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

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  • Archive for the 'Market Pulses' Category

    Recent market updates

    Posted by Frugal on 27th June 2013

    Many things have changed a lot since just three or four months ago. I’m going to keep it brief here.
    1. Stock market is a hold or even a short term sell. Should add more on pullback.
    2. Real estate is a hold, changed from a buy. Only add if ROI is bigger than the mortgage rate. The buy vs rent decision is very hard at this point, because most people won’t sell in less than 5 years. The short-term bottom is definitely behind us, but I’m not too sure about longer term.
    3. Gold is a trading buy. Scale in gradually if you want to buy. The short-term bottom should be just around the corner, but even if you miss the bottom by one day, it could cost you a lot. You should probably trade it out once it bounce.
    4. Bond is a sell. I haven’t held bonds for years (and I was wrong). The interest rates kept going lower and lower. Now with QE tapering coming(?), bonds have sold off and mortgage rates have risen to put a stop on the housing market. It’s hard to imagine that US interest rate would go back to the recent low from last year, but I was wrong on this for quite some time. If US becomes like Japan, then it’s definitely possible that interest rates will go lower. The best way for regular folks to play this is to lock the mortgage rate for longer term, and keep doing zero-point zero-fee refinancing whenever the rate drops. I’ve locked two of my loans close to the lowest points (just about 1/8 from the lowest). That’s the best way to participate.
    5. Bitcoin? Bitcoin is a scam, just like any other un-backed currencies. But it doesn’t matter however whether it’s backed or not backed by some assets. The only thing that matters is whether people are willing to continue to value Bitcoin, and my answer is a YES. Unless government totally shuts it down, I think Bitcoin is going stay around. By the way, not all virtual currencies are like Bitcoin. For example, OpenCoin is a scam among scams, despite having Google & Marc Andreesen behind it. I think OpenCoin will go down to the drain, simply because it’s just NOT an open standard. You just can’t have the cake, and eat it too, giving yourself billions of monopoly money, and expect others to exchange real money with you.

    Posted in Market Pulses | Comments Off

    Get your investing thesis correct

    Posted by Frugal on 1st June 2012

    Today market sells off big time (again), and it’s no surprise.

    I don’t understand why some pundits calling to get into energy and precious metal shares simultaneously. On an intermediate term basis, the two sectors would be out-of-sync more often than not. If you are bullish on energy sector, then you are bullish on the economy. If you are bullish on the precious metal shares, then you are bearish on the economy. On a longer term basis, one can be bullish on both, if one is bearish on the US dollar.

    I have not been touching much of the energy sector shares, precisely because I have been bearish on the economy on the longer term horizon. It’s interesting to observe how these two sectors going out of phase with each other. In this environment, I believe that precious metal (PM) sector serves as a leading indicator on the way up. It gives you an early hint on QE3.

    The previous market cycle seems to have completed. We will have a new up cycle, with today’s hints from PM sector. Now the only question is how low will this market go. But I sure don’t want to catch a falling knife here.

    If you ask me, my best guess is that market may short-term bottom here with a climatic sell-off. It would rally back towards moving average. However, starting in mid-August for many about two months, it’s best to stay on the sideline. Euro crisis is simply not going away. Remember sub-prime contagion? The finale may not come for another two years (2014), and in the meanwhile, markets will go yo-yo before things get resolved if at all.

    Posted in Market Pulses | Comments Off

    A year end rally from here?

    Posted by Frugal on 27th October 2011

    In the last two months, the stock markets have gone through a wild gyration. The bears had about 5 attempts to break lows, but they never materialized. Now that with Euro crisis “temporarily” out of way, S&P may get back above 1300.

    Markets may continue to act volatile, but taking no risk equals to taking no returns. There is a good chance for the leading tech names like AAPL, GOOG, or INTC or CSCO could push for new 52-weeks highs. Financial & banks will turn up as well, although I prefer not to catch a falling knife even in a counter-rally.

    For those who didn’t buy anything, maybe try early next week. The short covering will be strong today and Friday. I think it’s likely the good time will last for 1 month, but beyond that news on economy may dominate again.

