ,especially those of us who are traders, dismiss the simple for being ineffective but the truth is the more complex the trading system the more likely it is to fail over time.
And oh yeah-what I love most about this book-he gets right to the point and shows you how the system works. No beating around the bush for a 100 pages."
"I am a short term trader by heart but needed a system to manage my retirement accounts and this one certainly works very well.
I used the excel sheet provided in the book to test dozens of random stocks over the past 6 years and about 80% beat Buy and Hold over the same time period.
The results were good but I needed more proof since the market conditions of the last 6 years did not capture every possible market scenerio.
With the excel sheet , I simply created every possible market movement I could think of and still my results were very good.
This is the kind of system someone with very little investment or trading experience can pick-up and implement right away,that's how simple it is. I found that it will work for retirement accounts and trading accounts.
Many times ,especially those of us who are traders, dismiss the simple for being ineffective but the truth is the more complex the trading system the more likely it is to fail over time.
And oh yeah-what I love most about this book-he gets right to the point and shows you how the system works. No beating around the bush for a 100 pages."
Tuesday, 18 September 2012
Gangnam Style - You Just Have To Watch This
Posted on 21:22 by Unknown
Tuesday, 28 August 2012
Praveen in a Video Discussion on The Future of Money: Bitcoin, Economics, The Gold Standard, And Work
Posted on 09:36 by Unknown
Saturday, 25 August 2012
Follow Up to "Why I Just Bought Facebook (FB) Stock"
Posted on 23:19 by Unknown
I consider my IPO purchase of Facebook (FB) to be a contrarian move because the stock behaved differently than the conventional wisdom at the time.
I wasn't initially planning to buy but, from what I had read and from talking to other people in high technology, everyone expected Facebook to soar at the opening. I know someone, a senior executive at a high-tech company, who placed a limit order at the open to not buy over 55. So, he expected it to pop.
When I saw that it didn't soar like everyone predicted, I decided to buy it.
I thought it would increase over the next few days/weeks. As we now know, it didn't. Instead, it is down about 50%. Even though I didn't expect this, I am ok with it.
Because my system diversifies, and each individual position is re-balanced yearly, I feel safe sometimes taking a risk on stock.
I will rebalance my Facebook position at the end of the year. Even with Facebook's performance, my portfolio is up 11% for the year.
I don't use any stop losses with the Stock Trading Riches system - other than replace a position if I feel that there is something fundamentally wrong with the company. In my book, I list an optional stop loss rule in the section about customizing my system. It calls for replacing a stock if it declines 50% (or X% - it can be customized) from the initial buy. I state in the section that I don't use this rule myself, and it would have prevented the performance in the AMZN stock example in my book.
I wasn't initially planning to buy but, from what I had read and from talking to other people in high technology, everyone expected Facebook to soar at the opening. I know someone, a senior executive at a high-tech company, who placed a limit order at the open to not buy over 55. So, he expected it to pop.
When I saw that it didn't soar like everyone predicted, I decided to buy it.
I thought it would increase over the next few days/weeks. As we now know, it didn't. Instead, it is down about 50%. Even though I didn't expect this, I am ok with it.
Because my system diversifies, and each individual position is re-balanced yearly, I feel safe sometimes taking a risk on stock.
I will rebalance my Facebook position at the end of the year. Even with Facebook's performance, my portfolio is up 11% for the year.
I don't use any stop losses with the Stock Trading Riches system - other than replace a position if I feel that there is something fundamentally wrong with the company. In my book, I list an optional stop loss rule in the section about customizing my system. It calls for replacing a stock if it declines 50% (or X% - it can be customized) from the initial buy. I state in the section that I don't use this rule myself, and it would have prevented the performance in the AMZN stock example in my book.
Friday, 18 May 2012
Why I Just Bought Facebook (FB) Stock
Posted on 11:51 by Unknown
I just bought Facebook (FB) to be contrarian because of the way the IPO "fizzled".
I first started to think about buying Facebook because, for the last several weeks, I saw lots of news stories warning against buying Facebook when it went public.
Everywhere I looked, reports and columnists warned how the stock is over-hyped, the insiders want to cash out, people are foaming at the mouth to buy it, etc. The stock would run away at the open and, if you were foolish enough to try and buy it during the first day, you would end up getting burned.
I've learned to be skeptical of all these financial stories.
Then, this afternoon, I saw that Facebook did go public this morning at $38. The stock only opened at $42 (so much for the "frenzied pop"), touched $45, and now is around $40.
Also, the last couple of weeks have been bad for stocks, and it looks like Facebook failed to rally the over all market.
At this point, I don't feel like Facebook is overpriced. I think that, over the next several months, it has a good chance to go up because, as the uncertainty with Greece works itself out, and the markets put it behind and start to recover, individual investors and funds will start to revisit Facebook.
On the other hand, I don't see a lot of room on the downside for Facebook. Google Plus doesn't appear likely to do to Facebook what Facebook did to My Space - at least not yet.
As always, I bought Facebook as a long term investment, and plan to manage the position and harvest it for cash by trading around a core position according to my Stock Trading Riches system.
I first started to think about buying Facebook because, for the last several weeks, I saw lots of news stories warning against buying Facebook when it went public.
Everywhere I looked, reports and columnists warned how the stock is over-hyped, the insiders want to cash out, people are foaming at the mouth to buy it, etc. The stock would run away at the open and, if you were foolish enough to try and buy it during the first day, you would end up getting burned.
I've learned to be skeptical of all these financial stories.
Then, this afternoon, I saw that Facebook did go public this morning at $38. The stock only opened at $42 (so much for the "frenzied pop"), touched $45, and now is around $40.
Also, the last couple of weeks have been bad for stocks, and it looks like Facebook failed to rally the over all market.
At this point, I don't feel like Facebook is overpriced. I think that, over the next several months, it has a good chance to go up because, as the uncertainty with Greece works itself out, and the markets put it behind and start to recover, individual investors and funds will start to revisit Facebook.
On the other hand, I don't see a lot of room on the downside for Facebook. Google Plus doesn't appear likely to do to Facebook what Facebook did to My Space - at least not yet.
As always, I bought Facebook as a long term investment, and plan to manage the position and harvest it for cash by trading around a core position according to my Stock Trading Riches system.
Wednesday, 25 April 2012
Naked I Trade, Naked I Live
Posted on 22:36 by Unknown
No - I don't literally trade naked or live out my day running around the house naked!
I had a zen shift after getting zen slapped - I can't grasp, hold onto concepts anymore - I'm free. That's what has made me a successful stock trader. I no longer hide behind technical analysis or look for patterns, or expect the market to do what i think it should - I m no longer attached to the outcome.
