Personal Finance (13): A Confession of a Public Fund Manager In China

Good day,

Attached, ---8<  Cut and Paste >8---- , is the last portion of an article by a public fund manager in China confessing why he can never beat he "super wealth transfer machine"(stock market system) and decided to quit his job.  And, after all, in his 10 years of career as fund manager, he already made more than 10million RMB as a salary despite losing money for his clients...  

The full article, in Chinese, can be read from the link attached:

---------------------------------------Cut and Paste---------------------------------------------
一个公募基金经理的忏悔书
我无法对抗这个制度、我彻底投降、我准备辞职，我对我管理的基金的投资者表示深深的忏悔!我真的无能为力在这个市场中帮助你们赚钱！
　　中国XX基金管理公司 XXX基金经理
　　（恕我在此不公布老东家的名字，毕竟服务多年，领取了千万元的薪水！）
--------------------------------End of Cut and Pate ---------------------------------------------
http://bbs.hexun.com/stock/post_5_5961685_1_d.html

Any way, here is a very very brief summary with the KEY FACTOR of why he can't win:

"The author, 10 years fund manager in China, described that the stock market is a wealth transfer machine.... Due to the fact that the fund managers, by Law and software system, must keep at least 60% of the money in the market. Even if the fund manager want to get out of the stock and keep cash when the market is clearly in down trend or even crashing, the software would not allow them to sell...."

Here are some points of ponder:

* FACT
Now, the above chart showng the China Shanghai and ShenZhen 300 index (SSE300).  There is clearly more down trend than up trend for the past 5 over years.  And, if one were not only can't short the market, but also must spend at least 60% of the fund to purchase stocks at any point of the time.  As a Public Fund Manager, how can they make money as the calculated probability seriously against them?

Anyway, this is  the rules and regultion for fund managers world-wide.  Imagine IF there is no such rule, what would happen, if most fund managers try to find exits for cash?


* OPPORTUNITY
Now, what would you do IF you are a fund manager under such rule?
The manager would at least want to beat the overall market index by selling the worse sectors/stocks and get a ride on the better sectors/stocks.

So, in order to sell 10% worth of weak stocks in his portfolio, the fund manager MUST FIRST purchase at least 10% of the equal value of stronger stocks before the software system allow him to sell the weak one.

This would result in lot of money rushing into relatively handful of sectors/stocks and result in sharp rally!

For Example:  Some Internet/Games companies are the current percieved "safe harbour" and the money is rushing in at this point of time:(QIHU,DATE,GAME,YY)

..the above are just a few, can include the famous BIDU (but the up side is may not be that great as high price stock generally move slower... but safer).


*CONCLUSION:
It is better off spend your resources (time and money) to learn and DIY.  The chances is very much higher. 

AND, off course... don't do this:  Dash into the market without going throuh a proper stock market training, withot going through adequate paper practice, and without a reliable trading system.  It is like the message from the following cartoon I found in facebook. :-)

Thank you for your time, and

Bless You
KH Tang


NOTE: THIS ARTICLE IS MERELY FOR AWARENESS ONLY!

Personal Finance (12): Guru Rotation in the Financial Market

There are many famous Gurus in the financial market, and their philosophies are pretty well accepted by their followers (subscribers).

Take for examples:
1. Jim Rogers is the icon represents long term investment in the commodities market.

2
2. Marc Faber, also known as Dr. Doom, advocates that the market is collapsing, collapsing, and collapsing...

3.
3. Stephen Leeb is using the "Peak Oil" as a backgroud and focus on Energy Sector.

4.
4.  Peter Schiff is singing about the collapsing US Dollar and Accumulates physical gold or GLD (ETFs).

.
And, when they are correct, they will occupy everywhere in the media and get more followers.

Now... As shown in the charts, they were ALL CORRECT at certain point of time in a "Rotational Manner".

So...  Don't you think that having a "market neutral mentality", doing your study, understand and follow the market actions with the charts, and perform asset class rotation is a better deal?


