My 1st Million At 33 – yes, you can do it too

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  • Archive for March, 2008

    For Lehman, more bad news

    Posted by Frugal on 31st March 2008

    Lehman has been conned for about $250 to 355 million, depending on which article you read. That’s about 1 to 2 % of the shareholder’s equity on the balance sheet, if that number can still be trusted.

    Lehman is already trading at its current book value on Friday, so I assumed that this fraud is going to make lehman to go down by 1 to 2%, plus any other magnification/forward-looking effect.

    In a way, these financial firms simply haven’t done enough due diligences on all the loans that they’ve underwritten or taken onto their book (knowingly or unknowingly). The mortgage fiasco simply has exposed all the greed and ineptness of Wallstreet for the world to see. If I’m a big client with them, I wouldn’t have much trust left with them.

    IAI appeared to be rejected at the $40 resistance level. This is not good for the general market. Will there be a double bottom established for brokerage stocks in general? In any case, I’m going to count my money as the April expiration date approach. I’m short IAI calls in April, and at the time when I short them, the lowest available strike on these options were $40. So I went for the lowest available. Definitely markets are surprising to the most participants, except the super-bears.

    Posted in Market Pulses | 1 Comment »

    A big raise for this year

    Posted by Frugal on 28th March 2008

    This year’s raise is less than previous year, but my raise is still about the double of the average engineers in my group. It’s fairly good by any measure.

    One of the best ways to make more money is to invest yourself in your job and career. Whether it’s spending more time, volunteering, attending seminar and conferences, or picking up some broader knowledge. In the long run, it will pay off.

    I was blessed to be recognized for my contribution, after pulling off a mission impossible, delivering a complex design in less than 4 months, which would have been normally completed for 8 to 10 months. I was working about 100 hours a week for about the last two months during that crazy schedule. It was a mis-management on the product map, but engineering came in and saved the day.

    My working group has all the best people, so I probably won’t rise up to become a manager for another 10 years, even though I’m very experienced already. It’s very weird to have a (or multiple) former regional manager from a big company to work at the same (lowest) level as you are. But that’s just how good the quality of my working group is.

    Unfortunately, by the time when I could possibly rise up to the next level, I think my industry would have been either outsourced to Asia, or being taken over by Asian companies. High-tech industry in the US is getting less competitive as China rises up. Therefore, before my retiring age is reached, I will probably need to find another career.

    But I don’t think it would be such a big deal. I respect every profession as the necessary component of the entire society, and I’m sure I won’t have a problem doing something else.

    Posted in Career/Salary | 8 Comments »

    Is silver really in shortage?

    Posted by Frugal on 26th March 2008

    There have been several reports of people not being able to buy silver coins at the local dealers. Initially, I bought into their story of silver shortage. However, after more thoughts, I am not so sure if that is really true.

    The current shortage in silver seems to be caused by the minting capacity and human labor to process and ship orders rather than an actual shortage. Of course, this is just my opinion. I remember back in 2002 or 2003, when I tried to refinance my mortgage, it was really hard to talk to a loan officer because of a huge demand. There was certainly not a shortage of money to be loaned out. But there was certainly a shortage in loan officers to process these loans. I think the silver shortage is more of a shortage in human labor rather than a real shortage. And one thing is for sure, and that is a very big demand for silver coins, while very few people are selling.

    The cause for the apparent “shortage” is important in determining which stage we are in in this bull market (if it’s not done yet). What does such a big investment and retail demand represents for silver, and precious metal complex as a whole? I almost want to say that there is a higher probability of PM just going thru wave 5 of wave 1, rather than a wave 3 of wave 1 or 3 or wave 5 of A wave 5 represents more of a mania and an important top.

    If it was a wave 5 of wave 1, then PM will really have some good amount of correction ahead. Right now, I just cannot tell, even though Mark Hulbert at Marketwatch.com, and Bob Moriarty at 321gold.com are still positive and/or become positive about PM.

    I’m not going to get ahead of myself. If it’s a long correction, I will probably ride it out again. By my model calculation, HUI won’t give a buy signal for at least 10 trading days. So I’m going to be patient.

    Best luck trading,

    Frugal at My 1st Million At 33 .com

    Posted in Investing | 2 Comments »

    Danger zone may be over for stock markets

    Posted by Frugal on 25th March 2008

    Just a short message.

    You may consider getting back to the markets when the markets pull back from the coming earning announcement season.

    Today since it’s down a little, do some light pecking if you will.

    There is still a possibility of going even lower this year as suggested by BillCara.com. But the chance of that happening seems to be not big in my personal opinion (as long as this rally doesn’t go too crazy and greedy).

    This is for intermediate horizon only. Longer term, the markets should head down still, but just much later (not this year, but may be next year).

    EOM.

    Frugal

    P.S. By “stock markets”, I mean the general markets as indexed by SPY or QQQQ or DIA. Precious metal or PM markets are entirely different. Energy sector may or may not correlate to the stock markets, although I tend to say that it correlates mostly positively, except at extreme prices of crude oil prices. In those cases, they tend to correlate negatively.