I just use my Stock Trading Riches system.
All I care about is the stock fluctuates - I then play the stock. I follow it in and out - reset constantly.
That is how the rest of my life is now - old patterns are shifting, changing.
I want to be reborn every time I trade or write.
I had a zen shift after getting zen slapped - I can't grasp, hold onto concepts anymore - I'm free. That's what has made me a successful stock trader. I no longer hide behind technical analysis or look for patterns, or expect the market to do what i think it should - I m no longer attached to the outcome.
I just use my Stock Trading Riches system.
All I care about is the stock fluctuates - I then play the stock. I follow it in and out - reset constantly.
That is how the rest of my life is now - old patterns are shifting, changing.
I want to be reborn every time I trade or write.
Sunday, 22 April 2012
CFD Trading – What is it and Why is it Popular?
Posted on 23:08 by Unknown
A CFD or Contract for Difference is an agreement between a “buyer” and a “seller”, where the seller agrees to pay the buyer the difference between the current price of a financial asset, and its price at a pre agreed point in the future. The CFD is a relatively new financial derivative that has many similarities to spread betting and many CFD Brokers offer both services. Spread betting still remains the most popular derivative instrument in the UK due to the tax free status is enjoys. When you agree to a Contract for Difference, you are required to pay the broker in question a fee and this will be taken in the form of a commission and/or spread.
Why is it popular?
There are a number of reasons why people choose to trade CFDs rather than purchasing ownership of financial assets:
Shorting. When you purchase a company share or any other financial asset, you are essentially betting on its price increasing in value. The problem is, if you think the price is going to go down, you cannot put money on this outcome happening. This is where CFDs come in. A Contract for Difference broker will allow you to take either side of the contract which allows you to bet on its value going up or down.
Leverage. When you trade CFDs you are likely to be doing so with leverage (margin). This means you can take out positions that are worth considerably more than the value of your bet which allows you to receive a much higher return if the market moves in your favour. Conversely, if your position turns out to be unsuccessful, you will end up losing at a higher factor.
Market choice. Large CFD providers tend to offer a vast selection of financial markets. You can take out positions on a whole host of company stock, commodities, energy prices, interest rates and much more.
Where can I trade CFDs?
There are an ever growing number of CFD brokers on the market and it is important to choose one that is competitive with its fees and financially secure. As we saw with the recent downfall of World Spreads, you do not want to trade with a company where you can end up losing your money. IG Markets is the largest derivatives provider and probably the best service provider too. If you are looking to sign up with a company, they might be worth a look.
This article was written by Greg Bassett, editor of the online trading guide www.blueIndex.co.uk. Check the site out today for a comparison of the top CFD brokers on the market.
Why is it popular?
There are a number of reasons why people choose to trade CFDs rather than purchasing ownership of financial assets:
Shorting. When you purchase a company share or any other financial asset, you are essentially betting on its price increasing in value. The problem is, if you think the price is going to go down, you cannot put money on this outcome happening. This is where CFDs come in. A Contract for Difference broker will allow you to take either side of the contract which allows you to bet on its value going up or down.
Leverage. When you trade CFDs you are likely to be doing so with leverage (margin). This means you can take out positions that are worth considerably more than the value of your bet which allows you to receive a much higher return if the market moves in your favour. Conversely, if your position turns out to be unsuccessful, you will end up losing at a higher factor.
Market choice. Large CFD providers tend to offer a vast selection of financial markets. You can take out positions on a whole host of company stock, commodities, energy prices, interest rates and much more.
Where can I trade CFDs?
There are an ever growing number of CFD brokers on the market and it is important to choose one that is competitive with its fees and financially secure. As we saw with the recent downfall of World Spreads, you do not want to trade with a company where you can end up losing your money. IG Markets is the largest derivatives provider and probably the best service provider too. If you are looking to sign up with a company, they might be worth a look.
This article was written by Greg Bassett, editor of the online trading guide www.blueIndex.co.uk. Check the site out today for a comparison of the top CFD brokers on the market.
The Pitfalls of Currency Exchange that Tourists should Avoid
Posted on 23:07 by Unknown
The foreign exchange market is for many, a confusing one. Wherever Tourists go, they find themselves being offered the very best rates, 0% commission and more often than not, people lose out as they are not educated on the topic. This short guide has been written to make sure you do not suffer the same fate.
The problem with the tourist currency market is that it is quite unregulated and companies can (within reason) say whatever they want to, to win business over their competitors. If you need to exchange currency at some point in the near future, follow the following five steps to make sure you are getting the best foreign exchange rates:
1. 0% Commission doesn’t mean you’re getting the currency for free. Too many people fall into the trap of thinking an advertised 0% commission means they are not paying for a foreign exchange service. The phrase “commission free” is a very powerful one which is why most bureaus use it but you will often find that companies advertising such, are as expensive, if not more so than the competition. Companies that do not charge commissions will tend to charge a very wide spread which is the difference between their buy and sell prices and is essentially the same thing as a commission. The only thing you need to do when comparing companies is look at the actual rate they are giving you.
2. Don’t get suckered by your bank. High street banks are one of the most expensive places you can go to exchange currency. They prey upon their customers and are able to get away with the rates they charge because so many people trust them. If you can, try to avoid using a bank as there are much cheaper options out there.
3. Plan your currency needs in advance. Rather than leaving it until the last minute, plan how much you are going to take and weigh up the various options you are faced with. By giving yourself time, you will be in a position to research rates and choose the best method for you.
4. Consider using a currency card. Currency cards are a relatively new innovation to the world of foreign exchange although they are becoming more and more popular all the time. You simply preload your card with currency and can use it in restaurants and shops, the same way you would use a credit or debit card. The great thing about them is that the rate you will receive is far superior to what bureaus offer and they are much more secure than carrying cash.
5. Compare Rates. If trouncing around various bank and bureaus isn’t for you then you might want to think about using a rate comparison website. There are many out there that will check the latest rates and tell you which company will give you the most foreign currency for your money.
This guide was written by Marcus Holland, Editor of the currency rate comparison site ExchangeCurrency.com.
The problem with the tourist currency market is that it is quite unregulated and companies can (within reason) say whatever they want to, to win business over their competitors. If you need to exchange currency at some point in the near future, follow the following five steps to make sure you are getting the best foreign exchange rates:
1. 0% Commission doesn’t mean you’re getting the currency for free. Too many people fall into the trap of thinking an advertised 0% commission means they are not paying for a foreign exchange service. The phrase “commission free” is a very powerful one which is why most bureaus use it but you will often find that companies advertising such, are as expensive, if not more so than the competition. Companies that do not charge commissions will tend to charge a very wide spread which is the difference between their buy and sell prices and is essentially the same thing as a commission. The only thing you need to do when comparing companies is look at the actual rate they are giving you.
