The market had a free fall after I bought DXO. Dow fell as low as 6547 point. DXO dropped to 1.74 at some point. It bounced back as the market continue to slide. Today DXO stands at 2.42. I cashed out at 2.34. Although it was a bit early, I am pretty happy with the 18% return during one of the worst market downturn.
My other investment almost gave me a heart attack. I bought FAS (Financial Bull 3x) which move three times on the same direction with the financial sector. I bought it at 4.32. It went down the next day, and the next day, and even further the following day. It went all the way down to 2.70. I regret not having more money to put in at that point because I knew it will bounce back. It did last week. FAS came all the way back to over 5 dollars. I cashed out at 5.32. A return of 23% had capped this roller coaster ride.
At this particular moment, I am not sure where the market is going. So, I wait.
Sunday, March 15, 2009
Tuesday, February 17, 2009
The Golden Opportunity to Invest
The Dow lost 298 point yesterday and it is near its all time low reached in November 20 of 2008. It could go further down or bounce back a little. In my opinion, the chance of upside is much bigger. A lot of bad news hit the market pretty hard. Any good news or less bad news will cheer investors up.
I put the larger portion of my money into DXO (PowerShares DB Crude Oil Double Long ETN). DXO corresponds two times as the oil price. I bought over 1300 shares at $1.98. I bought it for the following reasons: First, the oil price is at historic low and I don’t think it will stay that way. Even with the falling demand, oil price could still go up through production cut and weak US dollar. Second, the market is at all time low. Third, I watched DXO go down over 14% before sending in my order.
I will update the performance of this ETN in the coming days.
The following links support my idea.
Top Stock Picks '09: PowerShares DB Crude (DXO)
http://www.bloggingstocks.com/2009/01/12/top-stock-picks-09-powershares-db-crude-dxo/
As prices slump, Nymex oil seen losing relevance
With WTI futures below international prices, are they a 'broken benchmark?'
http://www.marketwatch.com/news/story/nymex-oil-loses-glow-international/story.aspx?guid=%7B00C1AF3A-52C4-44DE-860E-F8620447A9E9%7D&dist=msr_2
I put the larger portion of my money into DXO (PowerShares DB Crude Oil Double Long ETN). DXO corresponds two times as the oil price. I bought over 1300 shares at $1.98. I bought it for the following reasons: First, the oil price is at historic low and I don’t think it will stay that way. Even with the falling demand, oil price could still go up through production cut and weak US dollar. Second, the market is at all time low. Third, I watched DXO go down over 14% before sending in my order.
I will update the performance of this ETN in the coming days.
The following links support my idea.
Top Stock Picks '09: PowerShares DB Crude (DXO)
http://www.bloggingstocks.com/2009/01/12/top-stock-picks-09-powershares-db-crude-dxo/
As prices slump, Nymex oil seen losing relevance
With WTI futures below international prices, are they a 'broken benchmark?'
http://www.marketwatch.com/news/story/nymex-oil-loses-glow-international/story.aspx?guid=%7B00C1AF3A-52C4-44DE-860E-F8620447A9E9%7D&dist=msr_2
Thursday, February 12, 2009
Investment Strategies for Beginners - Continued
Cash Out When You Can
Nobody can time the market. You can't tell when the price reached its peak. In a bear market, it is safe to cash out when you have a gain that is more than 5%. I have missed some big rallies by getting out too early, but I don't regret it. Having small gains is better than big losses.
Don't Rely on Futures to Predict the Stock Performance
It has become a habit for me to check the Futures before the market opens. In my experience, Futures does a pretty good job predicting the opening of the market, especially when the numbers are big. The premarket trading sometimes gives us a clue of the opening price of certain stocks. However, a strong or weak opening doesn't mean the stocks will perform that way. Most likely, the market will go up and down all day long.
So much for the "strategies". Next time I will talk about specific stocks I have picked and discussed what have worked and what have not.
Happy Valentine's Day to all the couples in the world!
Nobody can time the market. You can't tell when the price reached its peak. In a bear market, it is safe to cash out when you have a gain that is more than 5%. I have missed some big rallies by getting out too early, but I don't regret it. Having small gains is better than big losses.
Don't Rely on Futures to Predict the Stock Performance
It has become a habit for me to check the Futures before the market opens. In my experience, Futures does a pretty good job predicting the opening of the market, especially when the numbers are big. The premarket trading sometimes gives us a clue of the opening price of certain stocks. However, a strong or weak opening doesn't mean the stocks will perform that way. Most likely, the market will go up and down all day long.
So much for the "strategies". Next time I will talk about specific stocks I have picked and discussed what have worked and what have not.
Happy Valentine's Day to all the couples in the world!
