The red sun rises over the dragon

Five letters: NTDOY

That is the stock symbol for Nintendo. During the months of July-September it sold 3 times more units than PS3 and XBox. The demand is still higher than supply. The holiday season looks good, but the biggest news is this: Nintendo will begin selling in China for the first time ever in 2008.

With the Chinese market exploding the Wii should also. China is making millionaires percentage wise faster than most other countries in the world.

I only wish I had joined in sooner. I think this is a good example for dollar cost averaging up.

REITs Could Take Biggest Hit In Decade - Economists

"American REITs are forecast to suffer their worst decline in almost ten years and could drop up to 20% within the next year, Bloomberg reported Thursday. Economists cited by the New York Times estimate that problems in the mortgage markets could ultimately cost financial firms and investors up to $400 billion. REIT stocks have outperformed the S&P 500 every year since 2000, but are expected to suffer as higher borrowing costs put the brakes on takeovers and slash property values. "REITs are overvalued by 25-40% relative to stocks and bonds, and cash flow yields are too low," said University of California economist Kenneth Rosen. Investors are steering clear of bonds backed by subprime and commercial mortgages, and their reluctance to lend is affecting the value of trusts that own commercial properties, apartment complexes, hotels, shopping centers and mortgages. The Bloomberg REIT Index has fallen 16.5% since the Blackstone Group bought Equity Office Properties Trust for $39 billion including debt. Bloomberg notes that the last time the Index sank more than 10% was in 1998, when investors were pouring money into Internet stocks. The only segment of the Index not to lose value this year is warehouse and industrial, which rose 11.5%. Public storage REITs suffered most with a 19% decline. "There is plenty more shakeout to go in the REIT market," said American Century Investments fund manager Jeffrey Tyler. "Property values are going to be under pressure, and by extension that will move to REITs."

a lot of speculation there, but still, it might be a good idea to be ready to jump in when the housing market bottoms out in 2008 or 2009.

I've had it! (for now)

I just listened to http://radio.wallst.net/profile.asp?id=16#

Mad Money Machine on the 12 Steps

I'm so depressed. It totally trivialized active investing as a childish and useless behavior. I feel like a loser.

I'm going to go index, target retirement fund crazy now, It was nice knowing you!

Greg goes on a learning quest and obtains deep understanding!

Have you ever wanted to believe something was true? So much that you kept searching the internet until you found enough articles that backup up your position? Do you remember finding what you desired and not seeing the any contrary information? Did you tell you friends how wrong they are by citing fact after fact and anecdote after anecdote?

Well I have been on such a quest, but my results are different, I have actually found the truth. (The previous paragraph does not apply to me, obviously) I have correlated results from 3 sources. So what is my new found belief:

You can do better than just blindly rebalancing to your target allocation.

The first source is the Money-guy podcast. In one of his podcasts, Brian mentioned how he reduced his allocation of commodities because oil is overpriced. Then, 2 weeks later, he responded to criticism that his commodities trade was market timing. On the contrary, he states that he was "taking advantage of opportunity." He explained that if you make these decisions based on market valuation, you can increase your profits. Wow! Cool. He also gave us a hint that small stocks are overvalued now and large stocks aren't. Start selling!

Now the second source is the entire book I read called "The Intelligent Asset Allocator" This book was mostly a horrible, "go buy index funds," boring read, but it actually did make a few points about asset allocation. 1. You should buy asset classes which have been down recently. 2. Since trends are persistent for some time, you shouldn't rebalance often, maybe once per year or when the auto-correlation(Don't ask me to explain it) is a certain way. 3. Maybe increase your exposure by 0.1% for every 1% the asset goes down. 4. How about value cost averaging instead of dollar cost averaging? and 5. All this is psychologically difficult.

Phew. sorry about that boring synopsis. Are you still with me? We are talking about a new found belief!
The last source is an entire book written about asset allocation called: Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio

I have only read the introduction, but it claims it will actually explain asset allocation in more detail and 300+ pages!

Ok so to recap. I believe now that I can change my asset allocation based on "valuation" of certain assets to increase my returns, but I just don't know how to do it.

Do you believe me or shall I start citing facts and anecdotes?

Robin Hood

I watched the movie "Maxed Out" last night. It's about how people get saddled with debt and have to declare bankruptcy. There were a lot of crying people in the movie saying that they didn't realize that they were getting into trouble. That they trusted the credit card companies to only lend them money if the credit card companies thought they could pay them back. I know I know, what idiots! They balanced out those losers with some people who seemed to have legitimate claims against the credit card companies.

In any case, the real good part was when this professor from Harvard said something like "Credit is sooo lucrative" then she repeated "You don't understand just how lucrative it is, it's excessively profitable"

That made me think, it's our job as financially responsible people to take as much money from the credit card companies as possible: every free offer, every 0% interest deal, every free mile. We should extract every last penny of cash back. We must make the credit card companiespay for exploiting others.

