Facebook Speculation.
“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” – Graham and Dodd.
In light of the currently running market correction, and the Facebook IPO, I’m proud to say that my portfolio has done relatively well. I can attribute this to some very basic rules:
1. Avoid speculation. My FB minifeed has been flooded with “I’m now a part owner of facebook!” As much as I wish you all the best of luck in your investments, I cannot say you made a good decision. Given the current direction of the market (which should govern much of your investing decisions) and news about facebook, I just want to say I told you so.
2. Slow and steady. The key to investing is understanding that you will not instantly become a millionaire. And as with anything, practice makes perfect. Studying the market takes an incredible amount of work and patience. Not every single one of your decisions will make you money, and as long as you learn to limit your losses you can be successful.
3. Hedge. Even with preparation, things fail. Entropy always wins, and you are simply not in control of earnings, rumors, and the general future. You must hedge. Even some fundamentally sound companies have failing stocks. Putting bets in multiple places can significantly reduce your risk.
4. Stop loss. Always, always, always set stops. I cannot stress this enough. Unless you are making this a career, you simply will not have enough time to pay attention to each and every stock at every moment of the day. Sudden swings can leave you in a deep ditch. Always set stops.
Fundamentals will tell you which stock to buy. Technicals will tell you when to buy. If you are new to this, I suggest you read and study first. Missed money is always better than lost money.
Freedom of Inequality
There are several truths we must all accept, one being that nothing is equal. The occupy protests highlighted one of today’s most heated debates about the growing income gap. Recently, we’ve also heard about race (Trayvon), drugs, and same sex marriage.
Let’s make this clear: if you don’t want to have a gay sex, don’t have gay sex. Skweezy says it best (video attached at bottom). We strive constantly for equality, to give each person the same opportunities at success. And if happiness is analogous to success, then marriage falls well within the confines of success.
The same argument can be made about marijuana. Some call it a gateway drug, but this is a logical fallacy. (Marijuana as a Gateway Drug: The Myth That Will Not Die | Healthland | TIME.com) An increase in ice cream sales has been correlated with an increase in drowning deaths. So ice cream causes drowning? No, it’s just the summer heat. “There is no conclusive evidence that the drug effects of marijuana are causally linked to the subsequent abuse of other illicit drugs.” The real issue behind drug abuse is education.
Driving a car is dangerous, and if you don’t want to take that risk, then don’t drive. Don’t ban us all from driving. I’m disgusted at the fact that such bigotry exists in this country, but does that mean I should ban it? No. I will fight for your freedom to speak your mind, even if I think you are wrong.
That being said, equality is something we can strive for. Sure, we may not reach it, but everybody should have the same opportunities to succeed.
Yes, Skweezy Jibbs is just a character he does. Yes, it’s vulgar. But that doesn’t mean he’s wrong.
Draw Something
There’s been a surge in the number of mobile games being played. Unfortunately, people flock to games that require little brain activity, or little activity at all. Years ago, I discovered Chess with Friends and was addicted, but the people around me not so much. Recently, I’ve found that my students, and the people around me are playing Draw Something.
I’m disappointed. I’m disappointed in the fact that we’re so wired in all the time, and have access to a whole universe of information, but use this technology to play Pictionary. Less than 10% of my students have a clue about what’s going on in the world outside their bubbles, and sadly choose not to break the mold. Most of the people I meet aren’t in the least bit curious about anything beyond their day to day.
Apathy is a terrible thing. I’m not sure whether it’s simply a lack of curiosity, or a fundamental lack of education, but it’s horrifying. It’s mind blowing.
What’s more mind blowing is that each person is composed of trillions of cells. And within each of those cells is an unimaginable number of processes occurring. And each of those processes requires trillions of trillions of atoms to work. And within those atoms are an uncountable number of subatomic particles, each participating in the grand scheme of this thing that we call life. And on an even more magnificent scale, take a look at the image on the left.
Sure, you may feel completely insignificant because of this. But I feel an incredible obligation to find out as much of this awesomeness as possible. So think differently, and be curious.