Wednesday, February 11, 2009
Investment Strategies for Beginners
I started to trade stocks in October 2008, a little after I created this blog. I decided it was a good time to be in the market after Lehman Brothers went bankrupt and the market basically collapsed. Since then I made some good trades and some bad ones. Overall I made a little money. Most importantly, I gained valuable experience in stock trading. Here are some lessons I learned.
Buy Low and Sell High
This principle seems so easy that it is often overlooked. Some people interpret it as buying when the price is going up and selling when the price is going down. It happens sometimes when price keeps going up or going down. It is hard to draw the line between the two theories. Professional investors will tell you that it is impossible to time the market. At any given point, the price has two directions to go, up or down. At special occasions, the chance of one way is much bigger than the other. That's when I would jump in. For example, on 02/11/2009, Dow dropped nearly 5%. The stocks that were worst hit were financials; BAC and ZION were down about 20%. Even JPM was down 10%. I thought to myself, the chance that BAC and ZION will bounce back is much bigger than they will continue to fall. I bought ZION; it went back 5% the next day. BAC gained 9% on the same day.
Never Touch a Stock that Has High Default Risk
I didn't buy BAC even though it had the same potential. It was actually a good stock for speculation. However, I am not a speculator, I am an investor. The default risk outweighs all the good it has. To me, BAC has high default risk. It could fall or the government could take it over any time. To keep my investment hobby going, I can't afford to buy a stock that could end up worth zero.
To Be Continued.
Buy Low and Sell High
This principle seems so easy that it is often overlooked. Some people interpret it as buying when the price is going up and selling when the price is going down. It happens sometimes when price keeps going up or going down. It is hard to draw the line between the two theories. Professional investors will tell you that it is impossible to time the market. At any given point, the price has two directions to go, up or down. At special occasions, the chance of one way is much bigger than the other. That's when I would jump in. For example, on 02/11/2009, Dow dropped nearly 5%. The stocks that were worst hit were financials; BAC and ZION were down about 20%. Even JPM was down 10%. I thought to myself, the chance that BAC and ZION will bounce back is much bigger than they will continue to fall. I bought ZION; it went back 5% the next day. BAC gained 9% on the same day.
Never Touch a Stock that Has High Default Risk
I didn't buy BAC even though it had the same potential. It was actually a good stock for speculation. However, I am not a speculator, I am an investor. The default risk outweighs all the good it has. To me, BAC has high default risk. It could fall or the government could take it over any time. To keep my investment hobby going, I can't afford to buy a stock that could end up worth zero.
To Be Continued.
Tuesday, February 10, 2009
Can the Government Stimulus Package Stimulate the Economy
The market dropped nearly 5% after the Treasure Secretary outlined the Bank Rescue Plan and the Senate approved the $838 Billion Stimulus Bill. What went wrong? Nothing. First of all, the market has "priced in" the two pieces of good news in the past few days. Second, there are less details than people expected and the announcement could not live up to the high expectation from all different groups of people. Third, it is a good time to cash out when you can.
It is actually quite dangerous to let the government decide the fate of the economy. The government is run by politicians, not economists. Politicians make decisions based on political calculation instead of market principle. When the government increases spending, it is competing with the private sector for funding. If the government gets more money, that means the private sector will get less money. The government intervention distort price, which will in turn delay the recovery. Finally, the government takes away the creativity of the people and businesses and the market price discovery function. Therefore, more government intervention will mean slower economic recovery.
In Summary, the worst is yet to come and the road will be rocky ahead.
It is actually quite dangerous to let the government decide the fate of the economy. The government is run by politicians, not economists. Politicians make decisions based on political calculation instead of market principle. When the government increases spending, it is competing with the private sector for funding. If the government gets more money, that means the private sector will get less money. The government intervention distort price, which will in turn delay the recovery. Finally, the government takes away the creativity of the people and businesses and the market price discovery function. Therefore, more government intervention will mean slower economic recovery.
In Summary, the worst is yet to come and the road will be rocky ahead.
Monday, February 9, 2009
2009 - Year of Bull?
As we wrapping up the disappointing 2008, we all look forward to 2009. In Chinese Zodiac, 2009 is the year of Ox / Bull. People certainly hope that the new year will bring good luck to the financial market. For the Chinese, 2009 lived up to its name so far. The Shanghai Composite Index went from 1880 on January 5 to 2224 as of February 10, a 18% increase.
Unfortunately, this is not the case for the rest of the world. January marked the worst month ever in US stock market. The Dow Jones Industrial Average finished January down 8.84% and closed at 8000 points. The employers stepped up the pace of slashing jobs. The unemployment rate reached 7.6% excluding the discouraged workers and workers work part time because they couldn't find full time positions. 626,000 people filed jobless claims to collect government unemployment benefit, along with 4.788 million others.
