Why is the Japanese Stock Market Plummeting? - Japan's Debt Problem Visualized

Japan's Debt Problem - Affects Nikkei 

In 2012 Japan's debt was approximately 997 Trillion Yen. That is more than 200% of GDP or more than $80,000 per capita.

There is little chance this gets paid off. Unfortunately things are about to get a whole lot worse.

How does the government create debt?

Each year the government gets revenue from taxes and other streams. Then spends the money in public services.

If it has to spend more than it takes in from revenues including taxes then it has to issue IOUs or  bonds. Investors buy them. The government gets the money and investors receive interest. But when the outstanding debt gets too large, investors start to get worried that they won't get their money back.

The central bank would then print more money to lower interest rates. As a result investors will feel reassured that their debt will be paid. That way the government can keep spending as they please.

What happens when the debt keeps increasing?

Normally, a portion of the government's existing debt will be paid from taxes collected and another portion would come from new debt.

When the central bank lowers interest rates, the government pays less in interest to bond holders, which makes it easier for the government to meet its interest expense.

Eventually, the government keeps spending more money and interest expenses increase. The interest expense increases so much that even a small increase in interest rates would result in a large increase in interest expenses. As a result, all tax revenues end up going to pay interest expense. This leaves little to no money to pay for other expenses, which would force the government to take on more debt and issue more bonds to fund those other expenses.

Investors catch on and sell bonds to account for inflation, which increases interest rates. Sooner or later the tax revenue would only cover a fraction of the interest expense.

When the government can't pay its interest expenses, the country will default.

Where Does Japan's Debt Situation Fit?

Japan's debt is 23 times revenues. This means that a 1% increase in interest expense rate results in an increase of interest expense by 23% of tax revenues. 23% of tax revenues is already being spent on taxes every year. So another 3% increase in interest expense would result in having to use nearly all of tax revenues to pay just the interest expense.

Can the government keep debt interest rates below 4%?

The last 20 years, Japan's prices have been falling except for Japanese government bonds. This means a lot of the Japanese already have their money in bonds. New funds would have to come from foreign investors. But, they are more used to higher rates of return. 

In addition, Bank of Japan started to target 2% inflation. Japanese investors saw deflation of 1% and got a nominal yield of 1%, so they saw a real yield of 2%. But with the new target, they would recognize a real yield of -1%.

To get back to where they were before, bonds interest rates would need to be 4%. Once this happens its game over.




Compare the debt situation with that of the United States. Not all that different is it?



How can you short or long the Nikkei stock market?

Here is a list of long ETFs (Bull) and short ETFs (Short).

[Continue reading...]

Top Five Lessons From Jesse Livermore - Stock Operator

Reminiscences of a Stock Operator - Highly Regarded Financial Book

Background

Jesse Livermore was a stock speculator that lived from 1877 to 1940. He was famous for making and losing several multi-million dollar fortunes. This included selling short in the 1907 and 1929 market crashes. Although his thoughts and trading strategy are decades old, they are surprisingly still relevant today. You don't make millions in the stock market without having some kind of competence regardless of what time period you lived in.

1) Markets Do as They Please Regardless of What You Do

"I left Williamson's and tried other brokers' offices. In every one of them I lost money. It served me right, because I was trying to force the market into giving me what it didn't have to give - to wit, opportunities for making money."

After Livermore made a fortune speculating, he subsequently lost a great deal of that fortune in the stock market. He began borrowing money to fund his stock trading. Of course, he had trouble making money because he was too concerned about paying his creditors back. He began to try to "force the market" to give him profits. The markets will do what they will regardless of where you got in or got out. The question is are you going to be along for the ride.

2) Trading to Pay Your Bills is Harder Than It Looks

"As I studied the problem I saw that it wasn't a case that called for reading the tape but for reading my own self. I quite cold-bloodedly reached the conclusion that I would never be able to accomplish anything useful so long as I was worried, and it was equally plain that I should be worried so long as I owed money."

In Jesse Livermore's case, psychologically he was worried that he had to make money in order to pay his creditors. This obviously affected how he traded and as a result he lost even more money than he had initially borrowed. Having to trade stocks to pay the bills, puts pressure on the fact that you must have steady income from the markets. The stock markets don't care if you have to pay your water bill. There will be rallies and dead periods. If you want to trade for a living, you better be able to withstand the swings and understand there will be periods when you are not profitable.

3) If a Sector is Rallying, Buy Only The Best Stocks In that Sector

"Experience had taught me to beware of buying a stock that refuses to follow the group-leader"

If the financial sector is outperforming the SPY, then you would expect more of the stocks in that sector to be going up. If there is a laggard in that group, there is a reason it is a laggard. The reason isn't because hedge funds haven't done their research on the stock yet.

4) Follow the Path of Least Resistance

"You remember my trading theories about that line, don't you? Well, when the price line of least resistance is established I follow it, not because I am manipulating that particular stock at that particular moment but because I am a stock operator at all times."

It is much easier to run away from the wall then run through the wall. This is not to say you should run away from your problems in life, but in stock trading, prices move in the path of least resistance.

5) Do Your Own Research, Avoid Following Stock Tips

"I tell you it isn't pleasant to think that innocent people may have lost money following a tip of that sort. Perhaps you understand why I never give any myself"

Tips are just that. Tips. Following blindly is setting you up for epic ruin. First of all you have no idea what position that tipper is in. He may not even hold the stock he is recommending. Even if he is, you have no idea when he will unload his lot. Suppose he is selling his stock to you. Then you would be forced to dump it to someone else for a higher price.

[Continue reading...]

Pro Stock Trading Tips #3 - Stop Trying to Hit Home Runs - Position Sizing

The Importance of Proper Position Sizing Your Stock Trades

The novice trader does not set stops and does not practice position sizing techniques. He or she trades a stock based on the "feeling" they have. While the novice trader may experience some successes, they will be short lived when eventually one trade turns against him or her. Eventually the novice trader will see a trade in the red and end up holding on to a loss for too long.

