Apocalypse Now!

So just imagine, you have done pretty well for yourself, inherited a bunch of money, and was able to put your hands on millions of dollars. Then, out of nowhere, the world start to fall apart. It really doesn't matter what you do, the country gets sucked into a major war, catastrophe, or has a massive civil war. What are you going to do with all that cash, not to mention art works, gold bullion, a fancy house, jewelry, etc?

That is the subject of this book. Barton Biggs discusses what happened to wealth during the two world wars, how the market reacted, and also seemed to predict, the outcome. He also discussed what to do with your own millions.

Amazingly, prior to major turning points in the war, the markets in multiple different countries seem to rally if they were connected to the Allies. Conversely, The Axis powers had initial rallies during the first two years of the war, but then, a couple of months prior to the Allies gaining the upper hand, they fell apart. There probably was some component of a consensus in the market that sensed which way the war was going. Good stuff.

The best wealth protector for the ultra-rich? Foreign farm land. Beat everything else down the line, except for jewelry, which was needed in those short-term starvation cases where the food supply was also destroyed, and you could trade family heirlooms for stale bread.

Happy Investing!

Turn my back for one second!

Well, well, well. I have been a bit indisposed recently and have not been watching the market with my usual obsessive, portfolio watching zeal. So I was shocked to see the recent gyrations (yes, I did type the word"gyration," (now twice)). The market was flapping around like a fish out of water. Lets see how I held up.

Since the end of october, the S&P index has lost 250 points, or about 16.1% of its value. My portfolio, on the other hand has dropped only 5.8%, excluding dividends and taxes, but including commisions. What is the reason? Basically, the Sam Adams buy, a la How to Make Money in Stocks, was a big winner. Also, the ultrashort QQQ ETF which rises when the S&P drops, bought after reading Hedgehogging, went up.

All the others went nowhere other than down to varying degrees. The biggest loser so far has been TBSI international limited, a la The Little Book That Makes You Rich. I guess the title is a bit of a misnomer.

Here's the rundown:

Symbol	Name	Type	Date	Shares	Price		Notes
WAG	Walgreen Company	Buy	Oct 30, 2007	10.00	39.45		Rule #1
SAM	The Boston Beer Company, Inc.	Buy	Nov 16, 2007	15.00	34.44		How to Make money in Stocks
ASR	Grupo Aeroportuario del Sureste...	Buy	Nov 26, 2007	10.00	54.89		Random Walk
WBC	WABCO Holdings Inc.	Buy	Dec 3, 2007	12.00	46.36		Buffettology
IOO	iShares S&P Global 100 Index...	Buy	Nov 5, 2007	6.00	82.92		Future of Investors
ICFI	ICF International, Inc.	Buy	Dec 10, 2007	20.00	26.00		Little Book that Beats the Market
WFR	MEMC Electronic Materials, Inc.	Buy	Jan 3, 2008	6.00	88.00		Invest Like a Shark
WFR	MEMC Electronic Materials, Inc.	Sell	Jan 7, 2008	6.00	80.20		Invest Like a Shark
STMP	Stamps.com Inc.	Buy	Jan 23, 2008	50.00	10.80		Dhandho Investor
QID	UltraShort QQQ ProShares (ETF)	Buy	Jan 31, 2008	10.00	51.30		Hedgehogging
TBSI	TBS International Limited	Buy	Feb 19, 2008	10.00	38.17		The Little Book that Makes You Rich

Hot Stock Tip!

OK, so this is a bit off the usual post for this blog. One of my side projects while learning about the market is to focus on the "neurosciences" and the stock market. Now, a warning. I have no experience making investment recommendations etc, and I lost money recently (but not as much as the overall market). So, follow at your own risk.

A uncommon disease called myasthenia gravis affects less than 100,000 people per year in the US. It is caused by the inability of proper muscle contraction by antibodies to the muscle end-plate acetylcholine receptors. Learn more about it here. A common treatment is to give medications that inhibit the breakdown of neurotransmitters that act on the receptors, but it has numerous side effects, has to be taken multiople times per day, and so on.

However, there is a new drug that has great promise. This drug has the ability to inhibit the production of acetylcholinesterase which decreases the breakdown of the acetylcholine neurotransmitters using antisense oligonucleotide technology, which is really cool. Essentially these snippits of DNA can inhibit the gene transcription, or production, of acetylcholinesterase.

A U.K. company called Amarin, AMRN, which has been having some problems lately (delisting, turnover of management, and failed drug for huntington's disease, amongst others), has bought the rights to this drug from a Israeli company called Ester Pharmaceuticals. So what is the big deal? Well, hold on to your pants. The same acetylcholine neurotransmitter and receptor interaction is seen in the brain. And of two treatments for Alzheimer's currently being used (anticholinergic and antiglutaminergic), there is a wealth of information that supports increasing acetylcholine activity delays the progression of Alzheimer's disease. Yeah, that's right. This drug that is currently being used and is approved by the FDA for myasthenia gravis could potentially treat Alzheimer's disease, which affects millions. The numbers boggle the mind.