Now...
See what the successful Trader and Trainer in the Stock Market, Richard D. Wyckoff, had to say:

Very true!  In my view, most of the publication on financial advices and news are just like Coke or  genetic modified foods.  They are are produced for the public consumption with the intention of making a profits out of it.  The earlier one chooses to stop taking them, the earlier he gets healthier.

 

 

 

"What information consumes is rather obvious:

it consumes the attention of the recipents. 

Hence a wealth of information creates

a poverty of attention." 

- Herbert Simon 

 


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Project Freedom (12): Livermore Secret Market Key on Price Chart

Jesse Livermore (July 26, 1877 – November 28, 1940) is one of the most famous legendary traders in stock market.  His intriguing hero’s journey in the Wall Street was well recorded in the book – “Reminiscences of a Stock Operator” by American author Edwin Lefèvre.   And, this book is widely quoted in many trading books and recommended in many trading classes.

But, not many people know about his “Livermore Secret Market Key” which was written by himself and published in 1940.  This book can now being found in Wikipedia Link for free download.

Jesse Livermore spent up to 40% of his book in explaining the technical details of his operation in the stock market.  The challenge is for the reader to understand and implement it.

Unfortunately, it is not a simple task to understand the method in table form.  For there was no programming flow-chart during his time, he used a table and long procedures to go through how to fill it up.  Most beginners will lost his way in their first few attempts.

 

The objective of this article is to demonstrate that the 6-columns table can be programmed into 6-levels of band in modern price chart, and it would faciliate the readers to visualize the interaction of Jesse Livermore Secret Key and the stocks. 

Fig 1.  Transformation of Livermore Secret Market Key from Table to Price Chart. 

 

 

Fig 2. The Livermore  Secret Market Key in Action.

 

One of the famous quote from Jesse Liver more is:
"Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes".


So, What do you think?   IF he is still around today and using the same method, written 70+ years ago, can he still make money?

The following are various charts using Livermore Secret Market Key and they clearly demonstrate that he is right.  For this method is advocating Trend Trading and ignore minor noise (which means do not run in and out of a stock too frequently).


A Minor Change in the Rule:

During his time, Jesse Livermore used fixed amount of dollar to define the "Levels of Band" as filter, similar to Point and Figure charting method using 3 point change.  But as of today, there are stocks trade more than hundreds or thousands of dollar, so two types of changes can be applied to the original method to see the effect.  The first change in the method is, logically, using the fixed percentage change, and second, using the fixed amount of Average True Range(ATR) for the band's level.


Fig 3. Livermoare Secret Market Key applied on SnP500 ETF(SPY) (Weekly)
In Figure 3, the upper chart shows the "Fix Percent Band" while the lower chart shows the "ATR Band".




Fig 4. Livermoare Secret Market Key applied on SnP Financial Sector ETF(SPY) (Weekly)


There are two points to be made in Figure 4 (Click and Zoom In).
1) It is Crystal Clear that if one were to follow the weekly chart religiously, he will not suffer from the 2008 financial crisis. For the chart shows a clear down trend.

2) Using "ATR Method"  is superior than "Fix Percentage Method", for every stock/commodity/ETF has its own characteristics in terms of Volatility.  Using ATR method help to adjust the band-level automatically for all vehicles.

So, from here on, the following charts will ONLY use ATR band (Dynamic Band that self-adjust to the stock volatility) as demonstration.



Fig 5. Some Hot stocks - Apple and Google (Weekly).







Yes.  Due to whatever reason, even till today, there are still people using "Buy and Hold" method in the market.  From the above Chart, there are two points we can learn:
1)  IF the Goal is to make profit from the market, follows the trend.  NEVER EVER ARGUE with the price chart.  IF the Goal is to PROVE he is right that the stock will eventually go up again some time in the future while the chart moving down, by all means, let him hold on as long as he like.

2) IF the market is on side-way, using Trend Trading Method would incur in lost, therefore, one need to learn to learn the master the skill of CUTTING LOST.  It would be so much better to acknowledge that was only a small error made in the market rather than let it continue to grow and eventually becomes a BIG MISTAKE.