    Good luck in trading pits.

    Frugal at 1stMillionAt33.com

    Posted in Market Pulses | Comments Off

    Euro breaking down

    Posted by Frugal on 12th September 2011

    It looks like euro is not going to hold past the end of October. Very likely Greek will be kicked out, and stock markets will choke before that. I’m holding only about 6% of my net worth in the general stock markets, and about 40% in cash waiting for QE3. The rest is in miscellaneous stuffs. Now, even 6% feels like too much.

    Going forward, gold-related investment (not silver) is still preferred. The next is agricultural investment. When markets turn around, I will put money into tech and energy (oil & natural gas, not solar yet but no nuclear) again.

    Markets have been gyrating with huge volatility. The best thing to do is to stand aside now. After storms are over however, there will be very few people left who still have the stomach & nerve to buy. That will be the time to put in the majority of your cash.

    Best luck.

    Posted in Market Pulses | Comments Off

    Market plunged: cash on hold

    Posted by Frugal on 8th August 2011

    It is amazing how fast the markets can change in less than a week!

    While it is obvious that the markets are panicking, I think it is prudent to put cash on hold. I sold out my GOOG and AAPL right before the plunge, nibbled probably using 10% of my cash, and then stopped. Both GOOG and AAPL are still good companies, but markets do what they want to do.

    It definitely feels like 2008/2009 again. After my positions took a big cut on Thursday, I realized one thing: I simply look too far into the future, while the market is extremely short-sighted. Of course, the economy is not so good, and the unemployment rates still suck. But markets “apparently” are quite oblivious to these facts.

    Nevertheless, I still project the stock markets to rise into 2016 due to currency devaluation & inflation mainly, not due to a better economy. The fireworks in Web 2.0 may continue and grow into a bigger bubble. But that is 2016, not 2012. In this market, anything that is 1 minute later, is too far into the future.

    Both GOOG and AAPL are dropping to previous support, and it should be a fairly good entry point. I’m preserving my cash pile of more than 20%, anticipating for the final short-term pop in physical precious metals. Buying on pullback on precious metals-related complex still works better than the general stock markets (in the short term as well as in the long term). However, the volatility in precious metals is 2X to 3X higher than the general stocks, and it truly takes nerves of steel to hold onto your positions.

    Posted in Market Pulses | 1 Comment »

    Buy on any pullback

    Posted by Frugal on 13th July 2011

    Obviously in my previous post, I have been mistaken. The key thing is to realize your mistake and correct it as soon as possible. My cash level went down to 26% of my total networth. It was 64% in early June, and 30% last November. I usually kept about 20% in cash in an uncertain market. I do intend to become fully invested before the end of this year.

    For the first time in many years, I bought into GOOG, AAPL, and general market indexes. If it is not obvious to you, let me state it clearly: markets will be higher in two years.

    I made further allocations into gold/silver mining stocks after realizing my last mistake. I would like to add more on a pullback, but I won’t be chasing prices at this level. I have quite a lot already, and much more than any “normal” portfolio. Further greed on my part could easily back-fire.

    The next significant pullback will probably be in the month of September. But markets could steamroll ahead between now and then.

    Best luck trading.

    Posted in Market Pulses | Comments Off

    An Update on Uranium Stocks

    Posted by Frugal on 1st June 2011

    After Japan’s earthquake, I traded a small position in uranium stocks, and made a small profit.

    After reading a lot more about nuclear energies, I’m much less bullish now. I think Thorium would eventually take over Uranium in nuclear energies. The current nuclear energy companies may or may not be benefited from this switch, especially given that Thorium is much more abundant than Uranium. I have held onto two positions in uranium since 2005, and I have already liquidated them.

    I don’t think nuclear energies will go away, especially given oil depletion. Uranium stocks may go up again 3 to 4 years from now, if economic recovery gains steam and overheats. However, that is too far out for any prediction to be reliable, nor do I want to take that risk now.

    If you really like to own Uranium stocks, make sure that you stick to the big cap companies which have existing long term contracts, and will be less impacted by any shutdowns on outdated plants and new plant proposals.