A bank rescue plan scheduled to be announced by Treasure Secretary was delayed until Tuesday. Investors probably don't regard that as a sign of confidence. Two versions of stimulas package was floating around in congress and senate. Everybody agrees that something needs to be done. Nobody agrees on what needs to be done. Perhaps nobody knows what should be done. Experience tells me that a decision made in a panic mode is ususally not a good one. TARP (Troubled Asset Relief Program) is a good example.
Economists have gave up hope that the economy will show signs of recovery in the second half of the year. They now say we won't see those signs until 2010. It's only one year, but for people who are in misery that seems like a lifetime away. Many public companies have stopped giving guidance on earnings, fearing that they will disapoint the analyst one more time and their stock price will get punished. Frankly I don't understand this arrangement. Clearly the Wall Street analysts made some mistakes forecasting the companies' earnings, but somehow the companies are punished for not meeting their expectations. Why can't those people just admit they made a mistake and the companies can be more honest.
Does this mean there is no hope for 2009? Not really. I discovered that the market has a way of price in the bad news ahead of time. All the information I mentioned above are not news any more because they are priced in the financial market. Any news that is less bad or somewhat good will bring cheers to the market.
Right now the corporates have most finished their job of delivering bad news, it is the government's turn to do so. To be perfectly clear, I am not a fan of Keynesian Economics. In my view, the government can't solve all the problems. Most likely, they create more problems than they can solve. Politicians are not best suited for solving economic problems, they do have great potential of making things worse.
Here is my point, the worst is yet to come. Many people will panic after they realize that Uncle Sam is incapable of delivering us out of current financial crisis. They then get realistic and creative. The solutions will be found by the people. People will get their confidence back and the economy will start to grow again. The key to recovery relies on people that trust themselves instead of putting their hopes in the government.
When will the turning point occur? To be honest, I don't know. One sign I know is when people start to realize they are the ones that can solve the problem, not the government. To be specific, when the unemployed decided not to take the government check or the government running out of the checks.
Unfortunately, this is not the case for the rest of the world. January marked the worst month ever in US stock market. The Dow Jones Industrial Average finished January down 8.84% and closed at 8000 points. The employers stepped up the pace of slashing jobs. The unemployment rate reached 7.6% excluding the discouraged workers and workers work part time because they couldn't find full time positions. 626,000 people filed jobless claims to collect government unemployment benefit, along with 4.788 million others.
A bank rescue plan scheduled to be announced by Treasure Secretary was delayed until Tuesday. Investors probably don't regard that as a sign of confidence. Two versions of stimulas package was floating around in congress and senate. Everybody agrees that something needs to be done. Nobody agrees on what needs to be done. Perhaps nobody knows what should be done. Experience tells me that a decision made in a panic mode is ususally not a good one. TARP (Troubled Asset Relief Program) is a good example.
Economists have gave up hope that the economy will show signs of recovery in the second half of the year. They now say we won't see those signs until 2010. It's only one year, but for people who are in misery that seems like a lifetime away. Many public companies have stopped giving guidance on earnings, fearing that they will disapoint the analyst one more time and their stock price will get punished. Frankly I don't understand this arrangement. Clearly the Wall Street analysts made some mistakes forecasting the companies' earnings, but somehow the companies are punished for not meeting their expectations. Why can't those people just admit they made a mistake and the companies can be more honest.
Does this mean there is no hope for 2009? Not really. I discovered that the market has a way of price in the bad news ahead of time. All the information I mentioned above are not news any more because they are priced in the financial market. Any news that is less bad or somewhat good will bring cheers to the market.
Right now the corporates have most finished their job of delivering bad news, it is the government's turn to do so. To be perfectly clear, I am not a fan of Keynesian Economics. In my view, the government can't solve all the problems. Most likely, they create more problems than they can solve. Politicians are not best suited for solving economic problems, they do have great potential of making things worse.
Here is my point, the worst is yet to come. Many people will panic after they realize that Uncle Sam is incapable of delivering us out of current financial crisis. They then get realistic and creative. The solutions will be found by the people. People will get their confidence back and the economy will start to grow again. The key to recovery relies on people that trust themselves instead of putting their hopes in the government.
When will the turning point occur? To be honest, I don't know. One sign I know is when people start to realize they are the ones that can solve the problem, not the government. To be specific, when the unemployed decided not to take the government check or the government running out of the checks.
Thursday, October 9, 2008
Introduction
This blog is created for people who are passionate about economics, finance and investment. It is not about money although money is the by-product of great economics, finance and investment theories. If anybody tell you that he or she fully understands how any of these three things work, they are lying. My theory is the more intellectually curious minds you put together, the better ideas you will come up. So please join in and let's see if we can make more sense out of this crazy economic world.
From Wall Street Journal headline, "A Long Way Up, One Year Down, The Dow is down 39% from its record high" That means if you are one of the smart and responsible individuals that invested your money in the stock market in 1997 or 2002, you have seen significant increase of your wealth in the past few years. However, with the recent financial crisis, you are back where you were in 1997 or 2002. If you faithfully put your money away to a 401k account or other IRA accounts each month for the past five years, you will find that about a third of the value in those accounts are gone.