The following are more charts to illustrate the points mentioned above.

Fig 6. Commodity - Silver and Gold ETFs (Weekly)
.
Fig 7. Commodity - Argriculture and Commodity Index (Weekly)

NOTE: If Argiculture commodity is moving down or in a side way, chances that those related companies are not performing too, even if whatever fundamental data of the stock are strong.  Use the money to invest someway else, and wait untill the relevant commodity to move up, then buy the related stocks.


.
Fig 8. Malaysia KLSE Index and Singapore STI (Weekly)


..
Fig 9. Hong Kong HSI and Japan Nikkei 225 Index (Weekly)

.
It is very interesting to note that Malaysia market has performed so much better among her few Aisa peers since the 2008 global finacial crisis.  My guess is that the DID NOT lose so much money in that crisis in the US Banks as compare to the others. :-)

"There are many times when I have been completely in cash, especially when I was unsure of the direction of the

market and waiting for a confirmation

of the next move...."

Jesse Livermore

Project Freedom (4): Understanding of the States of Market Trend and Rotational Trading Concept

Attached are a few charts aim to demonstrate the importance of understanding the State of Market Trend and the Rotational Trading Concept which could help one to handle his personal finance.

POINT I: Understanding of the States of Market Trend.

Fig 1.  ^STI Daily Chart (2 years)  (Click on the chart to Zoom in)

The above chart show a daily chart for ^STI from Apr 2010 to Apr 2012.  This particular period is selected to show that money put in the market (so call buy and hold investment) can ended up with zero percent return over years.

In the price chart, there are algorithms built-in to draw the trendlines (also act as dynamic support and resistance lines).  When the bar change color, it signal a possibility of change in trend. 

In the lowest pane, it is an indicator desgined specifically to measure the Vibrational Energy of the stock:

If the Energy is High and moving upwards, it signals a state of UPTREND MARKET.

If the Energy is High and moving downwards, it signals a state of DOWNTREND MARKET.

If the Energy is Low, it signal a state of SIDE WAY MARKET.

It also display the number of bars in the respective state of trend and its percentage over the period.  For example:

Over the two years period, when breakdown into percentage...
The UPTREND is      : 31.39%;
The DOWNTEND is : 18.05%;
The SIDE WAY is     : 50.56%.

Fig.2 ^STI Daily Chart (1997 Jan - 2012 Apr)

So, one may think that two years of data could be too short to make the point.  How about longer period of data? 

So, with the longer term of data, it show that the result is similar with the previous finding. And, lead to some basic understanding of the market trends structure...

Conclusions from Point I:
1) The Speed of UPTREND is SLOWER and DOWNTREND is FASTER.
2) BUY AND HOLD strategy is NOT WORKING in todays market.
3) One must be able to ride on the Trend in order to make profits from the market.

POINT II: Understanding of the Sector Rotational Trading Concept.

As the previous point illustrate that money put in one market/Stock/Fund are really productive about 30% of the time in UPTREND, 20% in DOWNTREND, and wasting time 50% of the time.
So, if one were to only LONG the market, does that mean 70% of the time he must wait???
Not true if he understand the concept of Sector Rational Trading.


Fig 3. State of Trends in S&P500(SPY)
and its 9 sectors(XLB,XLE,XLF,XLI,XLK,XLP,XLV,XLU,XLY) (Apr 2010 to Apr 2012)

See... 
The money in the market are of fix amount.  When the stock market is moving up strongly, people would pull money out of bond market and put into stocks and cause bond market to fall, and vice versa.  Similarly, the professionals would not put their funds in equal distribution into all sectors, they would pull the money out from the weak sectors to put them into the strong sectors.  And the sectors Relative Strength would keep changing over time.  In the picture, you can see the TREND is Out Of Phase from one another.

With the same token, one can then zoom into the individual stocks, in the strongest sector, to ride on the trend with the few strongest stocks

By the way, you may be interested to zoom into the chart and see the respective percentage of trends in various sectors.