What is position sizing? 

Position sizing is the amount of money you have invested in a stock or option.

Proper position sizing is important to the success of a trader. Many of us figure out only in hindsight that we should have put more money on that stock that doubled or less money on the stock that fell 20%. We often think to ourselves, "if only we had doubled up and bought more of that stock or if only we had bought less of that stock".

While position sizing won't help you predict the future, it will help you control the amount of money you have at risk in the market. Risk tolerance differs from person to person. Some people have higher risk tolerance than others and people like myself would rather not have large drawdowns on the account.

How do I position size?

The best way to determine how much of a stock you can buy is to think in terms of how much you are willing to lose on a trade.

What does this mean? 

If  you buy 100 shares of a $3 stock that does not mean you are risking $300. You could set your stop at $2, which means if the stock hits $2, you will sell the stock. The end result is a loss of $100.

Purchase: $300 (Buy 100 shares of a $3)
Stop: Set at $2 

Stock hits $2 and you sell the stock
Loss of $100

Here is another example, suppose you buy 100 of a $10 stock. This means you put out $1,000 on the stock. You set your stop at $8, so you are effectively risking $200 on that trade.

Purchase: $1,000 (Buy 100 shares of $10)
Stop: Set at $8

Stock hits $8 and  you sell stock
Loss of $200

Yes, the stock could hit the stop and you could be out $200 and then you could see the stock go back up to $10. Alternatively, you could see the stock fall to $8 and then continue to fall to $5. If you didn't have a stop at $8 you basically lost $500 on that trade.

This is precisely what happened to many stocks in 2009. Whereby stocks like Bank of America (BAC) fell from $40 to $20 to $10 to $5. Even if you held on to the stock from 2008 at your purchase price of $35, you still would not see a profit in 2013.

Conclusion: Think in terms of how much you are willing to lose on a single trade. If you do that, you will not want to try to hit home runs on every stock trade.

[Continue reading...]

Start a New Business Career

The following is a guest post.

Start a new Business Career 

As a stay at home mom, sometimes I am bored. But I’m also often very much rewarded. Seeing the day to day of raising humans into the world truly does make the heart beam, and it’s not anything I’d have traded anything in the world for.

Sure, there are times I feel a little bit lost or lonely, or trapped in my home. But the benefits outweighed the bad times. But as my kids got older and needed me less, the loneliness and a bit of the desperation set in a little too much for my liking. I feared I may be getting depressed and I really didn't want that, I didn't want that for myself or as a burden upon those around me, the family that I love so much.

I thought it might be a good idea to finally take a stab at doing something for me for once and I had a girlfriend from the neighborhood who had had a wonderful experience with www.amerasiaconsulting.com, a website that helps people like me and my neighbors get into programs for business school.

Amerasia Consulting, provided all sorts of services, like MBA essay consulting, and tips for interviews and the whole process really. I wasn't sure at first that it was the right thing for me, because I’m the type of person that thrives on figuring out a solution and way forward. But then I realized that of course if this service exists, those with whom I’d be competing for limited spots in school would be partaking, and I’d be a fool not to at least get onto equal ground with them. It’s certainly not cheating, at all, it’s putting the varnish on a newly finished table, or a frame around a painting, or salt on a steak.

It’s taking a good thing and presenting it in the best possible way. Take a look for yourself if you’re interested in going down this path.

[Continue reading...]

Three Secrets to Being Happy - Less Intuitive than You Think

Three Secrets - Who doesn't want to be happy?

The idea of happiness is ingrained in our everyday lives. We see it in the U.S. Declaration of Independence where it states "endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness". We see it in Hollywood in movies such as The Pursuit of Happyness. When you ask someone what their goal in life is, it might be to make money, or to own their own business, or take care of their family. But, at the heart of every goal is the hope and wish that there will be happiness at the end. 

So what are the real secrets behind being happy? They are actually less intuitive than you would think. The main theme of it all is...

The more you think about happiness the less happy you will become. 

Here are the key secrets.

1) Think of Yourself as Already Being Happy

In other words, stop trying to figure out if you are happy or not. What happens when you try to figure out if you are happy or not is you look at the past and start comparing your experiences. If you are busy trying to figure out if you are happy or not, you won't be happy. All the time you spend figuring out whether you are happy or not is just that. Time spent trying to figure out if you are happy or not. What you should be doing is living in the moment and enjoying the moment independent of what you may have experienced or will experience.

Try it for a day, just don't think about being happy at all and live as if you are already happy.

2) Life Circumstances Impact Your Life Less Than You Think

When you were in middle school, you might have wanted to be in high school and in high school you wanted to be in college. Being married, getting that new car, graduating from college, all of these events, like it or not you will eventually "get used to it". Just like most of us adapt to dire situations, we also adapt to positive situations. People get accustomed to their situations. Just remember the day you got a new car and that excitement you felt. Soon after you did that buzz disappear. This isn't to say you shouldn't be happy when the big moment happens, you just need to temper your expectations.

Realize that big changes in life circumstances have less of an impact on your happiness than you think.

3) You Can't Always Have Intensely Pleasant Feelings

The reason you have intense enthusiasm, joy, or excitement is because you also have moderately pleasant feelings. If all you had were intensely positive emotions then they wouldn't be called intense. They would be normal.

Intense emotions also happen less often than moderately pleasant feelings. If intensely pleasant feelings happen less than moderately pleasant feelings and you expect to always have intensely positive feelings, by design you will almost always feel unhappy. In addition, always looking for these intensely positive feelings will eventually overshadow your normal positive feelings. Your benchmark for being happy will be higher than that of a normal individual. You'll always be searching for that out of the ball park feeling and more often than not the truth is you will be disappointed.

Don't try to hit home runs all time. Sometimes all you need is a base hit. 

