The last two posts were messed up.  Finally fixed them.  Hope you didn’t have a problem.

Last time NG went up by 33% was good. But not this time. GLG just went up by 20% because GG is buying it. Yes, I own GLG, and got a big boost. But I own GG too, but at a much bigger amount. So counting both gain & losses, I’m down about $1000 because of this transaction. I always thought that GLG had less reserve, and GG’s reserve is in very good shape. It just got lots of reserve from ABX-PDG deal, right? My reasoning has always been that GLG most likely needs to acquire some smaller player down the road. Something is wrong! Either my data is not correct, or my memory is not serving me correctly.

It’s really hard to play in this gold equity market. The big companies will continue to acquire the smaller ones. But the smaller players may or may not ride the tide together with the big trend. Plus that smaller companies can be really risky. When something goes wrong with small companies, it can be really ugly. HUI looks like is almost at the edge of breaking out the ascending triangle. I am very afraid of placing more bets for fear of a negative resolution. It’s also possible that it fakes down in a big way, and then reverses up.

Commodity index CRB has broken 200 days MA. Definitely not a good sign, if it doesn’t turn up soon. Yet, there seems to be a little more downside to go in oil and gold spot prices. What worries me is that maybe gold and stock markets will not be synchronous this time. The general stock market is looking better each day. But the driving force has been a lower oil price. Looks more like CRB and stock market is going to have a big fight instead of being jolly and rising together.

Waiting….holding tight….what would be the story in about 1 month (or less)?

It will most likely make or break my portfolio.

Allowing refinancing of Option ARM and interest-only ARM is the modern days of the Ponzi pyramid scheme. As long as some stupid Asian central bankers are willing to keep rolling over the loans, the big spenders in America can continue to live in paradise of ever increasing liquidity.

Most of these kinds of exotic ARMs started in 2002/2003, and really took steam in 2004/2005. The current calm before the big storm is due to the standard 5 year period before these ARM loans get recast into the rest of the 25-years amortization schedule. A recast of option ARM or interest-only loans mean that the payment of the loan is fully re-adjusted without subjecting to any max annual cap increase (usually 7.5%) to make sure the loan will be repaid in the rest of the years in the loan term. Well, like it really matters, if homeowners can just refinance into another option ARM, packaged into securitized “asset”-back bond products, and sold (and hid) in wholesale to another stupid investor who is hungry for “safe” and slightly higher yields.

Here is a partial table of a hypothetical case on option ARM re-payments. The payment shock is shown near the end of the table.

Obviously, I don’t think it is likely that anyone can meet such increase in payment, unless their wives go back to work and get high salaries (if not already). The key to whether the homeowners can refi their ways out lies in the credit market in 2008/2009 timeframe. If the lending standard tightens, or the credit market tightens later and force the interest rate spread to get much bigger for lower credit trenches, these homeowners will be looking at only one solution out - sell the home, possibly with a loss, or even come up with additional cash to settle the sale.

Increasingly, these lax lenders are eating their own dirt now. Ever heard of early payment default? How can a mortgage default in 2 or 3 months?! There can be only two reasons: either the loan was a fraud, or the loan shouldn’t be made at all to someone who cannot repay. In either cases, lenders simply have not done their due diligence to check the financial backgrounds of the borrowers. They totally deserved buying back those packaged loans and take losses.

All of the above payment calculations can be found and downloaded in this Excel spreadsheet. The spreadsheet also has the calculation for 3/27 and 5/25 ARM loans for my last article on The Duel of ARM Reset Vs Re-refinancing.

Maybe I’m right after all since last time. I bought an international stock fund. International equities seem to be stronger than US. However, both US & foreign equities seem to be getting better.

There are still some 20 days before Fed’s next meeting. I think it’s almost given that the Fed interest rate hike compaign is over. The rest of Fed talk will be BS and bluffs.

I’m still treading very carefully here. I am cautiously optimistic.