Conclusions from Piont II:
1)  It illustrates a VERY IMPORTANT POINT that is IN CONTRADICTION with one of the popluar myth in the investment industry -->  That is DIVERSIFICATION the money into many sectors in equal portions as to reduce RISK.  As sectors trend pretty much follows the market (after all they are the components that create the market).

2)  In order to maximize the profit from the market and reduce risk.  One must always rotate money into the strongest few sectors when there is a trend.

---------------------------------------------------------------------------------------------------------------------
I found a picture on the web and it is Very True. 

There are certain risks in life one can simply choose to avoid it, such as if one don't know how to swim and he choose not to go near the sea... He may miss some fun for that but find more fun somewhere else.

On the other hand, there are some risks one cannot avoid, such as financial crisis... Then, the only logical answer in dealing with it is to master it.  And,

if it is necessary...  Then, it doesn't matter how much time it may take.
Whether it may require 3 years, 6 years, 10 years or more,

something learnt is something gained. 

Time is ticking anyway regardless whatever nice phrases one may come out with. Such as:
"Only IF I have the time..."

With the current state of economy, which is full of potential for turbulences such as:
* Debts in certain countries in EuroZone building up,
* Energy Crisis due to Peak Oil,
* Over Population on earth,
* Aging of the Babyboomer in USA (in fact it is a worldwide problem, and more serious would be in China for its one child policy), and
* Increase in trend on Unethical issues exposed from corporation executives (worldwide)... etc.
I cautious myself not to be negative, but logically, it can only predict more financial crisis in local and global scale to continue happen in the near future...

So.  It is my simple idea that when more people willing to learn about it, then it would make market manipulation task more difficult for the minority and BALANCE IT.  Let's make it so! :-)

Bless You

KH Tang


A more throughout explaination on Sector Roation -> Back to Basics & The Galaxy Chart.

Project Freedom (3): Why and How Successful Traders CAN Keep Making Profits from the Market

Let's start by reviewing an old fable: “The Mathematician and the King”

Once upon a time there was a mathematician invented a chess game for a king.  The king was so happy about it and told the mathematician to name his reward.

“I don’t ask for much,” said the clever mathematician. “A single grain of wheat on the first square on the chess board, two grains of wheat on the second square, and double the number of wheat in every subsequent square….”

“So it shall be done,” said the king, who was not having any idea about the concept of exponential growth.

After the King got his men to work out the numbers, he was shocked that before reaching half of the complete chess board, the number had become bigger than total annual wheat production in his whole Kingdom.

The moral of the story is: TWO CONDITIONS are required to grow Rich. It takes both the “TIME” and “EDGE” to increase the number through exponential growth.

Now, let's see how these concept apply to trading:

* TIME: Every move to the subsequent square represents the “Time” required in the game. Adding all the individual step, short term, together become a long term. 


* EDGE: In the story, it has an “Edge” in doubling every next step. Similar to say that as long as there is a CONSISTENT edge, it would grow over time. The stronger the edge (Percentage growth over a fixed period of time) the faster the number grow, and Back Testing the system would help to identify which "Edge" is better.


Just like the house of any Casinos, as long as there are enough customers keep playing the game, they can keep making money because there are “Edges” built into all games by designed, though these edges may be very small in percentage in terms of winning probability bias towards the house.

(-> Here is a good article illustrating the Edage of a casino.  <-)

So...

When one can workout a consistent "EDGE" and keep himself continuously participate in the market... It is like, he is operating an online Casino by himself.

Of course, the "edge" must be much stronger than many other devaluation factors to be meaningful edge, such as "Inflation","currency devaluation","Tax", etc.This link has a picture to show how serious inflation could be over time:

http://blessedfool.blogspot.sg/2012/01/personal-finance-8-where-have-all-money.html

The moment when a trader is able to change from the state

of "understand the principle of probability" to the

state of "thinking in probability mind set",

he changes his world.
- Mark Douglas - "Trading in the Zone"

Personal Finance (8): Where Have All the Moneys Gone?!