We surely have every right to blame anybody around, the government, the banks, the mortgage brokers, rating agencies, irresponsible home buyers, and the list goes on and on. However, we are the ones that get hurt; blaming doesn't make the pain go away. What are we going to do next? My advice, educate yourself on the financial matters and take control of your futures.
I am no expert on investment, but I am passionate about it and have the intellectual curiosity to study it. I sometimes wonder if that has anything to do with my last name "Qian" which means money in Chinese. Ironically money is the last thing my family was blessed with when I grew up. I have seen firsthand the tremendous impact money have on people and families. Money can't fix all your problems, but if you don't have money, you will have a lot of problems.
I recognize my last statement is debatable. Feel free to jump in. Let me switch gears and throw in another question for discussion. How long is this recession if not depression going to last? I hope you are not arguing with me whether there will be a recession.
I think the recession is going to last at least five more years. Does this sound shocking to you? To be honest, I wish I am wrong. Five years is a long time to be in an economic recession. Let me explain what I mean by five years. The economy will take about one more year to reach the bottom. It will stay there for about two years and it will take two more years to get back to where we were in October 2007.
The reason for a prolonged recession is this. First, the US economy as well as many developed countries was heavily leveraged in the past five years. Everybody was borrowing from the future, financial institutions, home builders, consumers, governments. The price of past leverage and the fear for future leverage will extend the recession for at least one year. Second, the role of government in a financial crisis is heavily tested in the past month. In my view, the US government tried and failed. We have to the give the government credit for trying. However, the consequence of the failure is not only the failure itself, but also the people lost faith in the government and the financial system. Third, the baby boomers are finally going to retire. Even though many of them have postponed their retirement plans due to the current financial crisis. When they retire, the economy will lose large number of productive workers. In addition, the retirees will consume a great deal of resources, for example, funds in their retirement accounts, social security, Medicare, and etc. Many of them will have to trade their large beautiful homes for smaller ones. I predict the new reality for next generation of Americans is that they have to learn to live in smaller homes.
I invite you to join me and think about the future and share your thoughts.
William Qian
October 9, 2008
Provo Utah.
From Wall Street Journal headline, "A Long Way Up, One Year Down, The Dow is down 39% from its record high" That means if you are one of the smart and responsible individuals that invested your money in the stock market in 1997 or 2002, you have seen significant increase of your wealth in the past few years. However, with the recent financial crisis, you are back where you were in 1997 or 2002. If you faithfully put your money away to a 401k account or other IRA accounts each month for the past five years, you will find that about a third of the value in those accounts are gone.
We surely have every right to blame anybody around, the government, the banks, the mortgage brokers, rating agencies, irresponsible home buyers, and the list goes on and on. However, we are the ones that get hurt; blaming doesn't make the pain go away. What are we going to do next? My advice, educate yourself on the financial matters and take control of your futures.
I am no expert on investment, but I am passionate about it and have the intellectual curiosity to study it. I sometimes wonder if that has anything to do with my last name "Qian" which means money in Chinese. Ironically money is the last thing my family was blessed with when I grew up. I have seen firsthand the tremendous impact money have on people and families. Money can't fix all your problems, but if you don't have money, you will have a lot of problems.
I recognize my last statement is debatable. Feel free to jump in. Let me switch gears and throw in another question for discussion. How long is this recession if not depression going to last? I hope you are not arguing with me whether there will be a recession.
I think the recession is going to last at least five more years. Does this sound shocking to you? To be honest, I wish I am wrong. Five years is a long time to be in an economic recession. Let me explain what I mean by five years. The economy will take about one more year to reach the bottom. It will stay there for about two years and it will take two more years to get back to where we were in October 2007.
The reason for a prolonged recession is this. First, the US economy as well as many developed countries was heavily leveraged in the past five years. Everybody was borrowing from the future, financial institutions, home builders, consumers, governments. The price of past leverage and the fear for future leverage will extend the recession for at least one year. Second, the role of government in a financial crisis is heavily tested in the past month. In my view, the US government tried and failed. We have to the give the government credit for trying. However, the consequence of the failure is not only the failure itself, but also the people lost faith in the government and the financial system. Third, the baby boomers are finally going to retire. Even though many of them have postponed their retirement plans due to the current financial crisis. When they retire, the economy will lose large number of productive workers. In addition, the retirees will consume a great deal of resources, for example, funds in their retirement accounts, social security, Medicare, and etc. Many of them will have to trade their large beautiful homes for smaller ones. I predict the new reality for next generation of Americans is that they have to learn to live in smaller homes.
I invite you to join me and think about the future and share your thoughts.
William Qian
October 9, 2008
Provo Utah.
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