    Posted in Investing | 8 Comments »

    I made it to Peter Schiff’s seminar

    Posted by Frugal on 25th March 2008

    It’s kind of weird to see a person on TV in person. But anyway, Peter Schiff looks just like how he is on TV.

    I thought I may be able to hear something new in Schiff’s seminar. But he simply went over his standard set of arguments and viewpoints.

    1. Bad mortgage and housing bubble causing all these credit and economic trouble.
    2. Eventually government is going to monetize most of these bad debts, including Fannie Mae and Freddie Mac’s debts.
    3. Get out of $US and US-dollar based assets right now.
    4. His theme of investment has always been foreign stocks. He likes foreign stocks that pay good dividends in particular. And his strategy is to buy and hold for a long time, especially since selling will involve capital gain tax hit.
    5. His arguments has always been that gold & silver don’t return anything to buyers, unlike a good foreign company/stock. And he has stated many times that when foreigners stop subsidizing US economy, foreigners will be much better off because they will enjoy their own fruits of labor from all the manufacturing and production instead of sending those products to US.

    In summary (especially regarding #4 and #5 above), he is in the camp of a decoupling scenario for global economy (you can read this post on more details of the macro-economics if you want to understand more about decoupling scenario).

    Although in the long term, I kind of agree with Peter Schiff on the decoupling theory. In the short term however, I simply cannot agree to it a bit. The global economics is too much intertwined. Even though the current economy are supposed to operate at the speed of internet, in reality, it takes TIME to find new customers when your old customers who are the big spenders in the United States stop buying more products from you. Yes, eventually these new customers will be domestic customers. But it will really take TIME.

    What’s going to happen in the meantime, before the entire economic transition is complete? Before the economic transition of US dollar falling, and foreign currency rising, and shift of US consumption to other foreign countries, I believe that there will be a global synchronized economic slowdown. This slowdown may last for 3 to 5 years, but probably less than 10 years. At the end of the global economic transformation, I do see the decoupling theory to prevail. Unfortunately, during this transition, foreign stock markets are going to get whacked big time, possibly even worse than US stock markets. In fact, it’s sort of in progress already.

    Due to my own economic projection, I try not to invest in economic sensitive area, which includes energy sectors.

    In spite of what I believe in, it is extremely hard to predict how the decoupling theory and/or global synchronized slowdown plays out and/or interact with each other. Stock markets obviously are kind of schizophrenic, and the markets in the short term will definitely undergo episodes of both decoupling theory and global synchronized slowdown and global synchronized recoveries. It’s almost like weather. One day it will be sunny, and another it will be rainy. I think it’s more important to get the “season” right, rather than the daily weather correct. And I’m voting my own dollars for a global stagflation scenario.

    Peter Schiff has been right on money on the housing bubble. I don’t know whether he will be right on the decoupling. But frankly, this is too important to mess it up. Although the current “weather” in the stock market looks like energy sector is going to go back to possibly new high, I’m not so sure how the two opposing factors of peak oil and global economic recession will play out in 2009 on this highly volatile sector.

    Best luck trading.

    Frugal at My 1st Million At 33.

    Posted in Investing | 2 Comments »

    I will take the new 3% cashback credit card from Chase

    Posted by Frugal on 24th March 2008

    For those who have missed the HSBC 5% cashback credit card offer, I must say that it’s a great pity. Like the previous citibank dividend platinum card which eventually had its 5% reduced to 2%, I’m a little afraid that the 5% cashback on my HSBC credit card will eventually go away. Quite often, good things just don’t last very long.

    Therefore, I decided to apply for this 3% cashback card not only as a backup, but to also increase cashback in my other spending area. What’s good about this “Freedom” card is that you don’t need to be mindful about where you are spending your money. By default, it’s going to give you 3% cashback on the 3 categories where you are spending most of your money. Some of the categories include grocery, gasoline, drugstore, pet supplies, utilities, etc. I’m actually getting $100 cashback instead of the $50 after the first purchase. My offer was in the mail. If you apply from this link, you just get $50.

    In any case, 3% is not too shabby. Especially considering that the cashback is tax-free, I’m much more motivated in getting them. A dollar saved is two dollars earned. The statement pretty much applies to my personal situation since my marginal tax bracket is at 40%.

    Why is it important to get a cashback or a good deal on your credit card? You can read more about my arguments in this post on Two Must-Do Money Saving Tips.

    Good luck on your savings,

    Frugal at My 1st Million At 33 .com

    Posted in Credit Cards | 7 Comments »

    Gold markets took a swan dive

    Posted by Frugal on 21st March 2008

    Geez, that hurts (a lot). I should have acted according to my own mathematical model.

    I really thought that PM markets were in the major wave 3 in Elliot wave. Now I’m not so sure. If the recent peak is the termination of major wave 1, there will be quite a long correction before PM. And that simply doesn’t bode well for anyone looking for a continuation of the bull market.

    If the recent peak is wave 1 of major wave 3 (which was my initial count), or wave 3 of major wave 3 (which is the most straightforward count, but therefore cannot be true when it’s so easy), then the correction may last less than 2 to 9 months at the longest.