(Click on the chart to Zoom-in)

In the above diagram:
1) The upper pane is the price chart shows a long term monthly chart of S&P500 ETF (SPY) for the past 19 years. 

2) The middle pane  shows that DEVALUATION of currency due to INFLATION. The Back/Blue/Green/Red color are representing 0,-3,-5 and -10 percent per year respectively.

3)  The lower pane shows the inflation adjusted value of the S&P500 Index.  Now, when factor in devaluation rate of  0,-3,-5 and -10 percent per year due to inflation, the number is more realistic in reflecting the "actual value" after all these years of investment.

Consider the annual inflation rate as of today, and think about how this FACT would affect your retirement plan (if you already have one).
For those people who simply look at their bank account balance without factor in the devaluation due to inflation could be having a shock at a later date.


So, after many decades of world peace since the end of WWII... 
After chopping down so many forests...
After using up about half of the total crude oil on earth...
After polluting so much rivers/air/environment under the name of development...
At the end: Where have all the moneys gone??!!

May be this song will give you some inspiration to find out.

Where have all the Moneys gone?
Long time passing
Where have all the Moneys gone?
Long time ago
Where have all the Money gone?
Gone to ????? every cent
When will we ever learn?
When will we ever learn?

->Home<-

Personal Finance (7): Realistically, What’s the Yield Rate for Top Traders?

For many beginners  who come to invest/trade in the stock market, they don’t have a realistic idea of how many percent they might gain over a year.  For years, from the trader library and forums, I figured out that the top number was around 28-35%/year.  And, recently, I discovered that these numbers are way too low for benchmarking at all…  and, that could set an invisible barrier of limit in traders mind.

1) Breaking Through from the Limiting Beliefs:

Here is just a short story of how imaginary barrier can limit people performance and may spark some inspiration in the mind…

* The 4 minutes Barrier

Just like once people thought that the world was flat.  Before 6 May 1954, athletes had never able to run a mile under 4 minutes, and some “experts” at the time even commented that it was physically impossible for a human to do so, or the heart would explode under the pressure to run a mile in under 4 minutes.

Roger Bannister was medical students at that time, not even a professional runner, believed it could be done.  He prepared himself with training and he became the first person to ever run a sub four-minute mile (3min 59.6sec) on 6 May 1954.

More interestingly, 56 days after Roger Bannisters breakthrough, John Landy ran the four minute mile in 3 minutes and 57.9 seconds in Finland. Later Bannister and Landy raced in the Mile of the Century where Bannister won in 3 minutes and 58.8 seconds.

As for today, it is no more any surprise for high school athletes to run a mile under 4 minutes, for that mental barrier had been gone.

ONLY after a person breakthrough from his own limiting beliefs, he can then sail into uncharted waters and has experiences he never had before.

2)      Setting the Right Benchmark or Higher

Recently, I have come to know of an old trader who wrote and trade his own system for 30 years and only work for himself.  He does not sell his system or even signals for trade.

On the other hand, he joins some forums and professional groups to share some valueable views and ideas…  He also presents his research paper freely for others who may interest to read.

For those who may get the ideas from his paper would know that his system is for REAL, and not fantasy.

If you are interested to get into the financial market some day, say in the future.  Then it is strongly recommended that, take a look at his website… His papers and his simulation results.

http://alphapowertrading.com/

These are some of the back test results with over 100% return a year:->
On Turtle system:

http://alphapowertrading.com/index.php/tests/turletests/turtles-test-v32-improved
On Modified Jesse Livermore System:

http://alphapowertrading.com/index.php/tests/livermorechallenge/livermorechallenge3rdact

(with permission to post as reference)

ONLY when there is a good Benchmark, then one can know what kind of aim he should set…

OF COURSE, the market cannot give profits from air, when more and more people are aware and able to use such strategies and tactics, the profits would drop according to number of participants are able to develop such systems.  

Many “Conventional Wisdoms”, such as ship must be built by wood in order to be able to float, no machine can fly, and later believe that plane cannot break the sound speed barrier, etc…  are now proven to be wrong ideas that limiting people imagination...