What happens if you ignore the three secrets? 

Excerpt from Adam Grant's article on Does Trying to Be Happy Makes Us Unhappy?

I saw it happen to Tom, a savant who speaks half a dozen languages, from Chinese to Welsh. In college, Tom declared a major in computer science, but found it dissatisfying. He became obsessed with happiness, longing for a career and a culture that would provide the perfect match for his interests and values. Within two years of graduating from college, he had bounced from working at the United Nations to an internet startup in New York, applied for jobs as a supermarket manager, consultant and venture capitalist, and considered moving to Puerto Rico, Trinidad, Colombia, or Canada.

These careers and countries didn’t fulfill him. After another year, he was doing standup comedy, contemplating a move to London to pursue an advanced degree in education, philosophy of science, management, or psychology. But none of these paths made him happy. Dissatisfied with his own lack of progress toward happiness, he created an online tool to help people develop more productive habits. That wasn’t satisfying either, so he moved to Beijing. He lasted two years there, but didn’t find the right cultural fit, so he moved to Germany and considered starting a college dorm for adults and a bar for nerds. In the next two years, he was off to Montreal and Pittsburgh, then back to Germany working on a website to help couples spend more quality time together. Still not happy, he abandoned that plan and returned to Beijing to sell office furniture. One year and two more moves across two continents later, he admitted to his friends, “I’m harder to find than Carmen San Diego.”

Conclusion: What is the secret formula then? It is simple, but easier said than done. Focus on the journey and not the end result or goal. Live in the moment.

[Continue reading...]

ThinkorSwim (ToS) Trading Platform - How Do You Get Rid of the Default Volume on Stock Charts?

Turn off the Default Blue Volume on the Stock Charts on ThinkorSwim Platform

The default charts have blue volume overlaid on them. When you shrink a chart or if you have too many charts on one screen, the blue volume makes the charts hard to read. This is especially the case when you have indicators on the charts as well. 

A reader asked me if there was a way to get rid of the volume or if there is a way to make the volume bars smaller. 

While it is not possible on the trading platform to make the volume smaller, there is a way to hide the volume. 

Under Chart Settings (wrench looking icon next to time frame)  and then Equities tab - There is a Volume option to "Show Volume" uncheck that and volume will disappear.

In the screenshot below, the wrench looking icon is just underneath 'Product Depth' on the top left and there is another one for the right graph just under the two square boxes at the top right.

[Continue reading...]

Seth Godin - Backwards - America's Greatest Marketer

Are You Looking at Everything Backwards?

Seth Godin has written fourteen books that have been translated into more than thirty languages. Every one has been a bestseller including "The Icarus Deception". He writes about the post-industrial revolution, the way ideas spread, marketing, quitting, leadership and most of all, changing everything.

American Way Magazine calls him, "America's Greatest Marketer," and his blog is perhaps the most popular in the world written by a single individual. His latest book, We Are All Weird, calls for end of mass and for the beginning of offering people more choices, more interests and giving them more authority to operate in ways that reflect their own unique values, and Seth once again breaks the traditional publishing model by releasing it through The Domino Project.

Here are some key takeaways from his most recent speech at this month's CreativeMornings.

Myth: Great Designers have Great Clients 

It is the other way around. Having great clients makes you a great designer. Great designers would not be great designers without their clients. Find clients that provide you with the platform for you to become a great designer.

Ask yourself - How much of your day is spent working to get better clients versus pleasing the clients you already got? Is pleasing the clients the best way to get better clients? Is a better client that pays your more? OR as mentioned above, is finding the client that provides you with the platform for you to become a great designer what you should be looking for?

Myth: Success is Overnight

People got to where they are by being impatiently patient. What does that mean? It means that Twitter would not still be around if the founders quit after two weeks. Companies would not be built if founders said that if it doesn't work in two weeks we should go do something else. Basically what he is saying is that it takes perseverance to succeed and just as Rome wasn't built in a day.

Myth: It Would Be Nice to Do That, But My Boss Won't Let Me

If you ask your boss if you could do something new or different, of course she won't let you because basically you are saying I want to do something really cool. If it works, I get all the credit and if it doesn't you get all the blame because you said it was okay. The secret is leading the people to make better decisions. Lead your boss to make better decisions. 

Here are four actionable items right now. 

1) Do it on purpose -  With purpose ask yourself, how am I leading my clients to become better clients thereby finding more clients? How am I leaving tracks that will get my boss to become a better boss? Lead your boss to make better decisions.

2) Tell stories that resonates to those in charge - You can't prove anything to the people you work for to get them to do something, but you can tell them a story that gets under their skin that resonates.

3) Demand responsibility, don't worry about authority - People who take responsibility are often given responsibility. If you are willing to let other people to pretend to have authority it's fine. You don't need a badge. Let your work speak for itself.

4) Reflect credit - If there is something wrong embrace blame. If there is something the boss wants to take credit for, let them take it. They will be more eager to work with you. Do small things that won't get you fired. If you do it 4 times or 6 times and they get credit for the small thing, they will let you do that small thing again. Then they may ask you to do it even bigger. It is the work you are after not the credit.

If  you want to make a change do it for people who deserve it. If Exxon doesn't get it, call on someone else.

Ask yourself:

a) How do you want your customers to change?
b) What change do you want to make in people you work with?

The change Apple wants to make is to make customers with good taste. If customers have good taste they are more likely to buy more products.

Everyone owns a media company. If you want to put on an event and have 500 people come you can. If you want to write a blog post and have a million people read it you can. 

You job isn't to make someone for everyone. Most popular drink is "other". 

Just do work that changes some people.

[Continue reading...]

Tips for Maintaining Productivity During the Flu/Cold Season

Tips for maintaining productivity during the Cold/Flu season

We may just be entering summer, but it won't be long before 2013’s cold and flu season comes back with a vengeance. Not only does this leave many people suffering for a week or longer, but it can also have a direct impact over the productivity of businesses. There is never a better time than now to prepare your business for the worst eventuality during this year's flu season, staff shortage, workload management and putting in place any policies that will help both your business and your staff during tough times.

