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

A site to share my tips, tools, and humble thoughts on the journey to wealth

Legal disclaimer     Place your ad here    
  • Categories

  • Archives

  • Spam Blocked

  • Sponsors

  • Archive for May, 2010

    What a volatile week

    Posted by Frugal on 29th May 2010

    This week it looked like I was early by 1 day in calling the bottom this week (so far, if markets don’t break lower). But the bounce was weaker than I have expected so far. Regardless my game plan is still the same. I’ve bought into the bottom by covering my shorts, and I am planning to re-establish some of my short positions at the higher prices. My shorts on the general market are really hedges against my company options which I have been liquidating. But I will still be net long with the hedge.

    Technically the market is short-term over-sold, and with MACD turning up but not strongly, I don’t know if a bullish cross-over could be established (see the green arrows in the chart). If the market cannot make this bullish cross-over, it will be quite bearish, and markets will stay oversold with lower prices to come. Also, if the MACD cross-over is not strong, it could be a fake signal, and trap more bulls in a bigger downtrend.


    Most of the time I pay more attention to the fundamental side, and for obvious reasons, fundamentally this market is treading water due to European sovereign bond market problems. And they simply won’t go away in a very short time frame (in several months). In fact, I believe that it could intensify throughout this summer, and therefore I want to side-step away. My opinion has always been that since 2008 financial crisis with the biggest housing & mortgage bubble bursting, things simply won’t be the same as before. Stock markets react very fast initially, but eventually bond markets may shoulder all the pain.

    For the intermediate term, I still think that it’s better to stay in cash, and miss the potential next 10%. Stock market indexes won’t be going up by another 20% anytime soon in my opinion. But when it goes down, it will go down very fast, and the escape exits will not be available.

    Play safe.

    Posted in Investing | 1 Comment »

    No Escape

    Posted by Frugal on 25th May 2010

    I should have realized that, just like the incessant rising up since March 2009, this going down may not have any escape. Any counter-rally if there is any is weak and would be sold.

    Regardless of what happens in the short-term on a day-to-day basis, I still think that this summer, stocks will go down hard (on top of whatever that has already happened).

    My own portfolio is not taking a big hit yet. But I expect that when the tsunami comes, it won’t stand either. After 1st or 2nd week of June, if things still don’t turn around, I will start rising cash in prep of the coming storm.

    Best luck.

    Posted in Investing | Comments Off

    Sell the short-term counter rally

    Posted by Frugal on 24th May 2010

    The needed counter rally I believe will begin this Monday (or today) but may only last about 2 weeks with European stocks going up already. My current target is about right after first week of June. I think it’s very important to get out of stock markets after the relief rally, to avoid the coming intermediate decline this summer. From June to until end of August, and possibly longer, I’m not bullish on stock markets at all. I continue to believe that the stock markets will be ranged bound, with heightened volatility (fast ups & downs) throughout this year.

    The European debt problem will probably get quite bad this summer. It’s just not over. I would avoid Euro dollar & any European stock markets until mid-2011. The political uncertainties may continue to exacerbate Wallstreet this year. The mid-term election this November will bring down many incumbents around the country, as indicated by a big Tea Party win by Rand Paul in Kentucky. For June 8th primary in California, I’ve marked all of my choices: all incumbents are going out. Yes, vote ALL incumbents out (except Ron Paul of course) and return the government back to THE PEOPLE.

    I also expect precious metal investment to continue its march in the secular bull market. HUI may get hammer again this summer, but after that it should out-perform the general stock market (again).

    Although this sounds unlike me almost, but my long-term bearish stand on stock markets since year 2000 high-tech bust, is coming to an end possibly in about 1 year. This coincides with public abandoning stock markets left & right, and fully embracing the bond markets after the 2008/2009 stock market crash. At local bookstores, the books on bond investments are placed prominently indicating the shift in public sentiment. With $376 billion flow into bond funds, public is buying all it can into bonds. What I want you to take away from here is that in the shorter term timeframe for about a year, stocks may NOT do very well. But in the longer timeframe, it will be the absolute worst timing to switch from stocks to bonds where the final phase of the bond bubble is completing. Don’t let the high volatility get to you. Bond is at its last leg. Similarly a fall in bond will raise up the interest rates in general, compromising the inflationary force in real estate (for years if not decades to come). Allocate your assets properly.