    I just found out that US Mint suspended or put a long delay on silver Eagles because of lots of purchase order. That is certainly not good, since public or the crowd would probably invest in coins first. I’ve also kind of kept track of the tonnes held in GLD. Before the zoom up from $910 to $925, there were about 630 tonnes. After the swan dive, at Thursday closing, there were about 637 tonnes. At the peak, there were 663 tones. The first day, 15 tonnes were withdrew. The second day (yesterday), 11 tonnes were withdrew. Apparently, it was simply billions of hot money that went in and then went out.

    So is this hot money from the public? Moving at such fast speed, the most likely source is from the speculators and hedge funds rather than long term investors.

    I still think that the recent peak was probably more like wave 1 of the major wave 3. However, one cannot count out the possibility of wave 5 in major wave 1, in which case, you may see PM to correct and take out the over-boughtness on the monthly charts to the long-term moving average. That will be extremely ugly to say the least.

    Can the gold bull market be finished right here? I think the chance is quite slim. But again one must be open-minded at all times.

    I’m going to wait for my model to turn up again before making any new purchase. I just refined my model again, and added in the commission and a few more details. It is at least outperforming index by 3X, and if I add intraday tradings, it would outperform by close to 9X (although it’s probably lower because I didn’t have 1-minute data for calculating a correct return).

    Posted in Gold/Silver | 7 Comments »

    Pre-expiration Rally

    Posted by Frugal on 19th March 2008

    Options are expiring this week. It appears that markets are trying to get shorts to cover.

    However, it is indeed possible that we have seen the low for the year. The rally seems to have legs, even though I don’t think the markets can go too much higher than 1380 to 1420 on S&P 500. Sentiment-wise, we should be quite close to the bottom of the markets. Any shorts should probably be covered opportunely. Possibly if a lower low is in the cards, it may not happen for quite awhile.

    Precious metals are suffering from the same cause of expiration week. It could be a good time for long term investors to pick up a little. The low is probably not in yet however.

    It’s important to see how markets react next week after option expired. That should tell you whether the market rallies really have legs.

    Best luck.

    Frugal

    Posted in Investing | 1 Comment »

    Better be a one full percentage cut

    Posted by Frugal on 18th March 2008

    Today is the Fed meeting again. I hope they will cut 1%, because I just don’t want to imagine what might have happened without such a big cut. The financial world is literally falling apart. And bringing down the economy into depression is no fun at all for anyone.

    Savers obviously will be hurt by such action. Of course, what hurts the most is the perennial fall in the $US. While the $US should have been rallying, along with gold making a short-term top, it is just nowhere to be seen (yet?). Frankly, I can’t see any fundamental reasons for $US to rally. I wouldn’t want to hold my currency in a country where big brokerage house can go kaput in 24 to 48 hours, and where AAA rated debt skips to CCC without warning, and where practically all banks, brokerage houses, and rating agencies have been lying about the integrity of mortgage debts all along. These are big lies and big losses. USA just cannot repair the trusts from international institutions and wealthy investors quickly.

    Yesterday’s markets appeared to be manipulated heavily, and same for the 400 points up day on Dow last Tuesday. The reason that I say that is gold prices are knocked down, while stock markets are supported in the opening, and especially closing hours. No matter though, it’s always the closing prices that matter (at least to the chart technicians).

    In any case, I think we could be at least half-way through the bear market. The second half is probably uglier than the first half. But at least, the light at the end of tunnel may be coming. Again, I still wouldn’t buy into this market. But if the sign of hyper-inflation is clear, I will jump in with both feet.

    Posted in Banking | 2 Comments »

    $2 for Bear Stearns (BSC) which was $143 on Jul 2nd, 2007

    Posted by Frugal on 17th March 2008

    Well, actually it’s probably going to be less than $2, since JPM will probably fall on Monday.

    BSC is the 5th largest brokerage company in America, brought down by the housing bubble created by Greenspan & company. These are the financial innovations on Wallstreet, creating bonus and money out of toxic loans.

    Gold and silver both broke new highs. Market on Monday is most likely going to be terrible. I think we may be heading towards another 20% hair cut in the overall stock market.

    Your and my life are going to be seriously affected by the current credit crunch no matter what, whether it’s heightened inflation or decreased economic opportunities (layoff). The entire credit pyramid when it crumbles is just not a pretty sight. It’s called deflation. Or more correctly, it’s called asset deflation.

    What I expect going forward in the coming decade is
    asset deflation and
    commodity inflation.

    This is the most lethal combination to wealth destruction. From 1980 to 2000, it was the best combination for wealth generation:
    asset inflation and
    commodity deflation

    Those lucky baby boomers who rode the entire up wave in stock markets were fortunate to reach multi-millionaire status. But going forward, I believe few people will be able to preserve their existing purchasing power. Collectively as a whole, the sum of purchasing power for all people has to be reduced thru the process of asset deflation and commodity inflation.

    Better preserve your buying power before it’s too late. By the way, I think there is at most another 10% upside in gold. There should be a correction. If you jump in, don’t forget to jump out.

    Posted in Market Pulses | 2 Comments »