The most important item that needs to be in place is a way to ensure staff that are infected stay away from work, to get healthy and also to stop the spread of infection, but that they have access to their work during this time. It may be that they are well enough to work from home and they are staying away for the sake of other employees. This is the type of situation is where having protocols in place in the first place will ensure that workload doesn’t over stretch your other staffs capabilities.

Here are some examples of clever ways you can keep the productivity up and make sure your employees are happy and healthy.

Install a Remote Desktop Protocol

It wasn’t all that long ago that if you were off work due to sickness there was very little work you could do from home, unless you had all the documentation, access to emails and other important data. As illnesses cannot be planned, the majority of employees would have to rely on their colleagues to cover their absence. Luckily, these days are gone as technology has lead the way to a world where we can access our desktops from wherever you may be by using an RDP system like ericom.com for example.

RDP systems let you access your desktop computer at work from your home, using the internet as a means for your two devices to communicate. This allows you to work as normal, checking emails, working on projects and making sure that you are up to date for your return to work. Even if you staff can’t work full time at least the option will be there, especially if someone needs to access their work during their absence. All your staff will need is a device to access their desktop, a laptop or tablet and an internet connection with good bandwidth.

Make Sure Your Employees Have Mobile Devices

Many businesses are now supplying staff with a mobile device that they can use at home for work purposes. Now this may sound like an expense that you could surely do without, but the benefits of knowing that your employees are contactable at home will outweigh the initial cost. This is never more important than if you also have staff travelling for work, without access to the RDP system, or their emails you cannot ensure work productivity to be maintained.

  

Cloud Computing Can Help Your Business Productivity

One of the most important things for the staff that are in the office is that they have access to the work of employees unavailable due to sickness. Having documents saved on internal servers is all well and good, but difficult to access without passwords etc. By turning to cloud storage/services such as Google Docs, you can make sure that your workforce can access all the information they need to cover someone’s priorities.

Not only can this reduce stress levels for staff in the office, but create a happier atmosphere for all. Plus it will lead to a greener environment in general with extra layers of security should there be a flood, for example in your business building.

Finally, whatever choices you make as to how you will manage the loss of staff due to the flu seasons arrival, you need to make sure they are easily accessed by all staff. This could be in the form of an employee’s health policy that is handed out to existing staff and part of new staffing introduction packs. This way everyone will know exactly what they are expected to do if you are unlucky enough to catch a cold or flu.

[Continue reading...]

Pro Options Trading Tips #1 - What is Theta in Options Trading?

What is Theta in Options Trading?

Theta is one of the Greeks in options trading. Generally speaking, theta represents the time value of options. 

There are five Greeks in total - Theta, Vega, Delta, Gamma, and Rho.

In theory, theta is how much your option will decay for one day until it expires. In other words, it is time decay per day.

For example, if you have a one month option selling at-the-money and it is trading for a dollar. Theta could be -0.10, which basically means theta is -10 cents.

In theory, if one day goes by and all other options Greeks are held constant, the option should be trading at 0.90 cents. However, this is only in theory and in practice, the other variables will come into play. We will discuss those variables in other Pro Options Trading Tips.

The further out from the options expiration you are, the less expensive time value will be. 

Meaning we will be paying less for the time value of the option.  For example, if you have a option that expires in 3 months versus one that expires in 1 month, the time value on the 3 months will be cheaper than the time value on the 1 month.

As a 3 month option becomes a 2 month, the time value decays at an accelerated pace. 

This means a bigger portion of your options value will decrease as a gets closer to expiration. For example, a three month option may have a theta of -.02 whereas a two month options may have a theta of -.05.

[Continue reading...]

Excel Tip #6 - How to Count or Sum All the Positive/Negative Numbers in a Row/Column

Excel Forumla - Count or Sum All Positive or Negative Numbers in a Row or Column

As mentioned in Pro Stock Trading Tips #1, it is essential for the trader to let gains run and cut losses.

One way of tracking whether or not you are doing this is by actually looking at your trading results. If you track your results in excel, there are simple formulas you can employ to count the number of winners or losers you have and how much the total of your winners or losers is.

Counting number of positive or negative numbers use: 

a) Number of all positive numbers

=COUNTIF(D5:D20,">0")

b) Number of negative numbers

=COUNTIF(D5:D20,"<0")

Replace D5:D20 with your actual data set.

Summing all the positive or negative numbers separately use:

a) Sum of all positive numbers

=SUMIF(D5:D20,">0")

b) Sum of negative numbers

=SUMIF(D5:D20,"<0")

Again, replace D5:D20 with your actual data set. 

Average all the positive or negative numbers use:

a) Average of all positive numbers

=AVERAGEIF(D5:D20,">0")

b) Average of all negative numbers 

=AVERAGEIF(D5:D20,"<0")

For examples of this see Pro Stock Trading Tips #1 where an excel screenshot has been included. Be sure to replace the D5:D20 to your actual data set.

[Continue reading...]

Three Key Advice For Twentysomethings to Re-Claim Adulthood

Adulthood in your Twenties - Three Piece of Advice

Background

The importance of your 20s can not be stressed enough. Some of us think of our 20s as the throwaway period before you 30s, but it is quite the opposite.

Here are five key facts about life that may surprise you. 

   1) First 10 years of  your career has an exponential impact
       on the money you'll earn

   2) 80% of life's most defining moments happen before age 35

   3) The last growth spurt in your brain happens in your 20s
       (Now is the time to change things about yourself)
 
   4) Personality changes occur in your 20s more than ever before
 
   5) Female fertility changes peak at 28 and gets tricky after 35

There are too many 30s and 40s year olds who say about your 20s "what was I doing and what was I thinking?"