    Posted in Investing | 1 Comment »

    Protests on Austerity Measures

    Posted by Frugal on 20th May 2010

    The protests on austerity measures in Europe are becoming widespread. The thing that these people don’t understand is that either way they are screwed. There are only two choices:
    1. Austerity measures involving cuts on salaries & benefits.
    2. Devaluation / De-link from euro.

    The end result is similar: a combination of a drop in living standard AND total net worth.

    The second leg down is here with us. The US stock market drop has not reached the highest intensity yet. The biggest wave down may come in the month of June to August. I expect that stock markets to stay down until October. The market is at critical support now (if not broken already). After that, it would probably be another free fall.

    There will be a trading opportunity for this fall, but I’m not sure if I want to participate in that yet. I’m still waiting for the current bearish cycle (starting from 2007) to be over until mid-2011. After that point, one MUST switch into gold & stocks, for bonds will be hammered in my opinion.

    What is happening for Europe will definitely repeat for USA before 2015/2016: a combination of a drop in living standard and total net worth. There is no escape (unless you allocate your net worth properly).

    Best luck. Take the right side.

    Posted in Investing | Comments Off

    Gold breaks record price (again and again)!

    Posted by Frugal on 12th May 2010

    There may be a short-term top after this, but not before setting more new record prices.

    Again and again. That is the pattern of a solid bull market in progress. Yeah, I managed to invest 24% of my cash since the year starts, but my conservative investing approach has let a big sideline cash position at 26% of my total net worth. My cash position has been dwindling percentage-wise lately, mainly due to the increase in my other invested assets, not because I have put my cash into good use.

    I don’t chase prices into record high, but let me kindly remind you that in a bull market, what one should do is to follow Kelly’s criterion, and take some measured risks according to the price.

    One of the biggest investment mistakes that I kept making is that I don’t listen to myself more often. Instead I subscribed to newsletters such as Jack Chan’s, and continue to hold myself back too much (on cash). There are intuitions & emotions. The successful trader can distinguish the two, and make proper decisions.

    There is a time for everything. And I know instinctively that this year would be a big year for me. I hope that you will be on the ride too. There may be 1 more good chance if you & I are lucky, but if not, I’m properly positioned.

    If there is any investing secrets of mine, here it is (mainly due to lack of time to trade more often):
    1. Pick the right “train”, and hold on to it for your dear life on this scary ride.
    2. Eventually IF you’re successful in your pick, everybody would want to get on, and that’s the time you should get off.
    3. Repeat the same successful process, but with a different vehicle.

    Posted in Gold/Silver | 2 Comments »

    Coaching my best buddy on personal finance

    Posted by Frugal on 10th May 2010

    I have just a few best friends. I only told my IT friend about my blog because I needed several helps on the repeated hackers’ attack on my site. On mother’s day, my buddy and I talked almost 3 hours about his personal finance, answering every conceivable questions that he had (not that this is the first time). Kind of reminded me that I should not tell anyone else, :) .

    My IT friend is basically at the same age as I am. But in terms of accumulated assets, he is quite behind me (not that I’m trying to brag, my friend). He is one of the few people who I would call innately smart. And I have always encouraged him to go further beyond what he can achieve because he really can. He started out inherently behind me because he helped paying his brother’s college education. This is probably unheard of in a western American society, but we Asians would do that for our family members. Sometimes, an entire family would work together (financially) towards one goal, sending just a person for higher education, and then in term, this person would give back once he is able to lift up his financial and professional status.

    In any case, my IT friend is buying a house, and has been asking me lots of questions even before our 3-hour talk. I directed him to my rent-vs-buy financial calculator. We worked through all the numbers together. Besides the tax benefit that was not very clear initially, I think everything else was straightforward. On the “tax benefit average rate on property tax+interest”, one needs to account for the standard tax deduction (now at $11400 for federal tax) to calculate the tax benefits from itemized deduction of property tax and mortgage interest. It’s often A LOT less than one’s marginal tax bracket, on the contrary to the realtors’ claims. At his particular city and state, buying a home makes good sense because using conservative assumptions such as 0% appreciation rate for home, he can still break even in about 4 to 6 years. But that is with an implicit assumption of upgrading his lifestyle (for his anticipated family need) to a bigger home, paying a higher equivalent rent of $1900 instead of his current $1500. Most people buy home, thinking that house is an asset. But no, the home is only an asset, unless buying is better than renting. Otherwise, it’s a liability that bleeds your pocket. And buying a bigger home than what you need is NOT investment. Do not justify your ego’s need with the illicit logic of making a good investment. One way or the other you will ALWAYS pay for the expanded space with your own pocket.