So far, I don't see much evidence that anyone has thought this through to the logical conclusion. Again, I cannot stress enough that this blog post is all about speculation. The drug may not work due to lots of factors, but once the idea has spread though to the market, I think it will take off. I will pick up a few shares, and see if it pans out.

:)

Turtle Soup.

Spending the day idly trading stocks and pulling in millions of dollars really is the way to go. That is the main reason books like this are compelling. Unfortunately, as you read through this book, you come away with a sense that either this guy is a genius, or just really lucky. There is no way that an average shotgun investor who only places trades after hours and can look at his selections for just minutes a day could pull this off. Interesting stuff nonetheless.

Covel begins with a saying from Benjamin Graham, a guru of value investing, that analysts and fund managers cannot beat the market because they are the market. Essentially, when people trade frequently in the market it is a zero-sum game, or nearly so. For every winner, there is a loser. The person who makes the money, in general takes it away from people who lose money. For long term investors this is not the case, but the explanation is a bit to in depth for this post.

This is the story of how Richard Dennis, a wealthy commodities trader, placed an ad in a newspaper and recruited "normal" individuals and taught them how to make millions by trading in methodical ways. Very similar to the movie Trading Places, he began this experiment as a bet to see if anyone could be a trader. The old nature versus nurture.

He educated the turtles, and gave them his own money to trade with. They did well as a group, and made millions. They were is essence momentum traders, which is the subject of book also by Covel. I don't believe this books leads to a particular stock, so there won't be a purchase with this one. Very good story though. Top notch. And Dan Aykroyd and Eddie Murphy were great in Trading Places. If you like early 80's comedies, this one is for you.

Small book, big results (hopefully)!

The Little Book that Makes You Rich is a another of the "Little Book" series that supposes an easy way to make a killing in the market. It does not get any easier. Navellier makes investing seem like a spectator sport. All you do is go to his handy web site where he has constructed a grading scale for stocks.

In the book, he describes his ranking of stocks on eight different measures, all of them growth related. I'll list them so you do not have to read the book.

Positive earnings revisions
Positive earnings surprises
Increased sales growth
Expanding operating margins
Strong cash flow
Earnings growth
Eearnings momentum
High retun on equity

They are tabulated to come up with an overall fundamental and quantitative weighted grade. If the stock is an A, then you buy it. If it is an F, you sell. It is that easy. So, how do my stocks rate thus far? Let's go to the site. Of course, they don't rank the ETFs that I purchased, but of all the others, ASR, ICFI, and WFR are graded as "A," SAM is a "B," STMP is a "C," and WAG is a dog graded at a "D."

There is not a lot of other material in the book, so I don't recommend it overall. He states how he originally came up with the formula and gives some theoretical reasons why it should work. He does have a good discussion of Beta, the volatility of a stock compared to the overall market, and Alpha, the return of a particular stock above or below the overall market. Not to much info that is new. One would want to diversify holdings to keep beta low, and pick stocks that have a high alpha to increase returns. Unfortunately, alpha is how a stock has done in the past, so may not hold true in the future.

Now, which to buy? Very easy, he rates each stock on his site, so I will pick the recommended Marine company TBSI, which has a overall grade of A on both the fundamental and quantitative scales.

Ugh.

Well, this has been a bad week for the shotgun investor. However, it was much worse for the stock market as a whole. My recent purchase of the QID ETF even eeked out a gain. Unfortunately, the rest of my picks matched the overall market, and I essentially have been riding the market down. I will regroup and finish a new book with a new investment choice as soon as time permits.




I have decided to hold on to each stock for three months, then to cut losses or lock in gains.

My first hedge fund!!!!!

Barton Biggs has inspired me to open and run a hedge fund. He was a big player at Morgan Stanley, and this book chronicles his thoughts on Wall street and the rise and fall of hedge fund traders, and other greedy folks on Wall Street.

My favorite parts of the book include his meeting with Margaret Thatcher (Hillary is no comparison), the ins and outs of losing hundreds of millions of dollars in short order, and the short-essay length biography of John Maynard Keynes (the gayest economist in history, called his love of boys "Higher Sodomy").

Also, he explains ideas such as the rise of gold in fairly simple terms, in which he gives an insight into some of his thinking. The Institutional Investors have about half of the $60 trillion market in tradable securities. There is only $200 billion in investment gold available in the world at the "true" price of about 500/ounce. So, if the Instituional Investors get nervous, and move some of their usual 3% of money in Gold to 5% of assets, the price jumps by quite a bit. Two percent jump of about $30 trillion dollars is an additional $600 billion invested in gold. So, if the price gets to a total of four times its "true" price, then he would short it big time.

So what to trade? I'll be purchasing five hundred smackers of Proshares relatively new Ultrashort ETF for the Nasdaq called QID. It is designed to increase twice the amount the Nasdaq drops. What fun! If you think China is in a bubble, they have an ETF for that.