2. Don’t get suckered by your bank. High street banks are one of the most expensive places you can go to exchange currency. They prey upon their customers and are able to get away with the rates they charge because so many people trust them. If you can, try to avoid using a bank as there are much cheaper options out there.
3. Plan your currency needs in advance. Rather than leaving it until the last minute, plan how much you are going to take and weigh up the various options you are faced with. By giving yourself time, you will be in a position to research rates and choose the best method for you.
4. Consider using a currency card. Currency cards are a relatively new innovation to the world of foreign exchange although they are becoming more and more popular all the time. You simply preload your card with currency and can use it in restaurants and shops, the same way you would use a credit or debit card. The great thing about them is that the rate you will receive is far superior to what bureaus offer and they are much more secure than carrying cash.
5. Compare Rates. If trouncing around various bank and bureaus isn’t for you then you might want to think about using a rate comparison website. There are many out there that will check the latest rates and tell you which company will give you the most foreign currency for your money.
This guide was written by Marcus Holland, Editor of the currency rate comparison site ExchangeCurrency.com.
Friday, 6 April 2012
Instant Zen Article on Stock Trading As A Martial Art
Posted on 13:42 by Unknown
On my Tao of Simplicity blog, I used the instant zen writing technique to bang out a quick article on Why Stock Trading is A Martial Art.
Thursday, 5 April 2012
Zen Simplicity in Stock Trading
Posted on 14:29 by Unknown
I developed the Stock Trading Riches system when I became fascinated with the idea of a pure Zen trading system. It would use no news reports, indicators, charts, or parameters to distract you from Now. It would be able to handle any market condition.
I turned to jazz, improvisation, Taoism, simplicity, and minimalism for inspiration.
I ended up building a simple and minimalist trading system around an old, obscure, 19th century Wall Street formula called constant value investing.
I turned to jazz, improvisation, Taoism, simplicity, and minimalism for inspiration.
I ended up building a simple and minimalist trading system around an old, obscure, 19th century Wall Street formula called constant value investing.
Monday, 2 April 2012
Author Interview on "SellingBooks.com"
Posted on 22:14 by Unknown
Here is an interview I did for my book "Stock Trading Riches" on the book site "SellingBooks".
Here is a nugget from the interview:
What inspired you to write this book?
Years ago, I became passionate about stock trading, and spent hundreds of hours and thousands of dollars on books, DVDs, seminars, etc. Those techniques never worked for me and I got frustrated. A light bulb went off when I read a book called “Zen in the Markets.” I decided to focus on the present moment and simplicity, and developed a successful trading system that almost feels like meditation. I love sharing it with others who are interested in trading and investing.
Here is a nugget from the interview:
What inspired you to write this book?
Years ago, I became passionate about stock trading, and spent hundreds of hours and thousands of dollars on books, DVDs, seminars, etc. Those techniques never worked for me and I got frustrated. A light bulb went off when I read a book called “Zen in the Markets.” I decided to focus on the present moment and simplicity, and developed a successful trading system that almost feels like meditation. I love sharing it with others who are interested in trading and investing.
Saturday, 24 March 2012
Investing = Stock Picking + Buying Low and Selling High
Posted on 21:37 by Unknown
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.
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.
My Trading System
Posted on 21:34 by Unknown
I became a very successful trader after I developed my trading system.
My complete system, along with information on possible variations, effects of commissions, and beneficial tax strategies, are detailed in my book, Stock Trading Riches, which is available on Amazon.com.
I don't want you to just follow my system - I want you to start thinking critically, and develop your own system, that you feel comfortable with.
My system is like zen or tao. The market fluctuates and I am at peace with whatever it does. The system has no optimized parameters - it simply uses the formula for each stock to see how many shares it should own NOW. It makes no assumptions about the future or remembers the past.
I am "one with the market" in the present moment, and buy low - sell high.
Here is an example with Amazon.com yearly prices. Just imagine having a whole portfolio, where you buy some stocks at the top, some in the middle, and some at the bottom, all feeding and pumping cash, as the markets cycle over years!
My complete system, along with information on possible variations, effects of commissions, and beneficial tax strategies, are detailed in my book, Stock Trading Riches, which is available on Amazon.com.
I don't want you to just follow my system - I want you to start thinking critically, and develop your own system, that you feel comfortable with.
My system is like zen or tao. The market fluctuates and I am at peace with whatever it does. The system has no optimized parameters - it simply uses the formula for each stock to see how many shares it should own NOW. It makes no assumptions about the future or remembers the past.
I am "one with the market" in the present moment, and buy low - sell high.
Here is an example with Amazon.com yearly prices. Just imagine having a whole portfolio, where you buy some stocks at the top, some in the middle, and some at the bottom, all feeding and pumping cash, as the markets cycle over years!
Tuesday, 20 March 2012
Interview With Ev Bogue, Author of "Minimalist Business", Part II
Posted on 08:00 by Unknown
This is part II of an interview I recently conducted with Ev Bogue, who just released a completely rewritten version of his best-selling ebook "Minimalist Business".
You can read part I of the interview here. I would like to again thank Ev for taking the time to answer my questions.
6. What are some common mistakes that new minimalist business owners make with respect to attracting attention / getting permission?
Right now the biggest misstep I see is assuming social media is a list of people who are supporting the work. Social is a great way to get in touch with almost anyone when I need to make a request. However, it’s not a list of clients.
There might be a few clients in the bunch, but most of the people I follow on social fall into three camps.
1. Masters
2. Peers
3. Friends
Customers don’t fall into these three groups.
So where are customers? To find out, I need to gather permission in social spaces. I have to ask ‘would you be willing to hear more about the work I’m doing?’ I ask people to sign up for a list. Then I have an honest list of people who are actually interested in the work I’m doing.
This is hard, because the honest list for someone just starting out might be three people.
7. Can you give a rule of thumb, based on your experience, about how a new minimalist business owner who is struggling to attract attention (i.e. he/she is in "The Dip") can decide whether to keep trying, or should perhaps switch to a new topic?
I’m in a constant process of experimenting, measuring, and untethering when what I’m doing isn’t working. If I stuck with one topic, I’d almost certainly be bored – and the people who read me would be bored too.
