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.

Waltz

The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends

This is one fine book. A compilation of charts with running commentary by Kenneth Fisher, from Fisher Investments and Forbes. It covers about two hundreds years of history of the stock market, in this and other foreign governments, all in pictures.

Say you were curious about the bond market's prices during the US civil war? It is in there.

Interested in if the comparison of South African gold to world gold production from 1950? It is in there.

Say you wanted to know if a large deficit is bad for the economy? Yep, included. Fascinating that a large deficit is actually very good for the economy. When following Andrew Jackson's ideas in the early 1800s, the federal government repaid our deficit with disastrous results. there is a great graph of this that covers public finance from 1790.

What about the Iraq war? Good or bad for the economy? Not important, and he presents information to back it up.

A good read and coffee table book, but no specific investment advice on this go around, so I will sit on the sidelines.

Dhandho Ho!

Mohnish Pabrai is a managing partner of Pabrai funds, which is modeled (copied) from Warren Buffet's partnership. In this book, he explains the theory that he had used to have annualized 28% returns. All right, so what is it?

Buy stuff really, really cheap. Less than intrinsic value.

The catchy title of Dhandho is simply Hindi (Indian?) for business. He stresses that one should only buy business that are on a fire sale. The goal is to recoup all your invested capital in about five years or less, when the market recognizes the intrinsic value of the stock.

Also, he describes the Kelly formula, which is used to compute the amount of one's bankroll that one should bet based on the outcome, edge, and odds of the wager.

So what to buy? Looking at his filing with the SEC, his most recent position is in STMP. This is the company stamp.com, which is exactly what it sounds like. I will place an order for 500 bucks worth, and see where it goes.

Risk Risk Risk.

The history of mathematics as it applies to the probabilities and the stock market is of course one of the most fascinating subjects around. The book "Against the Gods: The Remarkable Story of Risk" covers it in great detail. A fascinating read, Peter L. Bernstein reviews the beginning of recorded history of "possible outcomes," to how the idea "evolved" into the current system of statistics and probability theory.

One of my favorite topics is the middle ages when insurance companies started to issue life insurance. Originally, companies would charge the same amount for a life insurance policy no matter the age or health of the individual, as the concept of "likelihood of death" was an evolving concept. They had no term for evaluating risk of death!!!!

Even more cool is the the way that he explains the history of the Gaussian (Bell) curve that we so admire. I was amazed to learn how much of the mathematics of probability was NOT invented by mathematicians, or even physicist or astronomy types. It was evolutionary biologists! Imagine that! I was shocked to say the least. I never realized how much mathematics was developed by the likes of Galton, Darwin, Mendel and his peas, and other tree huggers.

The last part covers modern game theory and other "recent" developments, such as efficient market theory and the Sharpe Ratio. Absolutely fascinating. A must read if you are into the history of statistics.

Unfortunately, no part of the book identifies any particular strategy for investing. No bets today.

Whales 1, Shark 0

So, the shark has lost. Per the last review, I dutifully bought their recommended stock, and placed a stop loss order on it. Not one week later, the stock tanked. Well, at least the stop loss kept me from losing more cash.

WFR just cost me 50 bucks!!!!!

Poor me.

Well, throw that book into the trash.

Otherwise, lets see where I stand. Since starting on October 29th, 2007, the S&P had a loss of 9%, while my scheme gave me a loss of 1.4%. This includes all commissions, but not taxes, as I am currently losing money (about forty bucks total). If it wasn't for the shark strategy, I would be up ten dollars.

Jaws Attacks!!!!!

"RevShark" as he is called, started a investing career after he went deaf, got divorced, and lost his job. He then traded up to millions of dollars and started a website for self promotion that reminds me a lot of Jimmy Buffet's.

He then wrote Invest Like a Shark which is a clear advertisement for his website, which can cost thousands to subscribe for a year! Don't worry, I will sum up his entire philosophy and strategy in a few short sentences.

First, his philosophy. Little investors can act like sharks. Fast, aggressive, following trends of the whales (big Wall Street types), and quickly moving on to the next opportunity.

Second, his strategy. Follow a low-cap stock, wait until it "makes a move" which is essentially crossing the fifty day moving average. Then, take a few "bites" by buying some shares. Finally, dump the stock very quickly if you lose money. If you do not lose money, hold onto it. Then, sell it once it stops performing for you, preferably with a 8-10% stop-loss.

What to buy? Well, that is easy. You can sign up for the "stock of the week" which conveniently fills all the requirements. This week, WFR is the one to buy. I will buy 500 smackers worth at the open, and place a trailing stop-loss that will automatically dump it if there is a drop of 10% from its high point.

Don't worry about the RevShark. He is making millions, got remarried, and now has a cochlear implant and can hear everything just fine.