After retiring early this year, I took the maximum loan from my pension and rolled it into an IRA with a discount broker. I have been investing and reading about investing for about fifteen years, so I as all gung ho to finally have a nice nest egg to work with and grow.
I did my research, stuck mostly to companies I know and do business with, Starbucks, Netflix, Verizon, CVS, Panera Bread, Disney, Panasonic, Honda, plus a couple of oil companies with heavy insider purchases. I read the S & P reports, looked at balance sheets, debt, income statements, analysts expectations, earnings growth, etc etc. This was late Februaruy 2008. Shortly after I bought, the market turned down. I limited myself to approximately a 5% loss in each position. A few went up, but basically I was down a couple of thousand dollars in a month.
I then decided that I needed a better system. I looked to see what book(s) on investing/trading were the best reviewed books by purchasers on Amazon.com. I found Al Thomas's "If It Doesn't Go Up, Don't Buy It". The number of five star reviews that this book got were incredible! It seemed everybody who bought it loved it. I Googled Al Thomas too and found some older interviews with him. I also found out that he has a website called "mutualfundmagic.com". One of the other websites that had an article about him had a link to sign up for his free newsletter. I ordered the book from Amazon and subscribed to Al's newsletter. It is supposed to be a 90 day free trial subscription, but it seems no one at Al's company was paying much attention to the time frame. I continued to recieve the newsletter for free for about six months until they cut me off.
Al's book is basically a very simple introduction to trend following or momentum investing. You basically buy what has been going up. You look at moving averages, especially the 200 day moving average. The 200 day moving average shows the long term trend. When a fund rises above it's 200 day M.A., you buy it. You can phase in slowly, 25% at a time or so, and keep following with purchases as long as it continues to rise. You NEVER buy anything that is below it's 200 day M.A.
I tried this for the next few months with very mixed results. Basically I was trading exchange traded funds, usually gold or oil funds, and sometimes inverse funds that rise as the market sinks. I say very mixed results bcause the results were about 50-50. I would "make" money about half the time. It was easy to get whipsawed out of positions, that is, buy something hold it for a few days, and then sell it because it has headed down too much. Another key part of Al's system is the stop loss. You set an automatic stop loss with your broker to sell the fund if it drops a certain amount below where you purchased it, usually about 8-10%. I kept my stop losses even tighter than this, usually around 5%, because I didn't want to lose 10% on any one position.
Bottom line, after six months of this I was down 10% from my original starting point. That's really not too bad, as the overall market fell about 10% too, though it has rallied here and there in between. The major thing I did was generate commissions for my broker. Thirteen hundred dollars in commissions in six months! I traded somewhere near 130 times in six months. If I had my commissions back I would actually have done pretty well, down-but less than the overall market.
So what did I learn from all this? What can you learn from all this? These exchange traded funds are really too volatile for me. Just because a fund has gone up for a day or two or three doesn't mean it isn't going to come down tmorrow and the day after. I need a smoother ride than this, less volatility.
Al has another article on his website that shows what happens to someone who buys (sells) just the S&P 500 as it moves above (below) it's 200 day M.A. I urge you to see this, either on his website or anywhere you can bring up a chart of the S&P 500 with a moving average (MSN Money, Yahoo Finance, your brokes website, etc). This chart is really eye opening. You don't have to buy just the S&P 500, you can buy whatever fund is doing very well, but you want to buy when the overall market, as represented by the S&P 500, is moving up. YOU NEVER BUY OR HOLD ANYTHING THAT IS GOING DOWN. YOU NEVER BUY OR HOLD ANYTHING WHEN THE OVERALL MARKET IS HEADED DOWN (except an inverse fund). I can't stress this enough, especially for mddle aged people who may need their money for retirement some day.
Another of Al's rules, which makes sense too, is to never buy individual stocks. Anything can happen to a company. It could be a great company today, and everyone thinks it is shit tomorrow because they missed earnings, misstated ernings, lost a big contract, the CEO got indicted, the comptroller quit, whatever. Also, there is too much inside information that moves stocks. It you don't have the inside information you could be the patsy and lose money. Just look at the prices of stocks, and especially options on those stocks, in the days before a merger or takeover is announced. There is too much risk in indivdual stocks. A mutual fund or ETF index fund protects you by diversifying.
Thus, the way to make money in the stockmarket, is NOT TO LOSE MONEY DURING THE DOWNTRENDS. These bear markets last a year or two. The person who sells just as the fund or index drops below it's 200 day M.A. protects his or her profits. The person who doesn't sell could be holding on for a 30-50% drop! Sell and park your profits in a money market fund until the overall market starts to move up again.
Wednesday, September 3, 2008
How to get a new TV
I bought a Samsung 42 inch DLP TV back in early 2006. It was fixed once under warranty by a contractor Samsung sent out. Then it screwed up a couple of times after the warranty expired. Nothing too serous, but it would frequently shut itself off and that was annoying. I had also scratched the screen when I was vacuuming and the pole to the vacuum fell over and scraped across the screen. Retirement isn't all drug fueled orgies, you know. The cost of replacing the screen was going to be close to several hundred dollars. Luckily I had purchased the Circuit City extended protection plan.
Circuit City sent out a real nice guy to fix it twice. He was maybe Malaysian or Indonesian. Real polite. He took off his shoes every time he came to my house. He always arrived on time, the very next day after I called, first thing in the morning, 9 AM he was here. I think I may have been his only customer. Unfortunately, he knew nothing about fixing TVs.