Knowing this, I continue to innovate based on what interests me, and how I benefit the people who support my work.
8. Can you briefly describe how your specific attention-gathering process (Google+, EvBogue.com sign-up box, daily letters) works? Why isn't the EvBogue.com page longer (describing your background, your products, etc)? Is the Google+ step suppose to make people comfortable enough that EvBogue.com only needs to present the sign-up box?
I haven’t gathered permission until I have permission to contact you in your inbox. My goal with social is to tell a compelling story about the work I’m doing, to incentivize new readers to sign up to hear more.
I look at the work I’m doing online as a constant experiment. The website I have right now may not be the one I have in one week. My social presence may shift to another service. The reality is, I need to be constantly trying new things to see how they land.
What works for me may not work for you.
9. Given that you switched EvBogue.com from a blog to a sign-up page / daily letter, why did you re-launch the "Minimalist Business" site using a blog format? Was this another experiment?
This is an experiment. Will having a blog associated with Minimalist Business boost sales? The blog is another tool for gathering permission to contact customers in their inboxes.
This being said, all of the information I push to the public web is solid. All of the experimental work I’m doing right now is behind the scenes. If you’d like to hear more, you’ll need to sign up for the list. The public work is just scraping the surface.
10. Finally, could you tell us why you distributed the new edition of "Minimalist Business" as a .mobi (Kindle) file, as opposed to pdf format (like the original)? Was this another experiment, or do you see an advantage to this format? Was this format easy to generate using "Scrivener"?
Exactly. Using the Kindle format allows me to compile quickly. I see Minimalist Business as an evolving book.
As the world changes, Minimalist Business will change with it. As the experiments I do teach me more about how the current world of the web works, I will update the book with what I find.
I’m beginning to see a book less like a brick of information, which can never be changed, and more like a fluid entity. This has been confusing for some, because we’re just at the start of the evolving book era. The trouble with a bricked physical book is it’s two years out of date by the time it’s published. With a digital book, I write, compile, update and distribute in a fraction of the time.
Ultimately, the goal of creating a Minimalist Business is to be flexible. It’s about changing based on the needs of the people who support your work. What works today may not work tomorrow.
You can read part I of the interview here. I would like to again thank Ev for taking the time to answer my questions.
6. What are some common mistakes that new minimalist business owners make with respect to attracting attention / getting permission?
Right now the biggest misstep I see is assuming social media is a list of people who are supporting the work. Social is a great way to get in touch with almost anyone when I need to make a request. However, it’s not a list of clients.
There might be a few clients in the bunch, but most of the people I follow on social fall into three camps.
1. Masters
2. Peers
3. Friends
Customers don’t fall into these three groups.
So where are customers? To find out, I need to gather permission in social spaces. I have to ask ‘would you be willing to hear more about the work I’m doing?’ I ask people to sign up for a list. Then I have an honest list of people who are actually interested in the work I’m doing.
This is hard, because the honest list for someone just starting out might be three people.
7. Can you give a rule of thumb, based on your experience, about how a new minimalist business owner who is struggling to attract attention (i.e. he/she is in "The Dip") can decide whether to keep trying, or should perhaps switch to a new topic?
I’m in a constant process of experimenting, measuring, and untethering when what I’m doing isn’t working. If I stuck with one topic, I’d almost certainly be bored – and the people who read me would be bored too.
Knowing this, I continue to innovate based on what interests me, and how I benefit the people who support my work.
8. Can you briefly describe how your specific attention-gathering process (Google+, EvBogue.com sign-up box, daily letters) works? Why isn't the EvBogue.com page longer (describing your background, your products, etc)? Is the Google+ step suppose to make people comfortable enough that EvBogue.com only needs to present the sign-up box?
I haven’t gathered permission until I have permission to contact you in your inbox. My goal with social is to tell a compelling story about the work I’m doing, to incentivize new readers to sign up to hear more.
I look at the work I’m doing online as a constant experiment. The website I have right now may not be the one I have in one week. My social presence may shift to another service. The reality is, I need to be constantly trying new things to see how they land.
What works for me may not work for you.
9. Given that you switched EvBogue.com from a blog to a sign-up page / daily letter, why did you re-launch the "Minimalist Business" site using a blog format? Was this another experiment?
This is an experiment. Will having a blog associated with Minimalist Business boost sales? The blog is another tool for gathering permission to contact customers in their inboxes.
This being said, all of the information I push to the public web is solid. All of the experimental work I’m doing right now is behind the scenes. If you’d like to hear more, you’ll need to sign up for the list. The public work is just scraping the surface.
10. Finally, could you tell us why you distributed the new edition of "Minimalist Business" as a .mobi (Kindle) file, as opposed to pdf format (like the original)? Was this another experiment, or do you see an advantage to this format? Was this format easy to generate using "Scrivener"?
Exactly. Using the Kindle format allows me to compile quickly. I see Minimalist Business as an evolving book.
As the world changes, Minimalist Business will change with it. As the experiments I do teach me more about how the current world of the web works, I will update the book with what I find.
I’m beginning to see a book less like a brick of information, which can never be changed, and more like a fluid entity. This has been confusing for some, because we’re just at the start of the evolving book era. The trouble with a bricked physical book is it’s two years out of date by the time it’s published. With a digital book, I write, compile, update and distribute in a fraction of the time.
Ultimately, the goal of creating a Minimalist Business is to be flexible. It’s about changing based on the needs of the people who support your work. What works today may not work tomorrow.
Monday, 19 March 2012
Interview With Ev Bogue, Author of "Minimalist Business", Part I
Posted on 08:03 by Unknown
I recently conducted an interview with Ev Bogue, who has just released a completely rewritten version of his best-selling ebook "Minimalist Business".
Since Ev kindly took the time to provide a lot of information in his answers, I decided to split the interview up into two parts. Today is part I, and here is part II.
1. How do you define a minimalist business?
A Minimalist Business exists in the cloud. It’s as close to zero-overhead as possible. A Minimalist Business delivers products and services digitally.
I built my first Minimalist Business in 2009, after I quit my job, threw out all of my stuff and started moving through the world more than I did before.
I realized if I separated my income from my location, I’d be able to earn a location independent way. If I kept my business (and personal) overhead low, I’d be able live a very flexible life in the world.
Over the past year, it’s become increasingly easier to live and work from anywhere in the world. Minimalist Business takes all of my experiences from the past three years living and working from anywhere and condenses the experiences into one compact package for your benefit.
2. Could you mention one difference between the original edition of "Minimalist Business" and the current edition, specifically concerning attracting attention/gathering permission?