The commission as a percentage that you pay for transacting stocks comes right off from your bottom line. Most of the time, you don’t get to choose how many percents you want to pay. Answering this percentage question is kind of important for your stock investing. If you treat stock investing like any other business you would run, the stock commissions that you pay are the direct and recurring costs incurred for buying your “merchandises”. Certainly, you want to lower it by as much as possible.

If you assume just an annual return of 10.2% for your stocks (quite a fair number actually), your “merchandises” supposedly can only sell for 10.2% more after 1 year, or 20.4% after 2 years. To carefully control your direct costs, I would say that your costs should be less than 5% of your gross profits, but definitely less than 10% of your gross profits. At 10%, it means that for every 10 transactions, the direct costs eat up all of your profits in 1 transaction. At 5%, it means that for every 20 transactions the direct costs eat up all of your profits in 1 transaction.

To achieve such good business practices, maintaining a lid on your costs, you can either try to lower the percentage that you pay for your stock commission, or you can lengthen your average investment horizon in the hope that you can gain more absolute return per transaction. If you use 5%, and an average holding length of 1.2 years, the commission that you should pay is 10.2% per year * 1.2 years * 5% = 0.612% towards the purchase of your stocks. If you use 10%, and an average holding length of 2 years, the commission that you should pay is 10.2% per year * 2 years * 10% = 4.04%. I don’t think you should use any numbers much bigger than 2 years, because I think that is simply not very realistic. Depending on your parameters, the answer can be ranging from 0.6% to 4%. Obviously, the less you pay, the more potential returns that you could get.

Now, if you use $5 per real-time trade from Izone, and just 1 buy and 1 sell per transaction, you need to pay $10 per transaction. Using 4% for the worst case, at the minimum, your stock transaction size should be at least $250. Personally, my transaction size are bigger. I use 10.2% expected return * 1 year holding period * 3% for better cost control = 0.3%, and at $7 * 2 at FirsTrade or Scottrade or $5 *3 (for 2 buys to reduce entry risk, and 1 sell), my aimed average transaction size comes out to be about $15 / 0.3% = $5000.

Although you can control your targeted “business costs” by increasing your transaction size, the other more important question is really your asset allocation. You should never have over-sized positions in respect to your entire portfolio/networth. Asset allocation is more important than stock picking in my opinion. And limited by factors due to asset allocation and diversification to at least 10 stocks, I will NOT recommend anyone with a portfolio size less than 10 * $5000 = $50K to invest everything in individual stocks. Mutual funds are a MUCH BETTER way to go. There is seldom something that I’m sure about investing, but trust this one on me: if your portfolio size is less than $60K, you should buy at most $10K or 2 to 3 stocks for playing in the stock market to increase your investing experiences. The rest of the money (if not all) should simply go to mutual funds, properly allocated according to your taste for risk & return.

I don’t mean that you won’t succeed if you don’t follow this advice of mine. But chances are that you will not hit home runs, but rather suffer big blows due to your inexperiences & lack of diversification. And if you succeed nevertheless, consider yourself either good or lucky or both.

P.S. You can buy mutual funds commission-free at FirsTrade. Send me an email and I can forward you a referal code (click to see details) for new account bonus of 5 free stock trades (mutual fund trades are $0).

Earlier in the morning, there was an error with my plugin. It is fixed now. If there is anymore error, please let me know. Thanks.

With $1000, you can start investing in many mutual funds. Here is what I would suggest:

1. Invest in a low expense ratio mutual fund. Find something that has a good 5 year track record, especially through the 2002 bear years. Use Yahoo’s mutual fund screener for your research.
2. If you have more than $3000, one of the better “mutual fund” that I can recommend is BRK/B, the B share of Berkshire Hathaway, the company of Warren Buffett. You can only buy 1 share since each share is about $3000. I did a comparison of his company to S&P 500, and his record is simply super-outstanding. Berkshire Hathaway holds many valuable and diverse types of business. Therefore, I am willing to put it into the category of “mutual fund”. Besides, I believe BRK will outperform S&P 500 going forward.
3. Buy some 1-ounce silver Eagle coins to just preserve your buying power.

With this amount of money, I would NOT invest in individual stocks or sector funds, both are too risky for a small amount of investable assets.