Case Study

A girl at the age of 25 was "having an identity crisis" She wasn't sure whether she wanted to work in art or entertainment. So she spent the last few years waiting tables. She lived with boyfriend who displayed more of his temper rather than his ambition. When she was filling out a form that required an emergency contact, she didn't know who she could put down. She broke down and cried for an hour.

She reached out to a distant cousin and found a job, which gave her a reason to leave the boyfriend. Five years later she is now a events planning specialist. She is happy and now married to someone she chose. In addition, she now has too many emergency contacts.

What are the three piece of advice for 20 somethings? 

1) Get Identity Capital - Forget about having an identity crisis. Do something that adds values and investment in who you want to be next. Now is the time to try that internship or move somewhere to explore work. Do that start up you've always want to try.

2) Reach out to Friends of Friends - The Urban tribe is overrated . 20 somethings that hang out with like minded peers limit how they think and where they work. Weak ties or friends of friends is how you meet people. Reaching out to neighbor's boss is how you get that job.

3) Start picking your family now - You don't want to be that girl or guy who grabs whoever is closest to you just because everyone else is walking down the aisle. Pick a family you would want rather than trying to make it work or being in a relationship just to kill time.

[Continue reading...]

Pro Stock Trading Tips #1 - True Meaning of Cutting your Losses, Letting Gains Run

How to make money even when more than 50% of your stock trades lose money.

In stock trading, it is important to have a trading plan. These are sets of rules that help guide your actions in the market. For example, what technical signals or fundamental indicators will lead you to buy a stock or sell a stock? 

In any event, a successful trading plan in one where you "CUT YOUR LOSERS and LET YOUR GAINS RUN". 

Why is cutting your losers and letting your gains run so important? 

Let me explain to you the importance.

Suppose you have two stock traders. Trader A and Trader B. 

Trader A on average loses 56% of the time, while Trader B loses 63% of the time. You might think both of these traders lose money all the time. If you had to pick one trader over the other, you would be inclined to choose Trader A because of the lower lose percentage. 

Here are the actual results from Trader A and Trader B.

You can see that Trader A even though she has a higher winning percentage, actually just about breaks even. Whereas Trader B has a lower winning percentage comes out profitable. Both of their percentages are lower than 50%. This means they lose money on trades more often than not. The key is that they cut their losses and let their gains run. 

You can see that the average gain of Trader A and Trader B is 149.57 and 387.03 respectively. Contrast that with the average loser which is 116.02 and 127.93 respectively. On average, Trader B's winners makes more than twice the amount of his losers. While Trader A's winners barely exceed the losers. 

Conclusion: The secret to making money is having a system where you let the gains run and cut  your losses. Even if your system loses money 7 out of 11 times, as long as you let your winners grow, you will make money.

[Continue reading...]

Pro Stock Trading Tips #2 - Don't Translate Paper Gains/Losses into Possessions

Lessons from a Pro Stock Trader - Don't think of paper gains/losses in terms of cars or vacations

Background

Tom Baldwin worked as a meat packer in Ohio. After graduate school, on the advice from a friend,   he moved to Chicago to begin bonds trading. Though his specialty is trading the 30-year bonds, his knowledge of trading can be easily applied to stocks as well.

What is so intriguing about his story?

He turned $25,000 into a $1,000,000 before his first year was up. In addition, he was paying $2,000 per month to lease the seat on the exchange and at least $1,000 for living expenses. Oh and his wife was pregnant at the time.

For all of you people out there who are looking for excuses not to trade bonds or stocks, consider Tom Baldwin's story. Tom Baldwin went from meat packer to bond trader investor and according to Jack D. Schwager from Market Wizards, Updated: Interviews With Top Traders 30 million dollars is a conservative estimate for Tom Baldwin's total winnings.

What is the single most important lesson in stock trading?

From the interview conducted by J. Schwager in the book mentioned above, the biggest take away I got from Baldwin's interview was the fact that he didn't view trading paper gains/losses in terms of what the money could be spent on or in the case of losses what the money could have been spent on. 

What does that mean?

Most stock traders will translate what they loss or gained from the stock market into terms of what can be purchased at a store or spent for shoes, TVs, or what not. This occurs almost automatically. After all, what we gain from the stock market, we eventually will spend especially if we do not reinvest it. 

Suppose you are in a long-term trade ranging from 6-12 months and risked $8,000. Suddenly after weeks of entering the trade you see that you are down $3,000. If you start to think of the paper loss in terms of money that could have been spent on a mortgage payment or a down payment on a new car, you will be tempted to liquidate the position. 

The original reason you entered the trade was because you had a theory (backed by research) that the company has solid financials and numerous growth opportunities. Unless these factors have been disproven or you no longer like the position, there is no reason to exit the position. 

Don't exit a trade just because you impulsely translated your risk into tangible terms.

Trading Lesson with a Personal Touch

Personally, liquidating a position prematurely has happened to me many times. This happens usually when I risk more than I am usually comfortable with. The minute it declines more than I am comfortable with, I exit the position. My theory had not been disproven and the only reason I exited the position was because I started to think of the cash in terms of what I could buy. This is a flaw in my trading strategy/behavior. In hindsight, most of these positions ended to be big winners. 

Trade the ideas and charts and manage your emotions. Don't exit a position solely because you start to think of what the money could have bought or can buy. 

[Continue reading...]

Benefits Of Invoice Finance Opportunities

Benefits Of Invoice Finance Opportunities

Invoice finance opportunities were specifically designed for small and medium businesses that required financial help due to unpaid invoices. When a company depends on the money they receive for a service, any delays with these payments can cause severe problems with the cash flow. There are now financial aids available to help businesses in this situation such as invoice finance.

Invoice financing is available in two different forms that are, discounting and factoring. Each of them has both pros and cons, and they do look quite similar at a glance. Deciding which option is more appropriate for a business can be very time consuming. They should always remember that what works for some businesses may not always work for theirs, but invoice factoring does seem to be the more popular option.