    Besides the home, I also advised him to read through “My Advice” page. Summarizing for him, to get to millionaire status, it’s basically
    1. Acquiring skills/network (for an income source).
    2. Relentless savings for accumulation.
    3. Proper investing for preservation.

    I tried to emphasize to him that the 3 best time to save (in the right order) is
    1. Right out-of-school, and before getting married.
    2. Before having kids.
    3. After kids finish college.

    Unfortunately, most of the American young generation either take up too much college debt, or frivol through their best years to save. Those early years obviously make a huge difference in the long run.

    Then I also strongly encouraged him that it’s never too late to save, and he still has a real chance of making into millionaire club. Why? His current household income is even higher than my 2007 base salary (or my household income for that matter since my wife doesn’t work). On my job(s), I’ve “slaved” through almost 7 years at a way-below average household in my area, accepting a 35% salary cut, and yet I was able to make into the club. If I could do it, then he or anybody CAN do it too. The key is obviously to somehow maintain your (hopefully significant amount of) saving within your own acceptable living style. I advised him multiple times to go through his own credit statements. Pulled out the last 3 months. Have a monthly budget and compare to what really happens. Re-visit after 6 or 12 months. Monitor spending until it’s within budgeted expectation. The budget needs to be realistic to reflect the spending. It’s the guide of how far your saving effort would go. Budgeting is a personal experience, and it’s where your emotionally material desires fight with your goal-oriented mind.

    He has not got into many needed investing side of personal finance yet. But again, it’s very important, since the only way to get into the club is
    1. First, you must have it (through earning & saving).
    2. Second, you must preserve it (through investing).

    I encouraged him that after 15 years to come back to my blog to write about his becoming millionaire experience. As the second part of the title of my site states, “Yes, you can do it too”. That is REALLY true for MANY of the people out there. But if you just started saving at 50, then I’m sorry that I’m not going to be like all those authors writing “feel-good” personal finance books out there, and tell you that “yes, you can do it too”. But the whole point is not to become just another millionaire. What your financial security (whether it’s $400K or $700K) gives you is a peace of mind. It’s when you walk into a car dealership to buy a car, pay cash to buy the car, and you don’t even need to fidget about whether you can make the next month mortgage or car payment. It’s if your family member gets terribly sick, and requires $100K medical treatment beyond insurance, and you don’t even need to worry about sky collapsing on you, or selling the house to pay for it. It’s when your kid goes to college, and you don’t need to say to him or her, that “sorry, you really have to pay for yourself”, or that “sorry, you can only go to state universities.”

    Striving towards wealth is truly about personal financial responsibility, and not about millionaire bragging rights. It’s about taking care of oneself, one’s family, and hopefully extending the helping hands to so many needy people out there. That’s what my site wants to convey to everyone of you out there (even when I just get to sleep 4 or 5 hours a day). “My 1st million, and YES, you can do it too”. In fact, “YES, you should try to do it too.”

    Here is one of my favorite quote from my favorite books, “Karma Yoga” by Swami/Yogi Vivekanada (p.27):

    A householder (as opposed to a monk) who does not struggle to get wealth is immoral. If he is lazy and content to lead an idle life, he is immoral, because upon him depend hundreds. If he gets riches, hundreds of others will be thereby supported.

    Posted in Debt/Frugality | 4 Comments »

    The Stock Market Free Fall and the “Audit the Fed” bill

    Posted by Frugal on 7th May 2010

    The potential passage in Senate of this “Audit the Fed” bill next week could be the cause of Thursday’s free fall in stock markets.

    Federal Reserve bought 1.2 trillion worth of junk toxic mortgage bonds on face value, effectively transferring money from Fed or the public to all the banks who have screwed up. Since no audits will show the true value of these bonds, they will simply rot on Fed balance sheet without nobody noticing. In the meanwhile, these big BAD banks continue to survive and siphon money out of the entire system, paying big bonuses to executives on a phony profits that are based on marked-to-fantasy book.