 

"One person with a belief is greater than a force

of ninety-nine who have only interests."
-unknown

Personal Finance (4) : Asset Allocation

The movie, INCEPTION, besides it was extremely entertaining, reflected back to me a very profound message -> "What ever seed(idea) that is planted into the subconscious mind, given time, it will sprout!" Therefore, the show ended after the seed was planted onto the target, by knowing that it will be carried out in reality later on.

So, what does it got to do with this article on Asset Allocation?!?!

Well, after staying in the market for many years, only until recently, I suddenly realized that someone had first seeded the idea of Asset Allocation in my mind, which then lead me to have the burning desire to know how the stock market works.

Here is the story...

About 9 years ago, a former boss called me up and said that she had just attended an excellent 2-day seminar on "Personal Financial Success" which could lead to early retirement... And, she wanted to share with friends because she thought that could be helpful. Indeed, that was so helpful that it rocked my comforting chair in the corporation into pieces!

And, here is the Outline of the concept of personal financial Asset Allocation:-

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Asset Allocation can be defined as the process of evaluating and choosing among the possible asset class for investment. So, that it can generate Passive Income.

Recently I came across an survey that most US citizen has about USD25k of net worth when they reach their retirement age. That's less than one year of their salary! Not even the professional trader can live with this small capital account...

So, in order to have adequate saving, for the working class, one must first break the "Parkinson's 2nd Law: Expenses always rises to meet income". If one don't break this law, no matter how much he made over the years with increments and promotions, he would not have much excess money for investment, and lucky if he don't have debt with his credit card.

Now, let say that one has the discipline to save portion of the money from his paycheck monthly, soon he will need to learn to manage the money for compound profits or the inflation will devalue them.

The core concept of the Asset Allocation is to divide the money into three portions. Imagine that you have three buckets, and you label them as "Security Bucket", "Buy and Hold Bucket" & "Speculative Bucket". Then allocate the money into there different buckets like planting seeds and letting them grow.

I) Risk Management

The purpose of separating them into three portions is to diversity the risk. One VERY IMPORTANT concept is that these three buckets MUST BE COMPLETELY ISOLATED. Meaning that, if one portion of investment incur losses, one must not use money from the bucket to fill it up again... Until one do his home work to find out what's wrong with the investment strategies...

Otherwise, it might just repeat the tragedy of the "Unsinkable Titanic"... The Titanic sank because of the partitions to isolate the sections of the ship was not high enough. So that the water can flow through the partition from the front section to the back after it hit the iceberg head on.

II) Allocation

And, as for the percentage of allocation of the asset... many text books and financial advisors from banks would recommend you to be more aggressive when you are younger (under 45), then become more conservative when getting older (over 60).

The following is a typical diagram can easily be found from the web... (Will comment on this later on.)

III) Rebalance

These bucket will need to be periodically revisited, preferably 6 months, and adjusted as needs and financial worth change.

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Comment: The above is yet another text book/class room theory for the beginner who did not spend time thinking of asset allocation before... In practical, one will then realize that there are flaws in the theory.

For examples:

1) Why recommend younger people to take higher risk in the market?!

It reasons that if the younger investor fail, then he can has more time to start all over again... That's completely nonsense!

Especially for beginner, it doesn't matter one is a CEO of a high-tech firm or a worker in the workshop... The experiences in his other careers and success don't count when it come to the stock market. All should start with "Very Conservative" in mind.

So, it should not be grouped by ages (as what the investment firms advise)! Rather, it should be grouped by professionalism! And, professionalism means adequate amount of learning, practicing and improving. And that got to do with personal time allocation. :-)

2) Why Buy and Hold for six month period?

Unlike fund manager, in the bear market, they can choose to rotate the fund among different sectors, but there are law to prevent them from cashing all out. Otherwise the market will fall to some point beyond imagination. But, as individual investor, you are free to do so!

"Every challenge we face can be solved by a dream."