Below are some benefits of invoice finance;

Sustainability

It can be quite complicated for a business to manage its production and service whilst chasing up payments from clients. Fortunately, invoice factoring provides them with a service that allows them to generate money that they will pay back once their clients pay their invoices. Without the ability to free up cash a company could be forced to temporary halt production or close the business. Invoice factoring gives small businesses the chance to stay afloat when their customers delay their payments.

Liquidity

Invoice factoring is a quick method to help generate liquidity for a business. They are able to use more conventional types of lending, but they can take weeks to be approved and there is usually a lot of paperwork involved so most companies wont have the time to wait for everything to be finalized they will need the money as soon as possible. The turn around time for invoice finance is definitely a plus.

Rate diversity

A businesses personal expenses can sometimes exceed the money within the business at that given time. Invoice finance borrows the company money owed to them to help boost cash and cover financial costs. Each lending institution will come with particular rates that can be adjusted according to the businesses personal necessities, so its best the business shops around before choosing their lender as they don’t want to sign a contract to then find a better deal.

In conclusion, invoice finance clearly has a series of benefits, regardless of the size of the business.

[Continue reading...]

Information about Bad Credit Mortgages

Why is it when the Government are trying to help people get on the housing ladder with the increase in the discount available to tenants, a great many lenders have pulled out of lending in that sector?

Part of the problem maybe that clients who wish to purchase their property under the RTB scheme are normally looking to borrow 100% of the discounted purchase price, and in most cases are looking to borrow extra funds for home improvements.

With this mind, lenders may be wary that if the client has not put any of their own money into the property that if they run into financial difficulties they are more likely to walk away from the problem. In the absence of any real data it would be difficult to make a comment on this.

The other issue is, in the event of a repossession, would lenders have more of a problem selling a property and recovering their money in an area that may still be predominately Local Authority owned? In this very fragile market I think the answer would almost certainly be yes, which may explain some of the lenders reluctance to lend on RTB’s.

This not what we want to hear as we need any stimulus that we can find to bring back that feel good factor to the property market and see a positive ripple move across the property valuations. I do not think that surveyors are helping themselves in this market by constantly chipping away at the property valuations. Nobody in their right mind would expect a surveyor to overvalue, but starting each day with a positive mindset may help. The market has to turn at some stage, and it will start from the bottom up, so we have think and be positive about where the market is going.

Would some lenders please think again, we need an active and positive RTB market, which for many clients maybe their only route to owning their own property. It does work, drive through any council owned estate and those properties that have been purchased by the tenants stand out like a beacon, with the changes and improvements that they have made with pride.

With the discount now as high as £100,000 if you live in London and £75,000 outside, what a fantastic bargain and a real incentive to get on the property ladder. We need this market to remain active and would encourage any tenant to explore the possibility or purchasing. Talk to your Local Authority to find out what discount you may enjoy, and then call us on 08452 605506 to see what mortgage plans are open to you. We are here to help and advise you, and we do not charge any up-front fees.

For more information on Bad Credit Mortgages or general mortgage advice then why not visit A Mortgage 4 You.

[Continue reading...]

Checklist Basics for Starting Your Small Business

Checklist Basics for Starting Your Small Business

So you have taken that first decisive step forwards. Before you get caught up in the day to day running, here are some important things to check off your to do list so you can be sure to put your new company’s best foot forwards.

First Things First – Put It in Black & White

You have the concept and your target market, now you need to put it in writing. This means a business plan. Writing everything down can help you keep track of your goals and will let you stay up to date with your progress. Choose the name your company will trade under and what type of company it will be, the main choices are private (limited) or publicly traded (plc) and sole trader (sole proprietorship). At this stage you may want to consult an accountant to make sure you have correctly registered your business and filled in all relevant forms with the government, tax and other official offices.

The Basics – Insure Yourself

Whether you will be working from a home office or moving into new offices, one of the most important things to remember in this day and age is to get prices for different providers so that you can compare and calculate your outgoings and keep within a set budget. Something that should also be top of your list is to get insurance for small business quotes. While it can be tough to have so much money going out during the first stages of a new business, it is imperative to set yourself up safely and securely for whatever may come. One extremely important thing not to forget is professional indemnity insurance quotes. These will ensure your customers and you are protected against financial losses due to a potentially simple slip-up or misunderstanding when advising your clients. Make sure to understand exactly what insurance needs your business will have; insurance brokers will be happy to go over every need. For instance, if you will be using one vehicle to start with for your company, you may need to consider van insurance which can provide cover for up to four drivers on one policy. Make sure to go through all your options and check out every different type of insurance policy to make sure your business is covered from every angle.

Logistics – Get Your Name Out There

Once you have your finances and insurance sorted out, it is time to talk to your customers. It is time to let the world know you have arrived. Whether you outsource your website development or use the wealth of information available online to build your own site, remember that, while it is very useful to have a social media presence, it is more important not to stretch yourself too thin. You want to show your expertise in your field clearly and make yourself a useful tool that clients will trust. A facebook page is all well and good but, will you be able to respond to every query and question across email, direct message, twitter and telephone while still providing excellent customer service? If you are not employing a social media or public relations staff, it is an idea to keep things simple at first, while you find your feet and grow slowly but surely, expanding over every medium available at your own pace.

[Continue reading...]

Tax Laws Regarding Gambling Winnings & Losses

Tax Laws Regarding Gambling Winnings & Losses 

In this uncertain economic climate, many of us are turning to secondary forms of making money. Whether we are selling our old possessions or starting a side career in gambling, there are many ways to make some extra money each month. Whether you are winning or losing, casinos offer us a unique chance to make some cash and equally have some great fun in the process, but what many of us don't know is that wins and losses made from gambling do have to be declared for taxes. 

