Welcome to Ziv's Investing Blog!
On vacation, blog continues after I come back.
Any stock has a life span. When we talk about intrisic value, it usually means the value for future 10 years.
It is not how large the bubble is to determine bust is coming. It is how serious the bust event is. Let's welcome the biggest bubble in history.
1. The best investing skills are the lessons learned from past mistakes, not the words of Buffett.
2. Start to reduce leverage as the bubble is higher and higher.
Don't worry too much about the bubble.Currently the interest rate is low, so it is hard to form bust event.
If you use the money you cannot lose to invest in stock market, you will definitely lose it.
In the long run, high price stocks have more growth potential.
1. Money can create independence. If you use money to squander, you become a slave.
2. Trust your own investment decision. This is only possible after you are quite sure your decision is better than others.
1. The bubble, especially in technology stocks, is really high.
2. In the stock market, earn money is boring, choose index fund and wait. Lose money is fun, gamble for rise or drop in every single day.
1. A lot of traders treat stock market as a casino to have fun. Only after big losses happen, they can study and think about stock investment seriously.
2. Wait long enough until Amazon fails to grow market share, then it will drop like a rock.
3. Google can boost productivity, but Facebook does harm to productivity.
1. A lot of people know nothing about investment. They choose an index fund and forget it. It turns out their portfolios perform much better than those who study investment everday. Studying finance initially hurts investment performance. Until you stay in the market for long enough, then the experience pays off.
2. When a stock is rising, only the one who sits tight on it for a few years can get the most profit. It seems that it is because that one is more patient, but actually it is his financial security makes him patient, not his temperament.
3. Nobody can predict exactly tomorrow's market trend, but at least you have a prediction for future, that is, the market will grow in long term, though there is set back in short term, otherwise it doesn't make sense to invest.
The problem with long term investment is that there is little change in short term and it is boring. Human being by nature only like short term stimulus.
An investor who has money,time,patience,intelligence,luck wins the money from the investor who doesn't have them.
As online shopping more popular, lots of people lose interest in black Friday deals.
Prioritize your cost: spend more on the things that grow in value, such as house, and stock. Cut spending on things that lose value, such as cars and dress.
Run your home like a company. Think how to make budget, spend wisely and save more for investment.
1.It is not IQ that determines your investment success. It is the patience that counts. The patience is finally determined by your financial security.
2.Stay long enough in stock market, you will finally figure out how stock market works.
For most families, cash flow is top priority, asset growth is 2nd.
Status items such as luxury cars, high price clothes cannot show the owners' wealth since most middle class can afford them, but show the owners' social status, just rise from a poor family, and have a strong will to show off.
1. A stable temperament is helpful for investment. Destress or relaxation skills are important.
2. Maslow's hierarchy of needs provides a clue for investment. When your lower level needs not satisfied, you cannot make good investment, which is higher level need.
1. In the past middle class owns most wealth. Now the rich owns most wealth. This is not good for long term enomony growth.
2. It is unfair that working middle class get far lower salary than experienced traders who don't contribute anything to economy.
1. Start to accumulate cash to prepare for the rainy days. Every bubble burst will make the people with cash richer and make the people without cash poorer.
2. Holiday season is coming. The stock market might have a minor correction.
3. As China economy slows down, wish India economy can sustain the global growth. Now it is hard since India GDP is only 20% of China.
1. For fixed income, you can show off or become well off, but you cannot do both. So buy luxury thing is a stupid idea.
2. Focus on US stocks. Everything has Mathew effect. Focus on the strongest stock market. International stock market seems more diversified and more attractive in short term, but it is much worse in the long run.
1. Financial freedom doesn't mean that you can afford luxury things, but mean you have more choices rather than make a living. It doesn't necessarily mean retirement, but mean you finally can work hard on what you like.
2. Long term goal and short term goal always have conflicts. Micro goal and macro goal always have conflicts. To be rich, you have to save enough to invest. This is micro goal for yourself. For the whole economy, every one should spend most their income, so that the economy can boom. This is why the government doesn't advocate saving, but advocates spending.