    Posted in Market Pulses, My Portfolio | Comments Off

    Waiting on the sideline with cash

    Posted by Frugal on 27th May 2011

    I have managed to liquidate various stock positions, and have about 50% in cash waiting on the sideline. Percentage-wise this is the second highest level of cash ever since 2008 stock market crash. Right before 2008 market crash, I reached 57% cash (but should have more). I’m raising so much cash because I feel like my risk tolerance has decreased quite a bit since 2008. I do have a feeling that I probably over-do it this time.

    If I’m investing in the general market, I probably would be more relaxed. However, I’m more into commodity/PM sectors, and the volatility in this sector is at least 3X to 4X of the normal market.

    Better safe than sorry. I’m actually quite content with what I have achieved so far since 2008 crash. My net worth is at least 20% higher than the pre-2008 peak. If the markets unfold as I am expecting, taking a mid-summer dip, build a base, and then comes back, hopefully I should be way on my way to get to 50+% total return in another 2 years.

    So far, all the MACD indicators on mining indexes, and precious metals have made the positive cross. I have a suspicion that this may be a head-fake. However, I still have a lot in the market, and plan to just ride it out for a potential 16% fall from here. If it does fall, it will be one of the most terrific buying opportunity. If not, and the markets zoom up and leave me in the dust, my potential return will be halved, but I’m already taking lots of risk anyway.

    Let’s see if my mid-June target date for another big correction in commodity will materialize. On the general stock markets (SPY, DIA related), I will be a buyer on a 10% pull-back. Furthermore, I will be buying into higher beta stocks this time. It is about time to turn bullish for the intermediate/long term (~5 years out only). Only time will tell whether I’m right.

    Have a good memorial holiday. Pre-holiday market is almost always good like today.

    Posted in Market Pulses | Comments Off

    Market surprise coming?

    Posted by Frugal on 31st March 2011

    The stock markets have bewildered many. I kept thinking that markets around the world will take a dive towards summer/fall time, but due to Japan earthquake, it appears that a lot of frothiness and overbought conditions have been temporarily resolved. It almost looks like markets can push higher without pulling back in the very short term.

    The biggest concern that I have on markets is still PIIGS in European region. I think the problem would turn worse before getting better. However, it is really hard to predict when PIIGS will hit the market, and my projected timeframe (was from Apr to Jul) appears to be pushed further into future (May/Jun to Sep/Oct).

    Although everyone’s crystal balls are quite fuzzy (including Mish & Barry Ritholtz who is about 50/50 in stock/cash), two things from the Japan earthquake and the mini-crash in May 6th, 2010 has shown that there are (or were) many people who will head to exit in an instant at any signs of troubles. The good thing is that the more we get those mini-hits, the less people would sell out in the future. In fact, maybe the coming market surprise is that there is not going to be a surprise after all, and we stay sort of flat throughout the whole year (with occasional but very few ~10% pull-back or so).

    Best luck,

    Frugal at 1stMillionAt33.com

    Posted in Market Pulses | Comments Off

    Oversea markets collapsing

    Posted by Frugal on 14th March 2011

    Japanese stock market went down 20% in 2 days. Dow Jones, S&P, and Nasdaq futures are off by 3%. Tomorrow we will have a mini-crash.

    What should a investor do now? If you haven’t sold, I suggest not to panic. But I would sell the bounce at near 1290 level at S&P. As for Japanese stocks, I’m actually looking towards buying a little (EWJ). Japan as a country won’t be defeated by this earthquake. It will come back.

    Tomorrow is also a Fed meeting day. Expect Fed to be lenient for sure. If Fed surprises positively, this correction could find a short-term bottom. However, I’m more worried about markets “expecting” the positive surprises, and yet finding not enough.

    As I have said several times, I expect a mid-year stock market correction, and expect QEn to kick in working overdrive after that to arrest an economic slowdown. General inflation will rise after that, and bonds are on a short-term buy (till July), and long-term sell.

    Posted in Market Pulses | 1 Comment »