The 3rd Alternative

The late Stephen Covey is indeed a master of finding Win-Win situations





If you are able to open your mind to search for something better than what you ever imagine can be done, make sure you spend at least 2 weeks to learn and apply the principles outlines in this book.

For example :
(1) The ACCA formula : Ask, Criteria, Create , Arrive ( 3rd Alternative)
                                     vs Ask, Justify, Haggle, Arrive ( 2 Alternatives )
(2) Me, You, Seek, Synergise


There are many principles worth looking into :

(1) Magic Theater
(2) Talking Stick
(3) Ubuntu : I can't be truly human unless I fully see and value your humanity as well. I can't demonise you , which means to literally see you as an inhuman demon, and still remain human myself.
(4) Ahimsa : do no harm to living creature
(5) HHH vs GGL : hardened human heart vs Genuine gestures of Love
(6) Retributive justice vs Restorative Justice

And many , many more...

(1) Money is only a kind of wealth, a mark of secondary success.
(2) Primary success, arises from our chararcter,  is measured in terms of the contribution we make . Integrity, Honesty, Hard work, Compassion for others. Spiritual wealth=primary wealth.
(3) We are a poor village. We have no answers. We suffer until the rich and educated come to our aid.

Profitability of Technical Analysis

Here is  book which made up Fred Tam's Master Thesis.

In his thesis, Fred tested 13 technical systems to 38 index-linked counters to find out whether the the technical systems were able to return "abnormal returns". In layman's term , can any of the 13 system return better than just simply buying and holding. If so, then it may be worthwhile to apply the trading systems tested to better grow your investing portfolio.

It proves that in the period tested, certain systems do give abnormal returns.

(1) Channel Breakouts gives the best abnormal returns ( 20-20, 20-10, 20-5)
(2) The RSi, Momentum and DMI do not give superior returns.

The results are back tested only , and hence, it is not forward tested.

As usual, past performance cannot guarantee future results and hence all results must be read with this limitation in mind.

My take is .... no matter what system you use, so long as it is consistently profitable over a substantial period of time ( at least 1,000 market days) then the system is robust and good.

 There are many local thesis  and good write-upson technical analysis on the local stock and futures market :

(1) http://psasir.upm.edu.my/291/1/549566_FEP_2004_10.pdf
(2) http://lcchong.files.wordpress.com/2011/06/my-trading-ideas-for-the-forex-and-fkli-spot-market-06072011.pdf
(3) http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1706683
(4) http://umexpert.um.edu.my/papar_cv.php?id=AAAMJCAALAAC1MdAAk

A book a Fortnight.... Da Vinci Code

Looks like I have to change my byline to READ A BOOK A FORTNIGHT...

Well some technical books are difficult to finish and digest in 1 week... It normally takes 2 weeks or more.

Novels are easier...

Maybe I should do a novel, then a technical book in rotation...

Today is a Highly Technical Book by Fred Tam

It is about Fibonacci numbers, the origins and the applications to trading.

Good for good night reading but in trading, there is a risk of overtrying to fit the prices into waves and Fibonacci retracement.

I do not use Fibonacci per se ... but the ratios are there for a guide. Any retracement mot exceeding 80% is valid by my books... be it 50%, 61.8%, or even just 38.2%. No need to lose too much sleepover it.

Some swear by it... as long as you make money consistently from it, well and good. Everybody will make money their own way!

Here is an extract from DESIDERATA  ( Desired Things, 1927 prose poem by American writer Max Ehrmann) http://www.businessballs.com/desideratapoem.htm:

".... Be yourself...

...You are a  child of the universe, no less than the trees and the stars.
    You have a right to be here

   And whether or not it is clear to you ,
   No doubt the universe is unfolding as it should .

.... Be cheerful
     STRIVE TO BE HAPPY "

Be happy, ok?

The Warren Buffett Portfolio

" I look for business in which I think I can predict what they are going to look like in ten to fifteen years' time. Take Wrigley's chewing gum. I don't think the Internet is going to change how people chew gum "   - Warren Buffett
 

Oh No ... another Warren Buffett book but not written by him?


Well , I got this hard covered book at a discount sale so, I bought it cheap.

Did I get value? Well, here is the gist...

(1) Warren Buffett likes his companies old.

(2) All his companies has earnings growth in the region of 10%.

(3) He treats his companies like "equity bond". Since the companies are old , established names and has a "durable competitive edge" ( ie likely to stay in business for anther 10 years at least and beyond), the company behaves like a bond ( in that it has "predictable earnings" in the past , present and likely in the foreseeable future). And because of the earnings growth, the earnings will be translated into value in future.

(4) He likes to buy his companies at a discount. If the earnings are stable and growing, it is safe that the company's earnigss is likely to stay stable and growing in the future. But the price of the company stocks fluctuate, and hence the PE ( price earnings ) will fluctuate with the current economic situation. If the earnings are seen to be stable, an fall in price will enhance the yields.  Say, if a company earns USD5 per year and grows at 10%, it is likely that the company will earn USD5.50 next year. Say this year, the price of the stock is USD75, then the pE is 15x. If the price of the stock is USD50 next year, then the PE has fallen to 10x. If the range of the PE is between 10x to 20X, then PE 10x is at the lower range and therefore a bargain. Assuming all the company fundamentals remain the same, buying at USD50 for an expected earnings of USd5.50 in the coming year is a bargain . In year 2 , the earnings is expected to be 10% more than USD5.50  at USd6.05. At the cost of USD50, the the return in the first year is 6.05/50=12% return in the 1st year!

Sounds good?

The trick is to find companies that grow 10%, and to buy and hold the comp[any forever.
And ... can the company you identify keep the durable competitive advantage forever?

A few calculators recommended ( found in pg34-36):

(1) To calculate the Internal Rate of Return ie how much the company has grown over an x amount of years :
http://www.moneychimp.com/calculator/discount_rate_calculator.htm

(2) To calculate future value of dividends after an x amount of years, growing at y rate of growth.
http://www.investopedia.com/calculator/fvcal.aspx

(3) After finding out the internal rate of return, and the future value of current dividend in 10 years, we can plug the lowest PE ratios for the company for the last 10 years ( to be conservative).

(4) Then we work backwards again to get the IRR from now to 10 years time.. Finally, we can find out if our investment at current price can meet the 10% return so sought after by Buffett.