P.S. I added comments on Warren Buffett’s old age. Be sure to check it out.

Warren Buffet started investing in ConocoPhillips in the fourth quarter of 2005. But I beat Warren Buffet by fully 1 year on his purchase on this stock, or almost 32% gain (if I use $60 for end of 2005). Click on the image to see a bigger picture from my Scottrade account record.

I just saw the recommendation from DailyWealth again on this stock. It has a very good studies on COP. You can take a look. The article title is “Warren Buffet’s Favorite Energy Hedge Fund”.

Obviously, Warren Buffet is in this stock for the long term. So am I. I bought it in 2004, and just left it there. This year is a year of energy bull on hold, so there was not much return on COP this year. Next year, we shall see. It’s time for anyone who is not onboard to get onboard I believe. I don’t believe it’s too late. And Warren Buffet certainly believed that it’s not too late. But please do your due diligence before investing in anything.

P.S. Lots of readings & links for any of the readers today from PF carnival and My Digg of the Week, or links in this post. I won’t write more for today.

The debut for My Digg of the Week is from Investorial. The article talks about Buffett’s version of being an investor and EQ for being an investor. If you want to become a good investor, definitely go and read this article and learn from the best investor Buffett.

Investorial has several more articles on Warren Buffett, all of which I find very interesting:

1. Buffett’s Tenets - On Being An Investor
2. Buffett’s Tenets - On The Market
3. Buffett’s Tenets - On Selecting Businesses (Part 1)
4. Buffett’s Tenets - On Selecting Businesses (Part 2)
5. Buffett’s Tenets - On Contrary Thoughts

Check his blog out!

This is the first time that I host PF carnival at 1stMillionAt33. Thanks to Flexo at Consumerism Commentary for giving me this chance to host PF carnival #63. If you’re first time here on my site, you can take a look at my SiteMap on the right column, or any categories that you like at the left column.

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Learn about Finance & Economics degrees from Walden University, Capella University, and Baker College

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Before I start giving you the carnival, I just want to inform everyone that Sharon at The Frugal Duchess is starting her Friday Spotlight to take guest articles from everyone on her blog. Since she writes a weekly column in Miami Herald, had been a stringer for People Magazine, be sure to submit some quality article (on frugal living/finance) to her. Just maybe your article or blog may appear in the off-line world.

Okay, here are all of the 48 submissions for this week of PF carnival, categorized and listed by the submission order within each category. I added a short comment or summary for each submission for the benefit of readers.

—- RED entries had more votes than others. Voting results are closed now. —-
I also added a poll on the right column for anyone to vote. The number in front of the post always correspond to the number in the polling. Sorry that there is a little bit out-of-order numbering, for the sake of categorization. You’re allowed to vote multiple times on any number of articles that you like (and please do vote). I have given every article 1 vote as a host of this carnival, and I also added 1 additional vote for the articles that I like. Readers can use it as a reference for a guide to read the articles. Unfortunately, I couldn’t make the poll to be tampered-proof, without allowing multiple votes on different articles. Bloggers, you’re welcomed to add 1 vote to your own article, but if I see too many votes on the same article from the same IP address, I will block that IP for the future.
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Also, just a word of caution, votes only serve as a guide, but not necessarily the best articles that you will like since everyone’s personal preferences are different. I will leave the poll there for 1 to 2 weeks, and then I will collect the results, and update this post with the yet-to-be determined top posts information. But if I detect that the poll result is likely to be tampered, with any one or two articles getting way too many votes, I will scratch all voting results.