- Dr. David Schwartz

Self Development Idea (12) - Team and Grow Rich

-----8< ----- Article Cut & Paste from Scientific American MIND, Vol 17 No 3, June/July 2006 -----

Better Than Individuals

When three, four or five people gather to solve a problem, chances are they will succeed beyond the efforts of an equivalent number of individuals working separately, even if those soloists are the brightest available. So conclude researchers at the University of Illinois.

The investigators enrolled 760 of the school’s students to solve complex letter and word problems. Some toiled as individuals while others functioned in groups of two, three, four or fi ve. The groups of three, four and fi ve performed better than any set of individuals.

The dynamic is sensitive, however. Teams of two performed at the same level as two separate people, suggesting that this team size is too small to foster the dynamics that create optimal problem solving. Also interesting is that groups of three, four and five did equally well compared with one another; there was no advantage to adding people beyond a trio.

Study leader Patrick R. Laughlin says that in addition to tackling workplace challenges, problem-solving groups might enhance classroom learning. Further research is needed to determine whether student groups perform better than individuals do in academic settings and, if so, at what ages and tasks.

— Mark Fischetti

--------------------------------------------------------------8< ------------------------------------------------------

Although the result of the above research is nothing new for those who had studied the books by Napoleon Hill, I think it is an excellent articles to illustrate the important point of teamwork.

Napoleon Hill called it the "Master Mind Group"- the power beyond science. In short he described that "The Master Mind effort is to get those of like mind, form an alliance with about 5-6 people as optimum number, to work actively in a spirit of perfect harmony towards accomplishing of a definite purpose."

In my view, this concept is now more valuable than any of the historical time. This is because the knowledge that need to achieve success in the modern society has become so complex that not only the depth, but also the breath of subjects are increasing rapidly which fuel by modern technology.

For example, in the past, a farmer, scientist, doctor, teacher, engineer or any person who have a full time job can concentrate in their work and entrust their life-time saving to the fund managers and banks that would be needed for retirement. But, in this dog-eat-dog era, with too many "Bad Apples" in the market, people has to worry about the ethical issues of their brokers/fund managers, bankruptcy of banks... And even with the possibility of bankruptcy of certain states or the whole country... or yet another round of financial turbulence that might wipe out their saving or loose their job!!! Think about it, what a joke (though not funny but a sad one) for the thousand years of evolution of human history.

Working harder on the job would not solve such problems. Think of it this way:- one would need to fill up a bucket of water as accumulating enough personal retirement fund. But, one cannot fill up a bucket if there are a few leaking holes on it. The more water one fill into it, the more it would leak out.

Anyway, here is a little suggestion... Individual can form team to handle their financial matters, and make sure that at least one person in the term have a compass to navigate through the turbulence market in the future.

"A dwarf standing on the shoulders of a giant

may see farther than a giant himself."

- Didacus Stella.

Here is a blog link for those who are not familiar with the term "Master Mind Group".

Stock Market Tools (9) - Point & Figure Chart with Relative Strength

Point & Figure Chart is an extremely old tool that use to trade the market. The oldest chart was found in a book "The Game in Wall Street, and How to Play it Successfully" written by "HOYLE" and first published in 1898. This tool is

very effective in aiming for longer term movement rather than day trading kind of hit and run tactic. So, it is particularly good for people who are having a full time job, and want to handle their own money in trading the market.

Fig. 1 The first form of Point & Figure Chart found in old book published in 1898.

Fig 2. P&F Chart on Commodity ETF (DBC) dated 6 Nov 2010(EOD).

Chart generated with Bull-Eye's Broker Software

Click on the Chart to Zoom In for clearer view. ^

Over time, with the aid of computer, Relative Strength Benchmarking feature is also added in the P&F Chart. The Chart (Fig 2.) shows the P&F diagram of the ETF- DBC, along with the Relative Strength against SPY and SGDUSD (Singapore Dollar vs US Dollar).

The first Relative Strength is to benchmark the S&P500. One should always remember to select a vehicle that is moving faster than the broad market index.