3. As of 11/13/2017, the market cap to GDP is 137.42%. It is higher than Year 2007 bubble, which is around 110%. It is still lower than Year 2000 bubble, which is around 151%. Now the bubble is second highest in the history, but it may pass Year 2000 bubble since more people have joined stock market.
Shipping stocks provide biggest potentials, also biggest risks. It is worth the risk to put $50K in them. Sit tight for 3 to 5 years. Remember this is a speculation strategy. They have 5-10 times upside, also may drop to zero. Make sure don't touch DRYS, DRYS is a scam.
Buffett insists that long term investment fits everyone, but in reality most people don't have the same financial security to do the right thing: buy on bust, sell on bubble. Because they are the weakeast investors, what they can only do is the opposite.
Most people don't have financial security to purchase aggresive growth funds, so maybe income funds not only benefit the retired people, but also common investors.
If you have enough cash, it has 90% success rate to invest in real estate and rent it out as long as you have positive cash flow. It has only 1% success rate in stock market. This is because real estate investing follows human's nature, but stock investing against human's nature.
After internet reaches every family, stock market becomes more and more effective. I am curious that 1. whether Buffett's fund can beat SP500. 2. Will the computer win all the money from mankind investors?
Most people still feel the pain of 2008 collapse. This is why this time the bubble will be much bigger because most people are cautious, so it is hard to form the bust event.
Market has significant bubble now. Shrinking balance sheet may cause short term sell off. But if Federal reserve can do it slowly, the market still has a huge potential to grow before collapse. I expect the market still has 30% upside.
It seems that this time stock market bubble is much bigger than 2008 market collapse. No one can predict when the market will bust, just like a balloon, if there is no needle to break it, the bubble can be huge.
I cannot understand why Amazon is so hot in Nasdaq. Personally I like amazon very much, but the main thing is whether Amazon can make money. Idiot can gain huge market share by losing money. Amazon has a perfect way to manipulate earning: either break even or earn a penny a share.
Costco is another joke. Costco uses a membership fee with 2% back as bait and sells everything in a huge package that no one really needs that much. Those middle class shoppers will be angry if it turns out that Costco makes more profit by making price/ounce cheapest, but having most ounces in a package. They will become mad if they happen not going to costco, but shopping at higher price grocery stores, and then saving hundreds of dollars per month by buying smaller package, but higher price/ounce products.
If house price and rent are considered in the expenditure, the actual inflation rate is much higher than before. No matter you own a house or rent an apartment, you can hardly afford either one.
It is a big issue to over emphasize positive thinking. Most people in USA are too optimisitic about their finance and buy big things when the market is about to collapse.
Economy has no room for rapid interest rate hikes. Stock market has no room for further growth, but there is no panic either, so stock market stays flat for a while.
What makes you rich is not how much asset you have, but how long a stable cash flow can keep.
Best funds: VGHCX, PRDGX, and VEIPX
Psychology of stock trading
If you understand that your future wealth depends on the number of shares, not the current price, you will celebrate the drop of stock market, not the rise.
QCOM is a not bad stock, it is a sure thing to have 20% return within a year plus 4% dividend.Even Apple may drop its modem, the whole cell phone market is better.
Buffett is selling his house in California, this signals downturn of real estate is within 1 year (possibly early 2018).
If there is no hedge fund manager, the world will be better.
Wells Fargo scandal provides an opportunity to buy in Wells Fargo at reasonable price. If I have extra cash, I will load more.
Bubble is not much in stock market. It still has room to increase before the interest rate hikes.
Activist investors create real wealth to human beings. Other investors are merely parasites.
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The opportunity to load oil stocks comes again.Accumulate oil stocks little by little as they drop since perfect timing is impossible.
US stock market hitting new highs won't solve the economy problem. The tax for riches has to be increased so that it is more fair and also protects riches' long term wealth.