In 2010, I released the original edition of Minimalist Business. I’d been living and working from anywhere for 6 months at the time. I’ve learned a lot since then, so I decided it was a good time to revisit the work.
The technologies we use to communicate online have transformed significantly over the past few years. I’m constantly experimenting to see what works best.
What I do know is this: I can only sell digital products to the people I’ve gathered permission from. There’s an entire section in the new Minimalist Business on gathering permission.
Gathering permission is the act of asking this in public spaces online ‘Would you be willing to hear more from me?’
3. Do you think it is harder to attract attention / permission online today, compared to when you first wrote "Minimalist Business? If so, is it because people are more jaded? Are prospects too busy trying to promote their own offers?
It’s actually easier to get the word out about your work than it was three years ago. The flow of information on the web is almost frictionless. Even a few years ago, information was still being controlled by a few self-appointed very important bloggers. Now, I know if I put something which benefits people into the world, it will reach the people who need it.
The challenge is, in this world of frictionless information – how do we stand out in the noise? The answer, for me, is to continue experimenting, and doing the work, every single day.
I know if I create things which benefit other people, they will find a way to the information.
4. Would it be fair to say that the overall lesson in "Minimalist Business" is about continuously conducting experiments to find an independent path to success - as opposed to giving readers an absolute plan to follow? Is there a concern that readers may want more specific steps?
There’s no certain path to success in the online space. In Minimalist Business I talk about how to keep overhead low, experiment, measure, and untether from what isn’t working.
The only way to find out if my work is going to land in the online space is to push it out into the world and see how it lands.
If there was a surefire path to success, everyone would be doing it, and it wouldn’t be a path anymore – it’d be a really crowded highway.
5. Could you give us a quick experiment that a new minimalist business owner (with no list or followers) could try to attract attention?
I were just starting off I’d try to find one person I really trust to give me honest feedback about how my work is landing for them.
I'd again like to thank Ev for taking the time to answer my questions. Here is part II of Ev's interview.
Since Ev kindly took the time to provide a lot of information in his answers, I decided to split the interview up into two parts. Today is part I, and here is part II.
1. How do you define a minimalist business?
A Minimalist Business exists in the cloud. It’s as close to zero-overhead as possible. A Minimalist Business delivers products and services digitally.
I built my first Minimalist Business in 2009, after I quit my job, threw out all of my stuff and started moving through the world more than I did before.
I realized if I separated my income from my location, I’d be able to earn a location independent way. If I kept my business (and personal) overhead low, I’d be able live a very flexible life in the world.
Over the past year, it’s become increasingly easier to live and work from anywhere in the world. Minimalist Business takes all of my experiences from the past three years living and working from anywhere and condenses the experiences into one compact package for your benefit.
2. Could you mention one difference between the original edition of "Minimalist Business" and the current edition, specifically concerning attracting attention/gathering permission?
In 2010, I released the original edition of Minimalist Business. I’d been living and working from anywhere for 6 months at the time. I’ve learned a lot since then, so I decided it was a good time to revisit the work.
The technologies we use to communicate online have transformed significantly over the past few years. I’m constantly experimenting to see what works best.
What I do know is this: I can only sell digital products to the people I’ve gathered permission from. There’s an entire section in the new Minimalist Business on gathering permission.
Gathering permission is the act of asking this in public spaces online ‘Would you be willing to hear more from me?’
3. Do you think it is harder to attract attention / permission online today, compared to when you first wrote "Minimalist Business? If so, is it because people are more jaded? Are prospects too busy trying to promote their own offers?
It’s actually easier to get the word out about your work than it was three years ago. The flow of information on the web is almost frictionless. Even a few years ago, information was still being controlled by a few self-appointed very important bloggers. Now, I know if I put something which benefits people into the world, it will reach the people who need it.
The challenge is, in this world of frictionless information – how do we stand out in the noise? The answer, for me, is to continue experimenting, and doing the work, every single day.
I know if I create things which benefit other people, they will find a way to the information.
4. Would it be fair to say that the overall lesson in "Minimalist Business" is about continuously conducting experiments to find an independent path to success - as opposed to giving readers an absolute plan to follow? Is there a concern that readers may want more specific steps?
There’s no certain path to success in the online space. In Minimalist Business I talk about how to keep overhead low, experiment, measure, and untether from what isn’t working.
The only way to find out if my work is going to land in the online space is to push it out into the world and see how it lands.
If there was a surefire path to success, everyone would be doing it, and it wouldn’t be a path anymore – it’d be a really crowded highway.
5. Could you give us a quick experiment that a new minimalist business owner (with no list or followers) could try to attract attention?
I were just starting off I’d try to find one person I really trust to give me honest feedback about how my work is landing for them.
I'd again like to thank Ev for taking the time to answer my questions. Here is part II of Ev's interview.
Product Creation: Should You Go For A Breakthrough or Improvement?
Posted on 07:21 by Unknown
The entrepreneurial and inventive spirit in you might dream about creating a revolutionary, breakthrough product that changes the world.
However, throughout history, new products or ideas that extend or incrementally improve on current technology have been equally (and perhaps more) important.
I have noticed that there are two types of creative people: Visionaries and Improvers. A Visionary (like Steve Jobs) can create successful products for people that they don't even realize they need. A scientific Visionary like Newton or Einstein can form radically different theories and models of everyday phenomena that are beyond common sense.
Society and, especially creative types, judge innovative success in Visionary terms. We want to change the world with a bang.
However, the Improvers are equally important. They change the world with a whimper. Their creativity lies in a less expansive vision, where they can see one step ahead. To be creative, they need a specific problem or observation that allows them to build on whatever the current state of the art is.
Personally, I'm an Improver. Whenever I focus on improving something that is existing, I am able to harness my creative juices and get absorbed in creating. If I try to create something totally revolutionary or involved, I get bogged down and lose steam - I lose any excitement or creative juice.
The problem is when I get down on myself because I think I need to create something big.
However, throughout history, new products or ideas that extend or incrementally improve on current technology have been equally (and perhaps more) important.
I have noticed that there are two types of creative people: Visionaries and Improvers. A Visionary (like Steve Jobs) can create successful products for people that they don't even realize they need. A scientific Visionary like Newton or Einstein can form radically different theories and models of everyday phenomena that are beyond common sense.
Society and, especially creative types, judge innovative success in Visionary terms. We want to change the world with a bang.
However, the Improvers are equally important. They change the world with a whimper. Their creativity lies in a less expansive vision, where they can see one step ahead. To be creative, they need a specific problem or observation that allows them to build on whatever the current state of the art is.
