While you may think this is simply a fiction, it is becoming more and more real that we have stepped onto the journey which is leading towards the end of dollar. Even though I'm not saying that this will be happening overnight, I highly suggest that you should be prepared for the unavoidable outcome. Given that, I recommend that you spend a few minutes to watch this video to experience in advance the day when the US dollar dies.
Similar to my very dim attitude toward the Euro, I think the US dollar will end very badly and hyperinflation is inevitable. Of course this is a long-term trend. In a very short term, the US dollar may rise significantly, which is already starting. The Euro is in a much worse shape and that's why I'm shorting Euro with EUO. If you want to take a ride for the rising dollar, you may buy UUP, an USD index bullish ETF. To bet against the US dollar for the long term trend, there are quite a few strategies. The most direct way is to buy USD bearish ETFs such as UDN. The better way is to take the opportunity of any gold and/or sliver correction to long gold/sliver. Shorting long-term US treasury bonds is another very good way to bet against the coming hyperinflation.
Consider you have been warned!
Tuesday, November 30, 2010
Wednesday, November 24, 2010
The reality of EU and its implication on the Euro
First of all, HAPPY THANKSGIVING to all of you. We are eager to flying to CA to visit our son for the next few days. So no long blog today. However, I really think you should read this report regarding the EU very depressing situation. As I said before in my blog, I doubt the Euro will even survive for another 10 years and I'm more negative now when seeing what is going on. I just hope Portugal will not deteriorate so fast to impact on our planned visit to Lisbon in the coming Christmas time.
I hope you have bought EUO, an ETF to bet against the Euro strengthening, which I have told you several times. This is a big trend trade, for which you should not be so much caring about the day to day fluctuations of its price. Even though my timing was not perfect, my positions are definitely profitable now and will be more over time, since I'm ridding correctly with a big trend. Coincidentally I also shorted an index fund (EWP) for Spain stocks as I have got a very negative opinion on Spain about its economy for some time. It was again against me initially as I was also a bit early. But now herd investors have suddenly awaken and realized it was not a good idea to long Spain stocks. So about 40% gain so far for me to short Spain. This is the beauty of identifying a trend and stick to it.
Wish all of you a very peaceful and happy long holiday weekend!
I hope you have bought EUO, an ETF to bet against the Euro strengthening, which I have told you several times. This is a big trend trade, for which you should not be so much caring about the day to day fluctuations of its price. Even though my timing was not perfect, my positions are definitely profitable now and will be more over time, since I'm ridding correctly with a big trend. Coincidentally I also shorted an index fund (EWP) for Spain stocks as I have got a very negative opinion on Spain about its economy for some time. It was again against me initially as I was also a bit early. But now herd investors have suddenly awaken and realized it was not a good idea to long Spain stocks. So about 40% gain so far for me to short Spain. This is the beauty of identifying a trend and stick to it.
Wish all of you a very peaceful and happy long holiday weekend!
Monday, November 15, 2010
Successful Investing (1): Be Lonely
As an old saying goes: Personality determines one's fate. I'm often asked what stock(s) I can recommend. Actually successful investing is not too much determined by what stocks one has traded; rather it is more importantly determined by how one has traded. In other words, one's investing behaviors (personality) will ultimately determine his/her success (fate). Therefore I will share some thoughts about successful investing based on what I have learnt over years from my mistakes and successes.
Please honestly ask yourself: when do you feel most comfortable to buy stocks? Most people will likely answer: when the stock market keeps going up and a lot people are buying. This is called herd behavior. I can understand. After all, human beings are social animals. People feel safer when being with other people and feel scared when being left alone. However, if you really want to be successful in investment, you have to be used to being lonely, very lonely. Actually the greatest investment opportunities arise at the time when everyone is crazy about a stock and you want to short/sell, or when everyone is extremely depressed and you want to long/buy. The reason is actually very simple. The stock market is simply a gigantic money game. The stock market itself will not generate any money; it simply moves money from one pocket to another. Now let me ask you: do you think most people in the stock market will win or lose. If your answer is win, I will ask you to sell all your stocks immediately, run from the market and never touch any stocks, because you are too stupid to even play with any stocks. You are doomed to lose. The answer is for sure that most people will lose money in the stock market. If you understand this, then the logic becomes really obvious: if you follow most of the people in the market (the herd), you will most likely lose money. You have to stay lonely and do the opposite of what most of other "investors" will do.