    Since neither Wallstreet nor Fed wants to give back the money to People, nor do they want the public to find out, they are probably retrying the scaring tactics that worked last time.

    Check it out, the Mall owned by Federal Reserve:

    How could it have happened at all? Because Federal Reserve bought the particular toxic bonds from banks. Once the bonds go into default, Federal Reserve becomes the rightful legal owner. Now who is counting how much Federal Reserve lost on this particular deal (probably in excess of 60% loss)? And imagine how much money Federal Reserve has effectively transferred to banks through all those 1.2 trillion toxic bonds (which are supposedly required to be AAA to be posted to Fed)?

    Unfortunately this country is being wrecked by bankers right in front of our eyes.

    Posted in Investing | 2 Comments »

    List of the stocks that went to almost zero

    Posted by Frugal on 7th May 2010

    Nasdaq has published this list for the affected securities that traded beyond 60% down at (Download Microsoft ExcelViewer.exe if you can’t see xlsx files).

    There were total of 286 symbols. I checked some 10+ symbols randomly. One of them didn’t go down to below 0.10. Everything else that I checked went to $0.01 or $0.001.

    It’s obviously that this 2-minute feat was not performed by any human. But somebody cares to explain how so many stock symbols went to practically zero at $0.01 or less, some of which are quite big companies like EXC, or HHH (internet holder)? It can only be explained by the deliberate absence of all market makers in probably all stocks. And just go through those trading volume during those 2 minutes if you will. It’s simply not significant enough to bring about a 99.9% drop in these stocks under normal market conditions, except probably by their sheer fast speed.

    Somebody did it (through executing the trading program). We should find this company. It’s also time to stop all the high-frequency trading.

    This is the very reason that I haven’t placed a stop-loss order for the last 10 years. I know these market makers routinely sweep (sells into) buy orders to trigger additional stop-loss market orders. As a cardinal rule, I never leave a live (limit) order in the open market whenever I’m not in front of a computer terminal. The stock market is like a casino. And today is the best proof for it.

    Posted in Investing | 3 Comments »

    An Explanation for Dow Jones Dropping 1000 Points Today

    Posted by Frugal on 6th May 2010

    Yes, the market has been over-bought.
    Yes, the market should decline due to Greek debt problems.
    Yes, I’m not personally very bullish on stock markets at all.

    But dropping 1000 points (including previous 200 points decline earlier) in less than 5 minutes?? Something has gone very very wrong today.

    As it happened in front of my screen, I was immediately puzzled by the relatively low volume accompanying with it. Normally such huge decline is always accompanied by HUGE volume. But NOT this one.

    Going back and reviewing the trading history of some stocks, I found that there were two stocks (and according to stock exchanges that there were MANY more) whose trading were simply absolutely ridiculous. They were ACN and SAM.

    ACN (one of the best consulting business) was trading at about $40, and then it went down to $0.01. SAM (beer company) was trading at about $56, and then it went down to $0.01. You would think that they were simply incorrect data passed between computers, but NO, some actual trades really happened at $0.01. Please see all the screen snapshots that I have captured from,,,, below at the end of this post. Some or all of the data you won’t be able to see them ANYMORE because NYSE/Nasdaq have decreed to cancel all orders beyond 60% drop between 2:40pm and 3:00pm, possibly realizing that the “fraud” has gone too far, and they want to erase all evidences.

    How can those stocks dropped to $0.01? My explanation (which is just a plausible explanation based on my knowledge, and please judge it yourself) is that the only possibility is that market makers for those stocks simply stopped making the market, and pulled ALL the bids, and let all the stop-loss market orders to execute at the worst possible price which is obviously $0.01 per share. In my opinion, what occurred today is Wallstreet terrorism. For stocks such as ACN ($27 billion market cap) and SAM ($800 million market cap), there are usually more than 1 market maker. To have no bids from market makers, they MUST have colluded together at the same time. As long as there is collusion, making stocks dropping to $0.01 is possible for several seconds.
    1. Since you are the market makers or professional traders, you see ALL orders (or at least through level-2 quotes). You know exactly how many shares of market sale order to CLEAR OUT all limit orders at any instant.
    2. Then you proceed to clear out all limit orders in a lightening speed, creating a vacuum of bids.
    3. Supposedly at this time, market makers should come in, and offer some reasonable bids. But what happened is that since there is no actual bids, but very likely tons of stop-loss market sell orders triggered by the sudden drop in price, you have sell orders, but no buy orders for probably 1 minute.
    4. Then now if the stock in question is one of those 30 Dow Jones stocks, you can basically SET the price by offering your buy order at a preset desired ridiculous price, which could cause the desired amount of Dow Jones drop, and triggering EVEN more stop-loss orders, and more panic selling orders.