Personally, I'm an Improver. Whenever I focus on improving something that is existing, I am able to harness my creative juices and get absorbed in creating. If I try to create something totally revolutionary or involved, I get bogged down and lose steam - I lose any excitement or creative juice.
The problem is when I get down on myself because I think I need to create something big.
Sunday, 18 March 2012
Successful Investing Is About Finding A Simple Strategy That Works
Posted on 00:25 by Unknown
My experience has been that successful investing is about finding a simple strategy that works, and then having the patience and discipline to stick with it - even when it is not performing in the short term.
Over short periods of time, randomness has a bigger influence. A lot of investors get impatient, and they then abandon the system and switch to trying something else.
With hedge funds and mutual funds, a lot of it is about needing good short term results to attract new money, so they keep trying complicated stuff to avoid any down performances - this helps keep them from getting good long-term results.
On this blog, I did write about a book called "The Hedge Fund Mirage", which is critical of that whole industry:
http://simple-trading-system.blogspot.com/2012/02/who-really-benefits-from-hedge-funds.html
Over short periods of time, randomness has a bigger influence. A lot of investors get impatient, and they then abandon the system and switch to trying something else.
With hedge funds and mutual funds, a lot of it is about needing good short term results to attract new money, so they keep trying complicated stuff to avoid any down performances - this helps keep them from getting good long-term results.
On this blog, I did write about a book called "The Hedge Fund Mirage", which is critical of that whole industry:
http://simple-trading-system.blogspot.com/2012/02/who-really-benefits-from-hedge-funds.html
Saturday, 17 March 2012
Stock Charting Flaws: Why Using Charts To Trade Does Not Work
Posted on 22:59 by Unknown
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.
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.
Monday, 5 March 2012
Do Billionaires Have To Give Charity to Help Mankind?
Posted on 13:31 by Unknown
People who think in terms of scarcity want billionaires to "justify" themselves by donating to traditional causes. With an abundance mentality, you realize that the wealthy help mankind no matter what they do with their money.
1. Let's say they buy luxury goods, like a Rolls Royce. Their money is then supporting jobs. The money is flowing to the dealership, salesman, service techs, etc. They, in turn spend money on themselves and their families, etc. So, if a billionaire doesn't give to charity himself, there is a good chance people downstream of his spending will donate.
2. If, instead, the wealthy save/invest the money, then it is used to invest in companies and businesses, creating jobs.
3. Even if they burned their money in a big bonfire, it would help mankind, because it would raise the value of all remaining dollars relative to goods (less supply of dollars).
The only thing that wealthy people can hurt are certain geographic areas, when they take their money elsewhere. For example, a corrupt African dictator gets his wealth locally, but then doesn't re-spend it locally - instead he sends it abroad. His country will have a net loss.
Even in this example, however, on a global scale, the money is not wasted. The dictator's money will help people somewhere in the world by getting invested or flowing through luxury good purchases. Maybe some of the people benefiting from his spending - such as a Ferrari dealer in France - might even donate money back to the dictator's country (not that this makes up for what he took, of course).
1. Let's say they buy luxury goods, like a Rolls Royce. Their money is then supporting jobs. The money is flowing to the dealership, salesman, service techs, etc. They, in turn spend money on themselves and their families, etc. So, if a billionaire doesn't give to charity himself, there is a good chance people downstream of his spending will donate.
2. If, instead, the wealthy save/invest the money, then it is used to invest in companies and businesses, creating jobs.
3. Even if they burned their money in a big bonfire, it would help mankind, because it would raise the value of all remaining dollars relative to goods (less supply of dollars).
The only thing that wealthy people can hurt are certain geographic areas, when they take their money elsewhere. For example, a corrupt African dictator gets his wealth locally, but then doesn't re-spend it locally - instead he sends it abroad. His country will have a net loss.
Even in this example, however, on a global scale, the money is not wasted. The dictator's money will help people somewhere in the world by getting invested or flowing through luxury good purchases. Maybe some of the people benefiting from his spending - such as a Ferrari dealer in France - might even donate money back to the dictator's country (not that this makes up for what he took, of course).
Saturday, 3 March 2012
Stock Trading vs. Football
Posted on 21:16 by Unknown
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.
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.
Tuesday, 28 February 2012
Does "American Airlines" Need To Terminate Its Pensions in Bankruptcy?
Posted on 20:19 by Unknown
American Airlines' parent company AMR corp, which is currently in bankruptcy, wants to eliminate its four pension plans, which it says is a "multibillion dollar liability on its balance sheet".
The Pension Benefit Guaranty Corp. disagrees, and says that American can emerge from bankruptcy without terminating its pensions.
They say that American still has $3 billion in cash and Delta, which has higher pension costs, is currently profitable. Also, Continental did not have to terminate any of its pensions during its bankruptcy.
The Pension Benefit Guaranty is the federal agency that takes over pensions when the original companies can no longer run them. Instead of tax money, they are funded by premiums paid by companies with pension plans.
However, the premiums that Congress allows them to charge aren't enough, and they are currently running a $26 billion deficit which, according to a "Chicago Tribune" article, would become $35 billion if they took over AMR's pensions.
Because of this deficit, they would only be able to pay each American Airline pensioner up to $54,000/year. This would short change some retirees, such as pilots.
The Pension Benefit Guaranty Corp. disagrees, and says that American can emerge from bankruptcy without terminating its pensions.
They say that American still has $3 billion in cash and Delta, which has higher pension costs, is currently profitable. Also, Continental did not have to terminate any of its pensions during its bankruptcy.
The Pension Benefit Guaranty is the federal agency that takes over pensions when the original companies can no longer run them. Instead of tax money, they are funded by premiums paid by companies with pension plans.
However, the premiums that Congress allows them to charge aren't enough, and they are currently running a $26 billion deficit which, according to a "Chicago Tribune" article, would become $35 billion if they took over AMR's pensions.
Because of this deficit, they would only be able to pay each American Airline pensioner up to $54,000/year. This would short change some retirees, such as pilots.
Kindle Version Of "Stock Trading Riches" Reaches Top 100 Business and Investing Best Seller List
Posted on 19:54 by Unknown
Today, the kindle version of my book Stock Trading Riches reached the top 100 on the Kindle Business and Investing best seller list.
Monday, 27 February 2012
To Be A Good Trader Or Investor, You Must Learn To Control Your Emotions
Posted on 19:55 by Unknown
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.
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.
Friday, 24 February 2012
Introduction to Market Capitalizations For Stocks
Posted on 20:20 by Unknown
A stock's market capitalization (market cap) is computed by multiplying the stock price by the number of shares outstanding. So, if a stock's price was $50 and there were 10 million shares, the stock's market cap would be $500 million.