As tax can be a confusing minefield, here are all the important tax laws you need to be aware of.

The Most Import Thing

The most important tax limitation to remember is that you can only deduct gambling losses to the extent of your winnings over the course of a year. This does count for the majority of gambling types, playing the lottery, pokies, sports betting, horse racing to name but a few, and is applicable for any type of mobile casino, and online or real life casinos. So what exactly does this mean?

Well imagine if you won $2000 during a year, but you lost a total of $2500 as quite often happens. You can deduct the $2000 losses from your initial winnings, but you will not be able to use the left over $500 to put towards another years taxes, effectively you will lose the $500.

Tax Rules For The Amateur Gambler

There are two main things you need to be aware of, if gambling is just a fun hobby; firstly that your tax will be claimed under Line 28 of Schedule A (Itemised Deductions). I now that is a lot of legal jargon, so here is a simple explanation: Itemised Deductions are any small amounts of winnings and losses you make during the course of a year. As this is only a hobby, these may not be a frequent as those of a professional gambler, so these are classed as 'Itemised'.

The main thing that you will need to make sure to do is keep a record of all your gambling transactions. This could be anything from receipts, losses slips, casino letters, or any proof you are given during your session. These then need to be kept and used as evidence when you complete your taxes. This should not include any expenses whilst you are gambling, travel, drinks, food etc. As you will be filling in an itemised tax form, if you don't have the records of the transactions, you will not get them written off meaning you could lose out.

Secondly, you need to be extra careful when declaring your winnings. This will be completed under Line 21 of form 1040 (the general tax declaration form). This is a separate section from Line 28 and again your winnings need to be clearly itemised here. One common mistake the people make is to only report the net winnings for a year, which can lead to you over paying on your taxes. To avoid this, be honest and keep every win written down.

Professional Gamblers and Tax

There have been many legal debates over the past few years as to what defines someone as a professional gambler. In general this is someone who spends large periods of time at casinos and has turned gambling into a career. Anyone who depends on their winnings as a meaningful form of income must therefore conduct their gambling wins and losses as they would a business, keeping records, understanding the laws surrounding their chosen form and become an expert in the declaration of taxes; sounds like a lot to take in, but the winnings can be huge.

If you are starting your career as a professional gambler then you will need to make sure that you state this when sending through your tax return. You will also need to complete a different section on the tax return, Schedule C of form 1040 - Profit or Loss from Business. Unlike amateur gamblers, as you are declaring gambling as your business, you can declare allowable out-of-pocket expenses, travel, food and hotels can all be added in here. All business expenses can be fully deducted against your winnings in section C.

You will also need to keep detailed records of all your transactions and list them, with evidence here and complete your winnings and losses as previously stated. Be aware though that you cannot combine your expenses and losses to try to get further reductions.

In conclusion, the main points to remember is that you cannot deduct more losses than you have in winnings, you need to keep track of every single transaction and declare it as such. By completing your tax in this way you will be guaranteed to be taxed in the correct manner.

[Continue reading...]

How Have Theater and Movie Production Stocks Performed During the Summer?

How have movie production studio stocks performed in the Summer? 

Is it time to buy stocks such as DreamWorks (DWA), Lions Gates (LGF), Disney (DIS), or even Viacom (VIAB)?

Every summer, movie studios release their blockbuster hits in the summer. Last year we saw the release of movies such as The Avengers, Men in Black III, The Amazing Spider-Man, The Expendables 2, and The Bourne Legacy. We don't need statistics to understand that movie studios make most of their revenue in the summer.

This year movie production studios will release Iron Man 3 (Disney), The Great Gatsby (Warner Bros.), and Star Trek Into Darkness (Viacom) , and Hangover Part III (Warner Brothers) all in the first few weeks of Summer.

For all intensive purposes we will consider May through August as the Summer time period. During this time, how have movie stocks performed?

Let us take a look into the studios behind the featured films to be released this summer among other studios.

My guess would be that because of hot releases in the summer, there would be a huge demand and rise in the stock price of the respective distributors and production companies.




Conclusion: Above are statistics of how the stock performed from May to Aug versus the total year including summer. Cyclically, it appears as of movie stocks do not perform well from May to Aug. Despite the fact that they were up in 2012, the stocks performed significantly better the other periods of the year.

The strongest stock in the list is LGF. DWA is the weakest.


Disclaimer: Article is written for informational purposes. It isn't intended as investment advice.
Disclosure: I have do not currently have any positions in any of the stocks mentioned in this article.

[Continue reading...]

One Year Lived - Adam Shepard Book Review

One Year Lived - Book Review

Maybe I need a year to live a little.

About the Adam Shepard, Author

Attending Merrimack College in North Andover, MA on a basketball scholarship, Adam Shepard graduated with a degree in Business Management and Spanish. Serving as a Resident Advisor during his upperclassmen years, he began to take particular interest in the social issues of our nation. Shortly after graduation—with almost literally $25 to his name—Shepard departed his home state for Charleston, SC, embarking on the journey that became his successful first book, Scratch Beginnings.

After a whirlwind journey that took his self-published book to the Today Show, CNN, Fox News, and NPR, he sold Scratch Beginnings to HarperCollins and made appearances on the Dave Ramsey Show and 20/20. He was likewise featured in the The New York Times, the New York Post, The Atlantic, and The Christian Science Monitor, and Scratch Beginnings has now been used on the curriculum or as a First Year Common Read at over 90 colleges and universities in the United States and translated across the world.

What is it about?

A few years back, a North Carolina native left his comfortable home and embarked on an amazing adventure. Not only did he get to see the world, but also brought back countless priceless memories. Having spent just $19,420.68, Adam Shepard visited visited seventeen countries on four continents in just under one year.

He didn't hate his job. He didn't have disdain for capitalism. No, he wasn't looking to escape emptiness nor was he searching for "meaning". Prior to the trip, his life was relatively normal. He wanted to see things and create a few memories before working the rest of his life in a career, getting married, and having kids. 