We have the gift of being able to pay our debts on time and to be able to add. Let's put that to good use

Book: Intelligent Asset Allocation

I am listing to a 4 CD book called "Intelligent Asset Allocation" thinking it would tell me something about asset allocation, but it turned out to be another "buy index funds and here's why book"

I hate that.

I listened to 2 whole cds which lead up to that statement. Duh! The funny thing is that there was a chapter on asset allocation, but it was really shallow. It told me the following:

• Invest in many asset classes invest at least 3, but you can add more!
  
• Spread your assets among the assets. Own more large cap stocks if you want your returns to mirror the market return, the less large cap stocks you own the more change your returns will be different from every one else's

Note: it doesn't tell you specifically how to calculate how much you should allocate to each asset, only that you should get a bunch, maybe do equal allocation, maybe not, depends on something that you can't make a decision on: "how much you will freak out if you don't get returns like the S&P 500"

*Sigh*

Well there are another 2 CDs left. But what is 2 hours wasted in the million ours of commuting I do.

Cheers!

Trust your Mechanic

Here is the plan for a new kind of car repair shop.

The main problem with car shops is there is no way you can trust them. Ever time I take my car in, I can picture the person at the front desk getting his training. "Don't you dare let that customer out the door without getting them to fix something. Even if everything is fine, find something that you can repair, for example, the drive belt always looks warn, customers are a sucker for changing the drive belt!" (I won't mention how many times I've changed mine)

The problem here is this: The mechanic is not on your side. His incentive is to find as many things wrong with your car as possible.

So here is what I suggest: A subscription-based car care. The way this works is you pay a monthly fee to your mechanic and in return he will charge you only for the parts he needs to fix your car. That way, his incentive is to make your car go as long as possible without needing repairs. He has no motivation for changing your drive belt if it's perfectly fine, he doesn't make any extra money as a result.

Now the trick is, how much would the monthly fee need to make it worth it for consumers. Certainly customers would be willing to pay a premium for having a trust worthly Mechanic, but not that much of a premium.

I think you have to base this calculation on how much an oil change costs. If you could make the price not that much more than an oil change, consumers would buy it up.

Let's say it costs on average $35 for an oil change at place like Jiffy lube and any car needs to change it's oil about every 3 months or 4 times a year. It also takes a person about 15 minutes to change some oil. The question is: How many cars do you need to have enrolled and how much money do you have to charge in order for it to be worth it?

A scenario: You have 3 employees. A mechanic (4000 per month), an oil change kid (costs 2000 per month), and you. You get 800 cars and charge them 15 per month, equivalent to a $45 + $15 for parts oil change. Not that bad for the consumer. You make a total of 12,000. Paying your self a pretty good salary of 6000 minus garage expenses.

You get the oil change kid to do all the oil changes, you have the mechanic do any complicated work, and you sit at the front desk and say hello to people. Your oil change kid can change the oil for 160 cars per week, giving him plenty of slacking off time since only about 100 cars will need to change their oil each month.

Would people actually pay $15 per month for that? I certainly would.

Oh well so much for living in a fair world. If one of you out there is reading this and knows when you really need to change a drive belt, quit your job and start a business! Or maybe I'll quit my job and start a computer maintenance business.

candy vending machines - a sweet/tart/sour quarter-laden cash-cow: http://geniustypes.com/the_best_deal_ive_made_yet/

3 reasons for posting this:
- talks about passive income
- talks about candy vending machines, which we've mentioned before
- shows an example of seeing value where others don't ("one man's trash is another man's treasure"), a subject near and dear to my heart, since i've easily saved over $1000 during the first year of home ownership by buying on craigslist and curb-shopping

thoughts, comments?

Free mocca-latte-double shot

Ok so here is the plan...

background:

My money blog, just posted about the discover card's 0 percent for 12 months plan. Plus you get 5% cash back on certain purchases like airlines at certain times of the year. If you want more go check out:

http://www.mymoneyblog.com/archives/2007/10/discover-more-card-40-bonus-0-apr-for-12-months-limited-5-cashback.html

Do something practical with that:

say you take a 10000 balance transfer.
option 1: put it in a CD and make 500 in interest, pay taxes on it, pay fee to discover, and at the end you might have 300 bucks. Not bad and not too risky so long as you can make the monthly payment
option 2: pay off some debt, risky because this represents extra money you would not normally spend. You still have to pay the minimum payments! Just calculate how much extra money you have for the debt and then that's how much you take out with the card.

With either option, if you are smart, you will make some money.

Now that you have a reason to get the card, think Latte!

So the card gives you 5% cash back on various things at different times of the year. If you spend 1000 on a flight for work, you will get reimbursed and get a $50 cash back! What's more, you can get a $40 gift card to Starbucks by cashing in only $20 of cash back. So that's like a 10% cash back amount! Phew!