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.
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.
Monday, 20 February 2012
For Many, Trading Dreams Turn Into Frustrations
Posted on 20:58 by Unknown
Many people get interested in trading after hearing about rich hedge fund managers, or getting a slick sales brochure from a "trading guru" trying to sell his latest system.
They see the well-chosen examples from the sales literature, understand how the system works, and then day-dream about the fortune they will make.
Then, they start trading and either under-perform the markets (if involved with un-leveraged stocks / funds), or else lose a substantial portion of their principal (through futures and options).
I know this, because it also happened to me. When I first started trading, I read all the gurus' literature, and decided that making a living from trading would be easy. I started day dreaming about what I would spend the money on.
Of course, I since learned that it's not that easy to get rich quick trading.
On the other hand, many frustrated would-be traders then completely quit trading and investing. This is a mistake because everyone needs some exposure to stocks and the stock market - otherwise your retirement savings will suffer "losses" through not keeping up with inflation.
I found the middle-ground between aggressive and conservative investing: I created the Stock Trading Riches system.
They see the well-chosen examples from the sales literature, understand how the system works, and then day-dream about the fortune they will make.
Then, they start trading and either under-perform the markets (if involved with un-leveraged stocks / funds), or else lose a substantial portion of their principal (through futures and options).
I know this, because it also happened to me. When I first started trading, I read all the gurus' literature, and decided that making a living from trading would be easy. I started day dreaming about what I would spend the money on.
Of course, I since learned that it's not that easy to get rich quick trading.
On the other hand, many frustrated would-be traders then completely quit trading and investing. This is a mistake because everyone needs some exposure to stocks and the stock market - otherwise your retirement savings will suffer "losses" through not keeping up with inflation.
I found the middle-ground between aggressive and conservative investing: I created the Stock Trading Riches system.
Friday, 17 February 2012
Aon Insurance's Move to London: An Example of How Shareholder's Votes Aren't Always Simple Decisions
Posted on 14:39 by Unknown
A month or so ago, Aon Corp. (one of the world's largest insurance brokers) announced that they would move their headquarters from Chicago to London. Even though only a few jobs would be affected, it was considered a blow to Chicago's prestige as an international financial capital.
Aon's board said the decision was made to lower their corporate tax rate and allow them to access $300 million of cash they have outside of the U.S. They made it seem like a simple, cut-and-dry issue.
On the eve of the shareholder vote, however, they had to comply with SEC regulations, and disclose the risks of the move:
1. Some shareholders might get taxed during the switch from a U.S. to U.K. company.
2. The IRS might fight the U.S. to U.K. switch. If Aon lost, the projected cost savings may not occur.
3. The litigation might take so long that, if Aon lost and the U.S. to U.K. move was undone, it might be too late for investors to file an amended 2012 tax return to claim a refund of the taxes from risk #1.
4. Shareholders like companies to buy back stock, but English companies face more restrictions than Delaware corporations for stock buy-backs. For example, they may have to get 75% of shareholders to vote in favor of it.
5. They may not be allowed to continue to pay their dividend until they built up "distributable reserves".
6. Finally, there is the risk that Aon may get removed from the S&P 500.
Aon's board said the decision was made to lower their corporate tax rate and allow them to access $300 million of cash they have outside of the U.S. They made it seem like a simple, cut-and-dry issue.
On the eve of the shareholder vote, however, they had to comply with SEC regulations, and disclose the risks of the move:
1. Some shareholders might get taxed during the switch from a U.S. to U.K. company.
2. The IRS might fight the U.S. to U.K. switch. If Aon lost, the projected cost savings may not occur.
3. The litigation might take so long that, if Aon lost and the U.S. to U.K. move was undone, it might be too late for investors to file an amended 2012 tax return to claim a refund of the taxes from risk #1.
4. Shareholders like companies to buy back stock, but English companies face more restrictions than Delaware corporations for stock buy-backs. For example, they may have to get 75% of shareholders to vote in favor of it.
5. They may not be allowed to continue to pay their dividend until they built up "distributable reserves".
6. Finally, there is the risk that Aon may get removed from the S&P 500.
Saturday, 11 February 2012
The Fuggerei - Really Long, Long Term Investing
Posted on 21:00 by Unknown
| The Wall Street Journal had an interesting article about people living in the Fuggerei - a Roman Catholic housing settlement for the poor in Augsberg, Germany. People who live here still pay the same rent that was set when the Fuggerei was first opened - in 1520! Then, the rent was 1 Rhein Guilder a year and 3 daily prayers for the well being of the Fugger banking family (make up your own jokes about "Fugg"ing bankers ;-) ). Today, the equivalent to 1 Rhein Guilder/year is 0.88 euros ($1.23) per year. The founder of the Fuggerei was Jakob Fugger "The Rich": Jakob the Rich was Wall Street long before it existed. He minted coins for the Vatican, bankrolled the Holy Roman Empire and helped steer Europe's spice trade in the early 16th century to become one of the wealthiest and most powerful financiers in history. He left more than seven tons of gold to his successors -- and a good deed. Much of the Fugger business empire crumbled over the next 150 years, battered by wars and soured credits. But the walled Fuggerei, with its picturesque lanes and seven gates in the heart of this onetime European banking capital, still stands. The Fuggerei is a good testament to the power of long term investing - even at conservative rates of return. In the late 17th century, after losing money in riskier investments, the bulk of the trust was invested conservatively - in old forest holdings. Since then, over the last 200 years, the trust has never lost money. The returns have ranged from 0.5% - 2%. |
Friday, 10 February 2012
Who Really Benefits From Hedge Funds? - Review of Simon Lack's "The Hedge Fund Mirage"
Posted on 15:34 by Unknown
The wealth of top hedge fund managers is the stuff of legend, but how about their clients - the "sophisticated" investors such as pension funds and wealthy individuals?
As Wall Street veteran Simon Lack says in his new book The Hedge Fund Mirage, "Who can name even one hedge fund investor whose fortune is based on the hedge funds he successfully picked?"
According to Lack, only a handful of superstar hedge fund managers made most of the industry's profits. As a broad investment class, he finds hedge funds to have been a terrible place to keep your money:
"If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good."
An even more shocking conclusion from the book is about the fees that hedge funds collect - which really kill any hope of a good return.
After crunching the data, Lack found that, from 1998 - 2010, investors made $70 billion, while hedge funds pocketed $379 billion in fees!