    But I guess that before “they” pushed the Enter button in executing the trading program, they forgot to set a reasonable price for ALL the stocks. The drop was happening for almost all stocks all simultaneously. I think only the stocks that had too many bids, and would be too costly to perform such manipulation, were dropping in a more “normal” fashion.

    Come on, people! A 16 million or 1.6 million sell order, mistaken as 16 billion or 1.6 billion sell order is simply NOT possible in P&G, the supposedly “guilty” stock that triggered the drop in Dow Jones. Today the total volume for PG is 28.6 million shares. If all shares were traded at $61, that’s only 1.7 billion dollar. We know for a fact that majority of the today’s trading didn’t happen at the $55 or $40 range. WHERE is that 1.6 billion sell order getting filled under “normal” trading without glitch????

    Again in my opinion, the ONLY way for today’s market actions is for ALL market makers to collude and walk away AT THE SAME TIME, AND bring in all the necessary market sell orders to clear out buy limit orders that has been put in, and then once everything is cleared, they can set ANY price (well, for just several seconds or minutes). Checking the trading tape for today, the volume for PG during those 2 minutes sell-off (& coming back up) is only 764600 shares, when today’s total volume is 28,565,275, and the volume per 5 minutes for the last twenty minutes are 741400, 546000, 742200, 588000 shares. Those 764600 shares (almost half of which are up-volume) are NOT big sell orders at all. The only way it could have worked is through super-fast computer trading clearing out & triggering stop-loss market orders. That is Wallstreet Terrorism at work.

    I did a rough calculation using Dow divisor as 0.13. One only needs to hand-pick 4 or 5 stocks to cause Dow to drop 500 points today. Among today’s suspicious trading, PG dropped from $62 to $39.37, but it’s showing $56 now everywhere. MMM dropped from about $84 to $67.98. CAT dropped from $63.5 to $58. BA dropped from $69 to $62. HPQ dropped from $48.5 to $41.94. That’s 450 points of Dow Jones dropped right away (on top of previous some 200 points).

    These are just NOT normal tradings at Wallstreet, and scared politicians are going to re-think their flimsy financial reforms now?? Why is that after almost 2 years, NOBODY from Wallstreet has gone to jail for all the mortgage crimes??

    Oh, I forgot. This is the America, where money speaks louder than anything else.

    Screen captures from 5 different data sources are here for ACN. I couldn’t get the real data from WellsFargo, since they have already “erased” the suspicious trades from their system. For TDAmeritrade and Scottrade screens, I’ve placed my mouse cursor at the interactive charting, so that it will show the volume and price range at that cursor position:

    Screen captures from 4 different data sources are here for SAM. I’ve placed my mouse cursor at the interactive charting, so that it will show the volume and price range at that cursor position:

    Here are just two screens showing that PG traded below $56 for many actual shares in only 2 minutes:

    Posted in Investing | 1 Comment »

    The effect of Greek debt problems on gold

    Posted by Frugal on 6th May 2010

    The Greek/euro debt drama continues playing out, and I expect the problems to peak around the third week of July, with possibly a temporarily relief in between. US dollar continues to grow stronger as I have expected.


    For those who don’t understand what a debt problem is, and what effects it would have, here is the best picture to describe it (gold priced in Euro):

    And remember that this is with just part of the Europe close to default. I believe that this very same picture is going to repeat for US dollar possibly around 2015/2016 timeframe. For now, $US dollar has another lease of life due to collapsing of euro.

    Hang on tight. Just make sure you’re on the right flight before things get crazier.

    Posted in Investing | 2 Comments »