This is of course easy said then done. It took me years to finally understand this and more importantly to be able to truly practice like that. In my earlier years of investing life, it was just like a vicious cycle: I felt good to buy stocks when everyone was buying but the market usually tipped over quickly. I then became depressed along with others and sold my stocks at loss eventually. Over times, I could never really make money. I was determined to change my fate by first changing my behaviors. My most proud experience of truly acting lonely was at the extremely depressed abyss of the most recent crisis. As you know, this has been the most severe bear market no any active investors have ever experienced since the Great Depression. I'd be a liar if I told you that I felt very good and not scared when going through this period but I knew it was the best time to invest if I really wanted to make money. I held my breath, pinched my nose, and closed my eyes when I put through my orders. Everything has been a history by now but I'm really happy when looking back to see what I did: I bought MO (Atria) at $14.99 on Dec 29, 08, MCD (McDonald) at $54.86 on Feb 20, 09, MSFT at $18.96 on Dec 29, 08, and EPD at $16.92 on Mar 6, 09. Based on the current prices, they have risen 65%, 44%, 38% and 156%, respectively in less than 2 years. I made another lonely bet recently to short MCP (Molycorp) less than 10 days ago. This is a stock of rare earth which has become extremely popular recently due to the fact that China is said to be controlling the export of rare earth. After studying its fundamentals as well as with the technical analysis, I think this stock has too much froth in it and such euphoria cannot last long. So I shorted the stock. The stock reached its peak at around $40 end of Oct and has come down to around $33 at the moment. Since I used options to trade, my paper profit has been around 25% in about 10 days or so.
If you are not comfortable to be lonely in investing, think it in another way. Do you want to buy at lower prices when you go shopping or you want to pay higher prices. Unless you are stupid, I guess you would want to buy stuff at lower prices. Do the same thing when buying your stocks when they are low in prices, which is often at the time no one else wants to buy it. Of course, do your home work and only buy the good ones at low prices!
Please honestly ask yourself: when do you feel most comfortable to buy stocks? Most people will likely answer: when the stock market keeps going up and a lot people are buying. This is called herd behavior. I can understand. After all, human beings are social animals. People feel safer when being with other people and feel scared when being left alone. However, if you really want to be successful in investment, you have to be used to being lonely, very lonely. Actually the greatest investment opportunities arise at the time when everyone is crazy about a stock and you want to short/sell, or when everyone is extremely depressed and you want to long/buy. The reason is actually very simple. The stock market is simply a gigantic money game. The stock market itself will not generate any money; it simply moves money from one pocket to another. Now let me ask you: do you think most people in the stock market will win or lose. If your answer is win, I will ask you to sell all your stocks immediately, run from the market and never touch any stocks, because you are too stupid to even play with any stocks. You are doomed to lose. The answer is for sure that most people will lose money in the stock market. If you understand this, then the logic becomes really obvious: if you follow most of the people in the market (the herd), you will most likely lose money. You have to stay lonely and do the opposite of what most of other "investors" will do.
This is of course easy said then done. It took me years to finally understand this and more importantly to be able to truly practice like that. In my earlier years of investing life, it was just like a vicious cycle: I felt good to buy stocks when everyone was buying but the market usually tipped over quickly. I then became depressed along with others and sold my stocks at loss eventually. Over times, I could never really make money. I was determined to change my fate by first changing my behaviors. My most proud experience of truly acting lonely was at the extremely depressed abyss of the most recent crisis. As you know, this has been the most severe bear market no any active investors have ever experienced since the Great Depression. I'd be a liar if I told you that I felt very good and not scared when going through this period but I knew it was the best time to invest if I really wanted to make money. I held my breath, pinched my nose, and closed my eyes when I put through my orders. Everything has been a history by now but I'm really happy when looking back to see what I did: I bought MO (Atria) at $14.99 on Dec 29, 08, MCD (McDonald) at $54.86 on Feb 20, 09, MSFT at $18.96 on Dec 29, 08, and EPD at $16.92 on Mar 6, 09. Based on the current prices, they have risen 65%, 44%, 38% and 156%, respectively in less than 2 years. I made another lonely bet recently to short MCP (Molycorp) less than 10 days ago. This is a stock of rare earth which has become extremely popular recently due to the fact that China is said to be controlling the export of rare earth. After studying its fundamentals as well as with the technical analysis, I think this stock has too much froth in it and such euphoria cannot last long. So I shorted the stock. The stock reached its peak at around $40 end of Oct and has come down to around $33 at the moment. Since I used options to trade, my paper profit has been around 25% in about 10 days or so.
If you are not comfortable to be lonely in investing, think it in another way. Do you want to buy at lower prices when you go shopping or you want to pay higher prices. Unless you are stupid, I guess you would want to buy stuff at lower prices. Do the same thing when buying your stocks when they are low in prices, which is often at the time no one else wants to buy it. Of course, do your home work and only buy the good ones at low prices!