Okay, here you go (enough of the polling. Not sure if it’s a stupid idea.):

Misc. Personal Finance
1. By Mmm… life… : Get Rich Quick!. A commentary on the opposite effects of get-rich-quick.
2. By Debt Free: The Three Strategies to Maximize Your Financial Success. The basics on how to achieve financial success.
3. By Consumerism Commentary: Selling My Books on eBay: Probably Not Worth It. Interested in the Doctor. Who books? Ebay is sucking blood out of the sellers again.
4. By Getting Out of Debt: Personal Finance: Making Difficult Decisions. Really tough choice made by this supermom for her vacation. I can’t imagine how I can be that brave to do the same thing and teach my kids.
5. By Aridni: Financial bloggers losing focus. Less counting pennies, but more money-generating ideas.
6. By My Money Forest: Basic Personal Finance Articles. A good collection of articles on how to handle your finance & how to invest.
39. By My Financial Awareness: Feel Guilty about Your Finances? Good advices on taking responsibility for your finances, and separate it from guilt or love for that matter.
40. By Roth & Company Tax Update: Bad Timing, Foot Fault Leads To Tax Debacle For Solv-Ex Exec. Lessons for stock gain tax planning. An example from an energy executive getting a margin call.
41. By No Credit Needed Blog: 10 Steps For Personal Finance Organization. If you don’t have your personal finance scheme works out, check out this post.
42. By No Credit Needed Podcast: No Credit Needed Podcast Episode 23. Episode #23….Sorry, I haven’t heard any Podcast before. You’d better listen to it yourself.
43. By No Credit Needed Network: Highlights From This Week’s NCN Network Members. A highlight from the best PF posts in NCN network.

Saving Tips
7. By Leahey.org: How I Saved Hundreds Per Month (Part I). Lots of money saving tips for you.
8. By The MotherLoad: Aldi Supermarket: Price Sheets & Store Information. A truly comprehensive prices for anyone too lazy to go to the store.
9. By Get Rich Slowly: A College Education for $10 a Course. Good tips on how you can learn some college-level courses for cheap. JD, you’re making me to really miss school. To all the college and school kids, enjoy the best learning time while you can.
10. By FIREFinance - Financial Independence Retire Early: Research - From Junk to Joy! A super-easy way to trade your junk electronics for cash.
38. By Frugal Duchess: 10 Luxe-for- Less Vacation Tips. Great tips for any end-of-summer travelling tips.

Career/Job
11. By Young and Broke: How to make it. Great advices for anyone who are starting out on their jobs.
12. By Free Money Finance: Which is More Important — A High Starting Salary or Higher Average Salary Increases? Math doesn’t lie. Check out the numbers for yourself.
13. By It’s Just Money: Ways your personal life can hurt your professional life, or Don’t Be Tom Cruise. Advices on how to stay out of trouble on your job.
48. By Entrepreneur’s Journey: Pricing Points, Perceived Value And How To Make More Money Per Sale. A personal and interesting experience on how to do pricing for his online editorial business.

Retirement
14. By Hill’s Personal Finance: Pension Protection Act of 2006. A really good summary on the latest changes in pension.
15. By Accumulating Money: Affluent Baby Boomers Ready To Retire With No Retirement Plan. Very good action plan for anyone who has no retirement plan yet.
16. By Simran Gill: Personal Finance and Simulation Modelling. Using Monte Carlo simulation to project a future networth.
47. By Investing Guide: Roth 401(k) status now permanent. Check out the Roth 401k benefits compared to regular IRA.

Insurance
17. By Blueprint for Financial Prosperity: Effects of Changing Personal Insurance Details on Premiums. Tips on how different parameters will change your premium on auto insurance.
18. By InsureBlog: $680,000 and Counting. A sad story, but a BIG warning for anyone who doesn’t have medical insurance.
19. By Chrees’ World: Is your home underinsured? A good list of questions to go through to make sure you’re not under-insured.

Budgeting
20. By Getting Finances Done: How to create a zero based budget. A very detailed guide on how to create your budget.
21. By Taking Control Over Money: What Do You Spend Your Money On? Good advices on examining spending/expenses and coming up with a budget. You can download Quicken categories to help making your budget.