Despite the correction, the stock market only has one trend: going up.
There are a lot of profit taking in oil stocks, so wait for the support. Oil price won't drop drasmatically like last year.
If you bought Shell oil stocks as I suggested, it maybe wise to sell them to lock profit. They both have good hedges, but debt to asset ratios are high. Change to other high equity stocks.
Brexit provides an opportunity to buy the dip. So called "Uncertainty" is good to load up at lower price.
The major issue of US economy is that riches become richer and richer, but hard working middle class are struggling to make ends meet.
China economy still has big potential. The turmoil was caused by political instability. After the leadership team settles (hopefully), the economy and the price of oil will recover sharply.
US stock has a correction now, but don't panic. It just accumulates the strength for a new high.
Though you make sizable profit by shorting apple, try to long it on dip, iPhone SE seems good.
How to be a millionaire early:
Be patient with stock market correction. It may take more time to settle.
Once Amazon loses steam of growth, it is a perfect example of bubble stock.
Before jumping in stock market, follow professional's advice first and understand it.
Dow Jones inched up and close to new high.
It is a safe bet to diversify and buy 20 relatively safe oil stocks.
Daytrader is just a dream, only long term investment and a stable income from work never fail.
In stock market, don't just focus on your stocks, but routinely check if the money to bring food on table is safe for the coming 12 months.
The stock market rule needs some adjustment to restrict the impulsive trading.
US stock quietly rebounced. It is safe for at least a few months.
Jump on oil stocks. It is not late now.
Money printing is all over the world, Japan even has negative interest rate. It is a safe bet to buy gold now.
Low quality product is only used in dumb function in dumb place.
High quality product is much cheaper than free crappy product in the long run.
Mathew effect is the basic rule in a stable society until the disadvantage group is strong enough to make the society unstable.
The long term investment means that you have to avoid panic sell and impulsive buy. To realize this, one thing is that you form a correct mindset, but more importantly you have to set a banking system which makes it impossible for panic sell and impulsive buy.
The key for financial freedom is not maximize 401k, but accumulate cash to buy property and create passive income, plus reduce income tax legally with strategy.
Spender->Saver->Investor : Kid->Youth->Adult
Investors aim to seek a day when passive investments will provide sufficient income to cover all of their bills.
US stock market continues gain recently. The turmoil early this year was a correction, not necessarily a sign of bear market.
Load up oil stocks and sit tight.
A huge bounce back for oil stocks, also a good entry for new positon.
Keep your position in stock market if you will invest for long term. Buy more on the dip is more rewarding than sell and keep cash in the long term.
If well diversified, high risk investment can create high return with low risk.
Today is Chinese New Year for monkey. Wish US stock market have a good start.
US job market is healthy. Stock market will be stable soon.
To save money in long term, buy second hand high quality product or discount high quality product. Though it is still significantly more expensive than low end product, but over the time, you save a lot.
Self discipline is ridiculously weaker than the impulse of baisic instinct. Don't trust yourself about the ability to think wise, but create a way that you can invest without too much discipline.
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. (Quote from Warren Buffett)
Real estate investment is much less competitive than stock investment. If you do have enough cash, buy real estate and rent it out.
For safe play, only buy good shale oil stocks with hedge positions.
Most people in stock market have above average wage. They are competitive workforce in their career. If you think about this, you will know how hard to make money by speculation rather than long term investment since all the competitors are clever. This is the reason why the people who are not that clever always win in stock market by holding mutual funds only. They are not competing with other people in speculation, but only ride on the growth of economy.
China economy will be worse this year, but United States economy is still healthy.
There is some bubble in US stock, but not as much as you think.
To diversify, it maybe be a good idea to load some preferred stocks.
Long US stocks, buy the dip.
Short as many AAPL (apple) as possible.
Load much more US shale oil stocks.
Load more US shale oil stocks.
Now it is a good time to buy dip in China market.