In conclusion, Lack feels that the fault doesn't lie with the hedge fund managers, but with the "sophisticated investors".
I agree, because one thing I have found during my almost 20 years of trading experience is that, in finance, people believe the complex and exotic is superior. They feel sophisticated and intelligent when, at cocktail parties, they can brag about investing in sexy things like hedge funds.
Every time I tried to trade sophisticated, leveraged instruments like futures or options or on margin, I underperformed or lost money. Instead, when I switched to trading plain old stocks using the Stock Trading Riches formula - which is simple, dull, and boring - I started doing very well.
As Wall Street veteran Simon Lack says in his new book The Hedge Fund Mirage, "Who can name even one hedge fund investor whose fortune is based on the hedge funds he successfully picked?"
According to Lack, only a handful of superstar hedge fund managers made most of the industry's profits. As a broad investment class, he finds hedge funds to have been a terrible place to keep your money:
"If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good."
An even more shocking conclusion from the book is about the fees that hedge funds collect - which really kill any hope of a good return.
After crunching the data, Lack found that, from 1998 - 2010, investors made $70 billion, while hedge funds pocketed $379 billion in fees!
In conclusion, Lack feels that the fault doesn't lie with the hedge fund managers, but with the "sophisticated investors".
I agree, because one thing I have found during my almost 20 years of trading experience is that, in finance, people believe the complex and exotic is superior. They feel sophisticated and intelligent when, at cocktail parties, they can brag about investing in sexy things like hedge funds.
Every time I tried to trade sophisticated, leveraged instruments like futures or options or on margin, I underperformed or lost money. Instead, when I switched to trading plain old stocks using the Stock Trading Riches formula - which is simple, dull, and boring - I started doing very well.
Thursday, 2 February 2012
Ground Hog Day, Stock Trading, and Probability
Posted on 09:49 by Unknown
Today is Ground Hog Day, and ABC News had an article on Punxsutawney Phil (the famous groundhog from Pennsvlvania).
The legend is that, if the groundhog sees his shadow, then winter will be 6 weeks longer. If it is cloudy, and he doesn't see his shadow, then spring will arrive early.
The ABC New article states that "It turns out the ultimate prognosticator- and his copycat counterparts- are wrong more often than they are right."
It then also states that "An analysis by the National Climatic Data Center found there is no correlation between Phil's predictions and the actual weather."
What's interesting is that, technically, these 2 statements contradict themselves. Being "wrong more often than right" is not the same as "no correlation" - and this has implications for developing a trading system.
If you develop a system for predicting the weather or for trading stocks, if your system does terribly, then you haven't failed. You would simply reverse the interpretation.
The worst thing that can happen when testing a trading system is not losing all your money - it's getting random results.
For example, if you tested a system of buying stocks on the first Tuesday of the month and selling 3 days later (this is a made up example), and you lost money 84% of the time, then this might not be a failure.
Why? Because this means you could short stocks on the first Tuesday of the month, and buy to cover 3 days later - which would win 84% of the time. (Of course, you would have to confirm that the total amount of money made on the winning trades exceeds the total amount lost over the 16% of the time where the rule failed).
The result you would not want would be to find that the rule broke even and gave no meaningful advantage. This would mean that, no matter which side you took, you would not expect to make enough to cover your trading costs (commissions, slippage, etc.)
The legend is that, if the groundhog sees his shadow, then winter will be 6 weeks longer. If it is cloudy, and he doesn't see his shadow, then spring will arrive early.
The ABC New article states that "It turns out the ultimate prognosticator- and his copycat counterparts- are wrong more often than they are right."
It then also states that "An analysis by the National Climatic Data Center found there is no correlation between Phil's predictions and the actual weather."
What's interesting is that, technically, these 2 statements contradict themselves. Being "wrong more often than right" is not the same as "no correlation" - and this has implications for developing a trading system.
If you develop a system for predicting the weather or for trading stocks, if your system does terribly, then you haven't failed. You would simply reverse the interpretation.
The worst thing that can happen when testing a trading system is not losing all your money - it's getting random results.
For example, if you tested a system of buying stocks on the first Tuesday of the month and selling 3 days later (this is a made up example), and you lost money 84% of the time, then this might not be a failure.
Why? Because this means you could short stocks on the first Tuesday of the month, and buy to cover 3 days later - which would win 84% of the time. (Of course, you would have to confirm that the total amount of money made on the winning trades exceeds the total amount lost over the 16% of the time where the rule failed).
The result you would not want would be to find that the rule broke even and gave no meaningful advantage. This would mean that, no matter which side you took, you would not expect to make enough to cover your trading costs (commissions, slippage, etc.)
Tuesday, 31 January 2012
Akorn is the Second Best Performing Chicago Area Stock of 2011
Posted on 21:13 by Unknown
In a previous post, I described Ulta, which was the best performing Chicago-based stock in 2011.
The second best stock was Akorn, Inc (AKRX), which is based in Lake Forest, IL. Akorn sells ophthalmic antibiotics, dry-eye treatments, and injectable drugs for hospitals.
This is another growth stock. Akorn's CEO, Raj Rai, took over in 2009 (when the stock was below $1) and led a remarkable turnaround - the stock increased 239% in 2010 to $6.07/share, and increased 83% in 2011, to $11.12/share.
Rai turned the company around by focusing on its profitable eye treatments and injectable drugs, selling its money-losing divisions like vaccines, investing in sales, marketing, and R&D, and acquiring factories in India to serve that country's fast growing markets.
Akorn has a lot of room to grow, so it could make a good growth stock purchase, especially at a lower price.
The second best stock was Akorn, Inc (AKRX), which is based in Lake Forest, IL. Akorn sells ophthalmic antibiotics, dry-eye treatments, and injectable drugs for hospitals.
This is another growth stock. Akorn's CEO, Raj Rai, took over in 2009 (when the stock was below $1) and led a remarkable turnaround - the stock increased 239% in 2010 to $6.07/share, and increased 83% in 2011, to $11.12/share.
Rai turned the company around by focusing on its profitable eye treatments and injectable drugs, selling its money-losing divisions like vaccines, investing in sales, marketing, and R&D, and acquiring factories in India to serve that country's fast growing markets.
Akorn has a lot of room to grow, so it could make a good growth stock purchase, especially at a lower price.
Friday, 27 January 2012
Ulta is the Top Performing Chicago-Area Stock for 2011
Posted on 10:58 by Unknown
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.
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.
Tuesday, 3 January 2012
Seven Year Return on My "Stock Trading Riches" Portfolio
Posted on 20:29 by Unknown
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.
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.
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