Consumption-related
22. By Frugal Wisdom from Wenchypoo’s Warehouse: The “Con” in Lexicon. Discussion on marketing words for your emotion.
23. By Free the Drones PF Blog: Dysfunctional Financial Personality #4 - The Emotional Spender. Tips on how to cope as an emotional spender.
24. By Frugal Wisdom from Wenchypoo’s Warehouse: My Big Fat Inanimate Object. Discussion on America’s consumerism on homes.
25. By Money and Values: Locally-Owned Businesses Vs. Corporate Chains. I fully agreed with Penny Nickel. I try to do the same thing to let my dollars stay locally.
26. By Mapgirl’s Fiscal Challenge: Patient Advocacy: Are you getting your money’s worth at the doctor’s office? Tips on how to get your money worth when seeing the doctors.
44. By FiveCentsNickel.com: Dish Network Customer Service Still Sucks. If you are thinking of getting Dish-network service, definitely read this article.
45. By AmericanInventorSpot.com: War of the Off Brand Sodas. A cool article on different off-brand sodas at many stores.

Real Estate
27. By Mad Kane’s Humor Blog: Hapless Home Buyer’s Guide. A step-by-step home buying guide with humor.
28. By The Finance Journey: Lessons Learned From Selling For Sale By Owner. Learn from his mistakes on FSBO.
29. By Bouncing Back: The Greatest Real Estate Tool Ever (Part 1). A tool guide on a real estate website.
30. By “D”igital Breakfast: Foreclosure Investing - A Look At Essex County. Foreclosure investing in action. Lots of notices.
31. By Queercents: Maintaining a Lifestyle of Conformity. A commentary on master-planned community.
46. By The Mortgage Reports Blog: Competing for sales in the Chicago condo market. A good local study on the under/cross-currents in rental, resale and new home markets.

Investing
32. By Stock Market Beat: Semiconductor Sucker’s Rally. Maybe you’re right, but I kind of like to keep my head buried in the sands.
33. By Start an Online Business - Tips and Advice: Savings Vs. Investing. Good advices on when to save and when to invest.
34. By The Dividend Guy Blog: Banks as Investments - Works for Me. Investing in canadian banks should be okay due to natural resource development, in my personal opinion.
35. By No Limits Ladies: Shopping For Stocks. A comparison between buying stocks & other goodies.
36. By Financial Options: The Week Ahead: Your Financial Roadmap for August 28 to September 1, 2006. Economic data releases and earning reports in next week.
37. By The Real Returns: Thoughts About Earnings. A lot of thoughts from an investor looking forward.

Last submissions after I published the carnival prematurely (SORRY)
38. By Frugal Duchess: 10 Luxe-for- Less Vacation Tips. Great tips for any end-of-summer travelling tips.
39. By My Financial Awareness: Feel Guilty about Your Finances? Good advices on taking responsibility for your finances, and separate it from guilt or love for that matter.
40. By Roth & Company Tax Update: Bad Timing, Foot Fault Leads To Tax Debacle For Solv-Ex Exec. Lessons for stock gain tax planning. An example from an energy executive getting a margin call.
41. By No Credit Needed Blog: 10 Steps For Personal Finance Organization. If you don’t have your personal finance scheme works out, check out this post.
42. By No Credit Needed Podcast: No Credit Needed Podcast Episode 23. Episode #23….Sorry, I haven’t heard any Podcast before. You’d better listen to it yourself.
43. By No Credit Needed Network: Highlights From This Week’s NCN Network Members. A highlight from the best PF posts in NCN network.
44. By FiveCentsNickel.com: Dish Network Customer Service Still Sucks. If you are thinking of getting Dish-network service, definitely read this article.
45. By AmericanInventorSpot.com: War of the Off Brand Sodas. A cool article on different off-brand sodas at many stores.
46. By The Mortgage Reports Blog: Competing for sales in the Chicago condo market. A good local study on the under/cross-currents in rental, resale and new home markets.
47. By Investing Guide: Roth 401(k) status now permanent. Check out the Roth 401k benefits compared to regular IRA.
48. By Entrepreneur’s Journey: Pricing Points, Perceived Value And How To Make More Money Per Sale. A personal and interesting experience on how to do pricing for his online editorial business.

My apology to the late posts but made the deadline. I listed your posts twice to make up your lost 10 hours in the spotlight.

Hope you have enjoyed reading these articles. Next week PF carnival will be hosted at Aridni, another great PF blog.