Value Investing: Seeking relatively undervalued stocks and believing they will eventually produce strong returns.
Fundamentals Investing: Identifying companies with strong earnings prospects.
Growth Investing: Buying into companies that have promising emerging products or services that hold promising growth potential.
Socially-Responsible Investing: Looking for companies that adhere to certain set of moral and/or ethical business standards.
Technical Investing: Examining past market data to look for hallmark visual patterns in trading activity to make buy and sell decisions.
Contrarian Investing: Making investment decisions in direct opposition to the market majority (selling when others are buying).
If you earn a big money by luck, it is like a loan with high interest, you will lose it plus paying interest you cannot afford in your whole life.
I believe I was wrong with US shale oil stocks. If I can find an opportunity to sell it, I will do so.
Strategy to hold FNMA:
Hold for ever until it is relisted.
Fidelity brokagelink account: 95% of 401K can be used to trade stock directly.
Merrilledge brokerage account for free 30 trades/month if you have $50k balance.
Will US stock market fall soon?
Not likely. It will be flat or slightly rise.
Technical VS Fundamental
Use Technical for short term.
Use Fundamental for long term.
Fundamental and Technical combined for high profit.
How to trade a volatile stock?
When it drops to the bottom, sell a covered put.
When it rises to a point you want to sell, sell a covered call.
Study psychology, history, philosophy.
If oil price recovers later this year, it will be the time to sell shale oil company.
China market will keep going up after correction for a few months.
Run your family like a company, think how to spend money wisely in order to provide more money for investment.
Cut spending and minimize taxes.
The real happiness is not from luxury thing, but from the self improvement.
When executive resigns for personal reason, it is actually not personal reason, it is because something is wrong with company.
If there is nothing to buy in the market, keeping cash is best investment. Spend it until the opportunity comes out.
Is oil stock good investment now?
Absolutely yes. Oil will go back to normal price within a few months. With the world economy slow down, it provides an opportunity for value investing.
Is there value investing in China?
Value investing doesn't work in China. The market is manipulated by either government or market maker.
Investing vs speculation:
Value investing for long term
Speculation for short term
By nature, human being prefers short term. That's why most people lose.
Increase the possibility of profit:
When you feel a stock is dirt cheap to buy now, hold on 3 more days to wait it to hit ground and settle.
When you are desperate on a depressed holding stock, hold on 3 more days to see if it will be better.
When you feel a popular stock is so hot and you have to buy it now, hold on 3 more days to cool down.
When you see a depressed stock finally breaks even and have the impulse to sell, hold on 3 more days to convince yourself you can sell it at higher price.
Is it possible to make a living in stock market?
Yes, when you have financial freedom and 10 years' concrete stock trading experience.
No, when you don't have enough money to support yourself or you are a newbie in stock market.
Short answer: If you don't need money, you get more money. If you need money, you lose more money.
Growth potential by sector:
Buy on bust.
Sell on bubble.
How to overcome greed and fear:
You have financial security, so you can be calm.
Personality and stock trading:
If you are sensitive, you will sell a stock once it is up or down just a little. You won't lose much money, but you won't earn much money either.
If you are not sensitive, you can sit tight, but you are not able to know the right time to sell. Maybe you have a huge paper profit, but very possibly you will sell it at wrong time when the stock is depressed.
No matter you are sensitive or not, you don't have the right mindset to make profit.
Tricks to hold stock longer without financial security:
Make yourself not able to sell one stock by shorting a covered call at current price plus 25% for 6 months to 1 year.
Trade stocks in IRA or 401k; This will make you hold stocks longer since you know you don't need the money in retirement account soon anyway.
Stock market cycle:
Bull lasts longer (usually 4 years); Bear lasts shorter (usually 1 year). The market keeps going up with dips.
Stock buying strategy:
Save up $10000 every 6 months and buy on big dip.
Sit tight for at least 1 year.
USA market will be flat for rest of 2015.
China market will have a correction for a few months.