Shepard's journey took him to Antigua in the Caribbean, Honduras, Nicaragua, New Zealand, Australia, Philippines, Spain, and finally Slovakia.

Throughout the book, the author provides insight into his life prior to the trip and how be became the person he was on the trip. He goes into his family life and his past as a basketball player. In addition, throughout his trip, he offers historical insight on the different countries he was at.

What is great about it?

Shepard inspires the reader to broaden his or her horizon and perspective on life. Through his excellent descriptive writing, the author makes you feel as if you were with him on his journey. Not only did he meet interesting people, but he also shares his greater appreciation for those around him. Although he came back with no money, he came back with a boat load of memories and extraordinary experiences. 

Shepard shares with the audience a number of his experiences including how he got robbed, survived a bull in Nicaragua and a pregnancy scare in Australia; went to the Rigoletto in Prague, danced in a cage at a gay club in Barcelona, got a tattoo in Thailand, rode an elephant, and so much more.

Embedded in this great travel story that started off as a trip volunteering in Central America, is him meeting "The girl", Ivana. He and her embark on the second leg of the trip beginning in Granada.

Here is an excerpt:

As I stepped out of baggage claim, I spotted the shuttle driver standing off to the side. He held a sign with my name on it and, as I approached, tucked it under one arm in order to shake my hand.

“Welcome!” he said in Spanish. “Welcome!” I said, returning the greeting.

He drove me out of Guatemala City in a rusty van that hacked and coughed its way from side street to main artery, bound for Antigua. It wasn’t the dark of the night or the wheezing of the truck that raised my eyebrows. It was the grunginess of this world surrounding me.

Something isn’t right. How did I get here?

I had committed to the trip, to a year that I’d never have back, and I’d bragged to my friends and family: “I can’t be dissuaded. Get out of my way.” I couldn’t back out. I didn’t want to become like everybody else who says they’re going to take a trip like this.

Then came the question: “Where to?”

I bought a world map, spread it on the wall, and peppered the drywall with the pinholes of notes posted and removed. I read this book and that blog post and—oh, my, it says right here in this magazine that I absolutely shouldn’t skip hiking through Patagonia. I quizzed well-traveled friends about their favorite spots; I posted on Facebook, where I got thirty-eight varying responses from twenty-seven people.

This book really makes you want to jump out of your seat and plan your next travel trip.

What is the not so great about it?

Shepard does touch upon the history of each country he travels to, which provides background behind his activities. Quite frankly, the "history lessons" within the book were bland. If I wanted to read about the Aborigine in Australia and what happened in 1869 or the history of the Mayans, I probably would've just opened up my old history textbook. However, to his credit, they were brief and for most readers might be necessary, personally, I didn't care for them as much.

What is your final recommendation?

Not only is Adam's book inspirational, it actually makes you want to go out there and travel. He does a great job detailing his experiences. Even if you aren't an international traveler or don't see yourself as one, a weekend local trip or out of state trip can broaden your perspective. The point is get out there and get the book now!

[Continue reading...]

Things I Wished I'd Known At 20 Years Old - 26 Time Management Hacks

26 Time Management Hacks for the Intelligent 

These are the top 26 time management hacks that we wished we knew at 20 years old. Though they are still all applicable for any age group.
Initially, I had thought to go down the list and pick my favorites, but as I started going down the list, I realized all of them were very good.  

1. There's always time.  Time is priorities. 
2. "Only plan for 4-5 hours of real work per day."  Days always fill up.
3. "It's normal to have days where you just can't work and days where you'll work 12 hours straight." Work more when you're in the zone. Relax when you're not.
4. "Your time is $1000/hour, and you need to act accordingly." Respect your time and make it respected.
5. Single-treading and home at 5pm Stop multi-tasking. It merely kills your focus.
6. Set up a work routine and stick to it. Your body will adapt.
7. We're always more focused and productive with limited time.
8. Work is the best way to get working. Start with short tasks to get the ball rolling.
9. "Doing is better than perfect." Work iteratively. Expectations to do things perfectly are stifling.
10. More work hours doesn't mean more productivity. Use constraints as opportunities.
11. "Separate thinking and execution to execute faster and think better." Separate brainless and strategic tasks to become more productive.
12. Organize meetings early during the day. Time leading up to an event is often wasted.
13. "A single meeting can blow a whole afternoon, by breaking it into two pieces each too small to do anything hard in." Group meetings and communication (email or phone) to create blocks of uninterrupted work. 
14. Keep the same context through out the day. Switching between projects/clients is unproductive. 
15. Work around procrastination. Procrastinate between intense sprints of work (Pomodoro).
16. "Break the unreasonable down into little reasonable chunks. A big goal is only achieved when every little thing that you do everyday, gets you closer to that goal."
17. No 2 tasks ever hold the same importance. Always prioritize. Be really careful with to-do lists..
18. "Only ever work on the thing that will have the biggest impact." Always know the one thing you really need to get done during the day.
19. Break tasks into hour increments. Long tasks are hard to get into; feels like it all needs to get done.
20. "If something can be done 80% as well be someone else, delegate!" Delegate and learn to make use of other people.
21. "Yesterday's home runs don't win today's games." Turn the page on yesterday. Only ever think about today and tomorrow.
22. Set deadlines for everything. Don't let tasks go on indefinitely.
23. Set end dates for intense and stressful activities. Everything ends at some point.
24. "Get a reminder app for everything. Do not trust your own brain for your memory." Always take notes.
25. "Write down anything that distracts you- google searches, random thoughts, new ideas, whatever. The point is, if you write them down, they'll stop bubbling up when you're in the zone."
26. Take breaks. Sometimes.

26 Time Management Hacks I Wish I'd Known at 20 from Etienne Garbugli @egarbugli

[Continue reading...]