It was like a joke-he kept asking me what I thought was wrong with it. The first time he was here he suggested I get a new TV, since my Verizon FiOS service was "too good" for my TV. He made it sound like my year and a half old TV was obsolete. The second time he asked me again what I thought was wrong with it. This time he changed two parts. It didn't fix the problem. I started Googling "Samsung TVs" and "Samsung DLP TVs", I found a whole lot of people having problems with these TVs. Seems the parts are cheap, so people who hav out of warranty TVs just go through their 3 or 4 year old TVs replacing the three or four parts that fail most frequently. I wasn't willing to do this, so I started Googling Samsung Corporation and Samsung top executives. After I found three or four names who seemed high up in Samsung Consumer Electronics Division, I wrote a letter to the president of that division telling him about the problems with my TV. I also found two or three higher ups in Circuit City. In both companies I also included their corporation counsel in the carbon copies of the letter. I told them not only of my problems, but of the many other people I had found on line, literally several bulletin boards worth of problems and advice, with similar problems. I used word in the letter like "defective merchandise" and "class action". I told them I would like a 50% cash credit of the $1500 I had spent on the TV, or a new Samsung 42 inch plasma TV.
About three weeks passed before I got a call from Samsung. A woman named Elsie called me from their headquarters in NJ. She old me that as long as I could send her a copy of the bill of sale, and service records from three attempts to fix the TV, I could have either a reurbished TV of the same model, or an 80% cash refund. Now I was born at night, but not last night. I told her I would take the 80% refund. She arranged to have a trucking company come and pick up the old TV, and at the same time present me with a check from Samsung for $1200. Her only stipulation was that this transaction had to be completed within 30 days.
We got the transaction done, even though the first time the trucking company arived without the check. I had to send them away empty-handed. The $1200 was enough to buy the TV I really wanted back in 2006, a 42 Inch Panasonic plasma. That TV was $2000 then, but had dropped to under $1000 in less than two years. The $1200 covered the TV, the tax, and the extended warranty. This time I bought it from PC Richard, as Circuit City was not much help in dealing with the defective TV.
Hopefully this will help someone else who has purchased defective merchandise. Google the top executives, send your request to them and to corporate counsel, and tell them exactly what you want.
Circuit City sent out a real nice guy to fix it twice. He was maybe Malaysian or Indonesian. Real polite. He took off his shoes every time he came to my house. He always arrived on time, the very next day after I called, first thing in the morning, 9 AM he was here. I think I may have been his only customer. Unfortunately, he knew nothing about fixing TVs.
It was like a joke-he kept asking me what I thought was wrong with it. The first time he was here he suggested I get a new TV, since my Verizon FiOS service was "too good" for my TV. He made it sound like my year and a half old TV was obsolete. The second time he asked me again what I thought was wrong with it. This time he changed two parts. It didn't fix the problem. I started Googling "Samsung TVs" and "Samsung DLP TVs", I found a whole lot of people having problems with these TVs. Seems the parts are cheap, so people who hav out of warranty TVs just go through their 3 or 4 year old TVs replacing the three or four parts that fail most frequently. I wasn't willing to do this, so I started Googling Samsung Corporation and Samsung top executives. After I found three or four names who seemed high up in Samsung Consumer Electronics Division, I wrote a letter to the president of that division telling him about the problems with my TV. I also found two or three higher ups in Circuit City. In both companies I also included their corporation counsel in the carbon copies of the letter. I told them not only of my problems, but of the many other people I had found on line, literally several bulletin boards worth of problems and advice, with similar problems. I used word in the letter like "defective merchandise" and "class action". I told them I would like a 50% cash credit of the $1500 I had spent on the TV, or a new Samsung 42 inch plasma TV.
About three weeks passed before I got a call from Samsung. A woman named Elsie called me from their headquarters in NJ. She old me that as long as I could send her a copy of the bill of sale, and service records from three attempts to fix the TV, I could have either a reurbished TV of the same model, or an 80% cash refund. Now I was born at night, but not last night. I told her I would take the 80% refund. She arranged to have a trucking company come and pick up the old TV, and at the same time present me with a check from Samsung for $1200. Her only stipulation was that this transaction had to be completed within 30 days.
We got the transaction done, even though the first time the trucking company arived without the check. I had to send them away empty-handed. The $1200 was enough to buy the TV I really wanted back in 2006, a 42 Inch Panasonic plasma. That TV was $2000 then, but had dropped to under $1000 in less than two years. The $1200 covered the TV, the tax, and the extended warranty. This time I bought it from PC Richard, as Circuit City was not much help in dealing with the defective TV.
Hopefully this will help someone else who has purchased defective merchandise. Google the top executives, send your request to them and to corporate counsel, and tell them exactly what you want.
Sunday, May 25, 2008
Memorial Day Weekend
Have been too busy to post. Seems when it's raining and I'm not doing much, there's nothing to say. When it's been nice I've been too busy to post. Quiet weekend here. Taking a break after the fence project (6ft. privacy), but still in the middle of the ceiling replacement project. One more day (Tuesday) of spackle and wet sanding, then the painter comes Wed. I'll be glad when it's all over, as we are all livng in the backroom!
Tuesday, May 6, 2008
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