For the second Relative Strength, one can choose to benchmark a currency exchange rate. For example, a foreigner may like to buy some stocks or ETFs in the US market, but worry about the profits may be eroded by the weak USD against their home currency... By having this Relative Strength benchmark, one can make sure that he choose a vehicle that is moving faster than the change of currency exchange rate.

Many traders who know Technical Analysis may not know much about this tool or just ignore it. The main stream media, of course, do not publicize such tool that encourage patient which would lead to low trading frequency and hurt trading firms' commission.

On the other hand, this is a very straight forward tool that one can simply get a book on P&F and use the online free resources:-

-> P&F Charting Tools Online (Free).

-> Ebooks (Some are still under copyright).

------------------------------------------ Tea Break --------------------------------------------

Isaac Newton Loses A Big Fortune in the South Sea Bubble:

Even Sir Isaac Newton (4 Jan 1643 - 31 Mar 1727), the well known English physicist, mathematician, astronomer, natural philosopher, and theologian, got caught up in the South Sea mania and invested a big chunk of his fortune. Interestingly, he pulled out early (after making a respectable 7,000 pounds) then went back in after the bubble continued to inflate. The inevitable bust happened and he lost 20,000 pounds - a considerable sum at the time.

As a result of this crisis, he stated "I can calculate the motions of heavenly bodies, but not the madness of people".

Well. Recently, I heard of quite a few cases that some people due to what ever reasons, get out of their jobs in the corporation and just want to go trading for a living... Thinking that the success in one field can directly port over to the stock trading business within a short period of time. Such as buy a trading system, attend a class or just read a few books. This real story may help one to realize that success in one field or many fields such as a genius like Newton can fail in the Stock Market speculation miserably.

The objective of putting up this fact is not to deter anyone to get into the market, but rather to ask one to prepare seriously in advance. One should seriously consider study how the market works as a part of the retirement plan. Such as learning how a trading system works, how to test it, improve it, when to follow it and when not to follow it, forming a study group, etc... DON'T expect the insurance policies can help to cover the inflation (or if there is still any life insurance companies lift over after the baby boomers,1946-1964, had collected their shares.)

--------------------------------------------------------------------------------------------------

"Put Stock in Yourself, that is the only

one that will always go up!"

-Bashar

 

 

 

----- Point & Figure Programming Flow Chart, Inserted on 25 July 2013----------------------

 



Personal Finance (2) : Retirement Fund Excel Tool

Continue from Part 1:<-

As human perspective tends to focus on the short term events and, to most people, retirement seems to be something that is very far away. As the time keep passing by... and when it come close to their "official age" of retirement, most will get a shock that they are not ready for it.

Click to Zoom In

Another reason for people to ignore the retirement fund issue is as what Dr. Albert A. Bartlett had said:"The Greatest Shortcoming of the Human Race is our Inability to Understand The Exponential Function." That is most people cannot easily imagine in their mind that how big the number would get into with the compound inflation rate (and it now climbing proportional to the rate of Money Supply.)


To over come this challenge, here is a tool, Excel Worksheets, that was designed to help in putting all these figures down on paper. It can help individual to figure out how much it would require for him/her to be financial independent/freedom at a target date.


In the worksheet 1: just need to fill in the following data:


In the worksheet 2: one would need to fill in the details of expenses in various categories into the various fields as circled in the following diagram. It will then compute the ultimate retirement found figures with compound interest/inflation rate.




In the worksheet 3: Well, lot of people like to buy lottery and hope to retire now. This worksheet will tell you EXACTLY HOW MUCH you need to set the figure for achieving your goal -- that is the amount of money that you need to have in order to retire immediately. :-)


When someone is prepared early, this will not be his scenario:-



Here is link for the downloadable Tool in Scribd:->
Personal Finanical Tool:Retirement Fund Calculation

By the way, just some points for ponder....

* Why is there an "Official Retirement Age", and why many people follow? Are you plan to follow this "rule"?

* If making enough money can retire early, why many politicians and businessmen do not retire early and choose to work till the last day in their life?

"If you continue to think like what you always thought,

you continue to get what you always got."

- ?