“The important thing is not to stop questioning. Curiosity has its own reason for existing.” – Albert Einstein
Infinite Possibilities
“The infinite possibilities each day holds should stagger the mind. The sheer number of experiences I could have is uncountable, breathtaking. We live trapped in loops, reliving a few days over and over, and we envision only a handful of paths laid out ahead of us. We see the same things each day, we respond the same way, we think the same thoughts, each day a slight variation on the last, every moment smoothly following the gentle curves of societal norms.
We act like, if we just get through today, tomorrow our dreams will come back to us.
I don’t have all the answers. I don’t know how to jolt myself into seeing what each moment could become. But I do know one thing: the solution doesn’t involve watering down my every little idea and creative impulse for the sake of some day easing my fit into a mold. It doesn’t involve tempering my life to better fit someone’s expectations.
It doesn’t involve constantly holding back for fear of shaking things up.”
Don’t just read this and say “hey what a great quote.” Do something. Be assertive. Don’t just accept that things aren’t exactly how you want them.
How to Become Part of the 1% in 15 years
A little over two years ago I had a discussion with friend InvestmentBanker about how easy it is to make a million dollars. Keep in mind that easy is relative.
20% annually is no walk in the park. Learning about the stock market takes patience and diligence. There is so much information out there about fundamental and technical analysis that you could go your whole life and still not understand 90% of the things that happen on wall street.
The above is how I feel when I look at pretty much every single graph I see.
To the left you can see the success of capitalism. In the 1930s the average trading volume on the Dow was maybe 2 million shares monthly. In March of 2009, over 9 billion shares were traded. In today’s society it takes money to make money. We can complain all we want about how the rich get richer because of the stock market, but ultimately you should learn how it works: To become part of the 1% you have to think like the 1%.
I wrote before that to consistently beat the market is an impossible venture. I’d like to change that to improbable. Hard work pays off and we should never rule out optimism.
Remember the chart above; to save 10k the first 5 years and 20k for 10 years after is not difficult with discipline.
William J. O’Neill wrote, “The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.” That said, let’s make a million dollars.
*1 million dollars is not enough to retire, it’s simply an arbitrary target.
Wasn’t This The Purpose of Separation of Church and State?
I couldn’t have said it better myself!
Third World Countries Might Be Better Off With “Bad” Dictators
The recent Arab spring revolution has caused quite a stir, and today it was announced that Kim Jong Il passed away. I’d first like to congratulate the Arab countries for successfully overthrowing their oppressive leaders. However, I’d also like to send a warning.
“For men change their rulers willingly, hoping to better themselves and this hope induces them to take up arms against him who rules; wherein they are deceived, because they afterwards find by experience they have gone from bad to worse.” – Machiavelli in The Prince
Overthrowing one government in the hopes that another will fix the conditions is wishful thinking. The United States wasn’t founded on hopes and dreams, it took hundreds of years and thousands of legistlative adjustments to reach this point still far from perfection. As far as dictatorship is concerned, you will probably end up with a worse leader, cheers North Korea.
Kim Jong Il’s passing has likely put his inexperienced son in his place. According to wikipedia, Kim Jong-un is roughly 28 years old (pictured above). I’m no expert on North Korean government, but young dictators have never had me thinking, “excellent now we’re saved!” Also given the assumed state of North Korean education, I can only assume he is as irrational and ignorant as the average American teenager.
Leadership has and always will be an issue. Dictators rule with an iron fist, and it works because fear is an excellent motivator. Democratic countries have bought into this idea of freedom, but realize that it carries many burdens (OWS, anti-trust, corruption). So the real question is which is scarier, the 1% or Muammar Gaddafi?
Nothing is perfect, and this is especially true when we consider people as part of a society. It’s impossible for an entire country to agree, let alone a “Super Committee” of 8 politicians (‘Super committee’ fails to reach agreement – CNN). For this reason, dictatorship may often be the best option for these countries. Often, people wander aimlessly without a leader. Dictators, though possibly harsh and uncontrollable, can provide direction and leadership.
Sorry, but rules are not meant to be broken. The implementation of the correct laws can fix/boost a country’s economy, growth, education, etc. But I agree that the ruthless slaughter of a country’s citizens warrants that dictator’s death.
Image is from Earth (reddit). Yes, it’s a science book, the kind they don’t have in North Korea. Zing!