Monday, November 8, 2010
'Dumb Money' Returns to Stocks
While I'm washing my face off eggs for not being able to pick the exact top of the market (was I really trying to do so?), I come across this article ( see here). Instead of letting you be tired of me bugging you again and again about how risky this market is at the moment, this article may provide you one perspective that you should be very cautious if you are itching of getting long and buying stocks now. Of course it is your money and your decision what to do. Don't complain you are not warned!
Sunday, November 7, 2010
The biggest bubble is bursting?
If someone asks you to lend some money for 30 years and you will be paid by about 4% or so per year, will you be happy and lend the money? You may guffaw for such a stupid request. I agree and I won't, period. But wait, there are many, or probably say a huge amount of people indeed willing to do so. Who has such a magic power to lure people into such an obvious trap? The US government! Since the financial crisis, the yield of the long-term government bonds has been coming down relentlessly to the laughable 4% or so for a 30 years commitment and the bond price has increased substantially (the bond yield and the price have an inverse relationship). I honestly don't understand there will be anyone with a right mind to buy such bonds at such a low yield but of course there are so many things out there beyond my understanding. People think it is safer to park their money in the US government bonds, although to me this is a guarantee to lose money if you factor in the potential inflation over the 30 years period. I have heard many market gurus calling it the biggest bubble in brewing. I'm not sure if it is THE biggest but I agree it is at least a huge bubble. Check TLT, which tracks the long-term bond prices.
It looks like the tide is changing its direction. While many people were expecting further reduction of the long-term bond yield (meaning increasing prices of the bonds) following the Fed's initiative of a huge money printing, the result has actually been just the opposite. Since the Fed's purchase of the bonds are mainly those up to the 10 year period, there is not enough money left to push further down the yield of the 30 year bonds. Investors started to realize that there would be a huge risk of inflation down the road with the Fed's reckless money policy, which will certainly cause the collapse of the long-term bonds. So it may be a good timing to start bet against the long-term US government bonds. The easiest way to do so is to buy TBT, which corresponds to twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond index. Certainly there will be up and down, especially if the market corrects when many people will run to the treasury bonds again for safety. However, I firmly believe the long term trend is clear that the US treasury bonds will lose its value, and big time! Again, the best way to safely establish your position is to use the dollar averaging technique. Make up your own mind!
It looks like the tide is changing its direction. While many people were expecting further reduction of the long-term bond yield (meaning increasing prices of the bonds) following the Fed's initiative of a huge money printing, the result has actually been just the opposite. Since the Fed's purchase of the bonds are mainly those up to the 10 year period, there is not enough money left to push further down the yield of the 30 year bonds. Investors started to realize that there would be a huge risk of inflation down the road with the Fed's reckless money policy, which will certainly cause the collapse of the long-term bonds. So it may be a good timing to start bet against the long-term US government bonds. The easiest way to do so is to buy TBT, which corresponds to twice (200%) the inverse (opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond index. Certainly there will be up and down, especially if the market corrects when many people will run to the treasury bonds again for safety. However, I firmly believe the long term trend is clear that the US treasury bonds will lose its value, and big time! Again, the best way to safely establish your position is to use the dollar averaging technique. Make up your own mind!
Monday, November 1, 2010
A huge warning sign
I'm pretty busy lately and don't have much time to write. But I cannot believe what I saw today and cannot help but write this short note as there is a huge warning sign for the current stock market. If you know any history and understand the dynamic of the stock market, you should know whenever a major public media announces something for a market, it almost certainly just means the opposite. The public media, reflecting the popular sentiment for the stock market, is notorious and worst regarding its timing. If it claims it is the bull market, it actually means the top is reached. We just saw this today. Barrons, the well-known investment journal, announced "Bye, Bye, Bear" today on its cover. See yourself here: http://www.businessinsider.com/barrons-bye-bye-bear-2010-11
You know by now where I'm standing. I have kept adding VXX positions in the past several weeks. I don't think I need to wait long before telling you how I have been doing with this trading idea. In addition, there are many ETF funds to short the market:
It is very easy to trade them by simply buying them just as usual stocks. Of course, be aware of the risk associated with any trading and make your own decision what to do.
You know by now where I'm standing. I have kept adding VXX positions in the past several weeks. I don't think I need to wait long before telling you how I have been doing with this trading idea. In addition, there are many ETF funds to short the market:
| ETF Name | Ticker | Benchmark Index |
|---|---|---|
| Short QQQ | PSQ | Nasdaq-100 |
| Short Dow 30 | DOG | DJIA |
| Short S&P 500 | SH | S&P 500 |
| UltraShort QQQ | QID | Nasdaq-100 |
| UltraShort Dow 30 | DXD | DJIA |
| UltraShort S&P 500 | SDS | S&P 500 |
It is very easy to trade them by simply buying them just as usual stocks. Of course, be aware of the risk associated with any trading and make your own decision what to do.
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