Take that David Bach! (note: do a web search for David Bach's Latte factor and then you will LOL)

So then you can drive up to a Starbucks every morning, stress free knowing that you are not burning away you retirement money with a nasty habit. Bring on the mocca-latte-double shot espresso-pumpkin spice soy chai beverages!!

sector investing, got any courage?

http://stockcharts.com/charts/performance/SPSectors.html

If you go there you will see a whole bunch of sectors going up and the financial sector going way down. So, it's time to buy it up! Buy that loser sector! If it goes down in price buy more! The more money you lose the better. What a bargin!

In fact, I am so committed to this plan that I bought 100 fake shares and put it in my google finance portfolio.

The "Real" DOW

Whereas I have previously ignored opinions as the one presented in the link below, I'm not so dismissive anymore - not when every morning's WSJ bring more news of home sales falling.

http://www.itulip.com/realdow.htm

Even if these predictions will prove to be only partially correct, right now seems to be a good time to discuss strategies for staying afloat or succeeding in a high-inflation market.

More Ideas from book: The Wisdom of Crowds

Here's another idea: Look at the top 10 holdings of all the mutual funds in a category, then buy only those stocks that are rated the highest, but all of the managers.

Combine those ratings with the view points of all the random boneheads on the internet like me who know "nothing" but yet recommend stocks and you have the golden combination.

That is, a bunch of experts (ie. the mutual fund managers) with the added wisdom of a bunch of dummies (bonehead bloggers).

Reaction to book Wisdom of Crowds

So I am reading this book called "The Wisdom of Crowds." It's a great book. One of the points is that under the right conditions, a group of people can be way smarter than individuals. Furthermore, it goes on to say that a group of experts does worse than a group of one expert and several dummies.

Ok so what does this mean? Well, it means that experts aren't so amazing. It means that you shouldn't go look for an expert to solve your problem. You should look for a group.

Ok so what can we do to make a million dallas off of this? (You were waiting for me to speak about this weren't you?) Well it's simple, start "Wisdom of Crowds Funds"
. This is how it would work:
1. Hire a few stock picking gurus
2. When they have a theory like: Will Coke's new drink sell or will every one slurp Pepsis instead? You survey every one in the fund. They come back with a yes or a no and the stock gurus use that to make their decision on which company to buy.
3. Retire to island in the pacific.

It's as easy as that!

The genious is that the public will have information about the product of service in question that the stock guru's will never have. Each person adds their tiny piece of information and it aggregates together to be a really smart assessment. Thus, we've made the situation where the expert is teamed with a big group of dummies, and so the group decision should be better than any team of highly paid stock maniacs.

I'm suprised no one has taken advantage of this. There are millions of people who hold any given fund. Every single one of them is motivated to make the fund succeed. No one has bothered to get them involved in the stock evaluation! Amazing.

Anyway, I'm going to go back to paying my dumb experts 1% of my money so they can use their all-mighty powers to know which way the market will turn. Wish me luck!

Frustration at the fireside

Here is a simple, but genius idea I came up with while trying to make a smore on a really terrible gram cracker (side note: I paid $0.50 extra for the dam things because they had "a good source of calcium" but it's not worth it because they taste like cardboard!, ok back to the idea):

Gram crackers should be shaped like mini bowls in order to properly hold the marshmallow and chocolate.

Duh! How come no one has created such a thing! So next time I venture out to a fireside, I will have my home made vegan marshmallows, plus bowl shaped gram crackers I cooked in my cupcake pan! Wish me luck!

sector investing? the way to do asset allocation?

So, if one sector is doing bad, then why not buy a ton of it because it is bound to go up, then when it has peaked, sell!

here are some bad links:
http://news.morningstar.com/classroom2/course.asp?docId=3000&CN=COM&page=1
http://www.alphaprofit.com/sector-investing.html (junk)
http://fund-track.com/Fidelity/Fidelity_Main.htm

Well that has a term its called "sector investing" or "sector rotation" It's an interesting idea, but I wonder how hard it is.

The conventional wisdom is to set your asset allocation based on your risk tolerance and age until retirement. However, I don't think the professionals stick to that, and I wonder if you can do better. Sector investing might be one way, but what is the real way?

Anyway, case in point: I was listening to http://www.money-guy.com/asset-allocation-basics and Brian P said the shpeal about not trying to time the market. Well, then if you listen closely, you will see that he says "I'm keeping my real estate allocation low because it's getting killed right now" or "I'm taking some profits from commodities because oil just had a huge run from $50 per barrel to $80." He's tweaking the asset allocation! How does he do that?

Free trading?

Andrew,

Check this out free trades!
http://www.zecco.com/default.aspx

Are you excited?

I wonder if it would be worth it to use the account to buy ETF's
Or even I could just throw my $2500 into Bank of America and other dividend paying thingies and earn my 5-8%.

If you use it to buy mutual funds, I think there is a fee
http://www.zecco.com/trading/FreeTrading.aspx?tab=WhatsNotFree

-Greg