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Investing

My take on this ugly market

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Well, I am not going to short. Two reasons:

1) In order to short a stock, I need to open a margin account, which I dislike. Margin account means I have to borrow from the broker, which increased the risk quite a lot, and increases the “anxiety factor” which is something I dislike. A good example is: someone bought Berkshire Hathaway stock in its early days on margin could get wiped out, because the stock dropped 50% on the way. A more recent example is the CEO of Chesepeake Energy (NYSE:CHK), if we believe the story.

2) So I can not short. Why not buy the puts (or sell the calls)? Welcome to the wonderful world of Options. Well, from my observations (both my own small experiment and others experience), Options are totally different ball game. Basically we are play against time. Options have its expiration dates. While I think in this bear market, the down trend of some stocks are obvious, I have no idea how much the stock price will be at a certain period of time. Remember the old saying “dead cat bounce”. While it’s unlikely a company will use precious cash to buy back stocks these days, it’s likely we will see something like we saw on Monday Oct 10: a 960 points pop on Dow.

So what to do?

Save. Retire some debt. Get some more sleep. Do some research. Buy some fundamentally good stocks at bargain price because I believe the world is not coming to an end 🙂

Categories
Stocks

Why CHK is a sell?

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Chesepeake Energy CHK logo

Macro environment
This morning on my way to work, I found the regular unleaded gas is sold for $2.88 at Shell station near my home. The oil is coming down, amid the slow down of US economy, the No. 1 consumer of the light sweet crude: American consumes 25% of world crude production. Natural gas price is closely tied to the oil price. The Pickens plan, which calls for natural gas powered cars, to reduce the importing of foreign oil, has not gotten too much traction. Neither presidential candiate mentioned much natural gas as a part of the energy solution. The natual gas car is unlikely to happen at least in Detroit, because the car makers financial problems, and the consumers got squzzeed.

The margin call
Again I would not take the margin call of CEO at its face value. The analysis goes like this:

1) If the CEO REALLY sold its stock at margin call, for a company made its name from hedging natural gas production (derivatives trading), it’s like a high school math teacher can not solve primary school math problem. It’s possible, but unlikely.

2) If the CEO sold its stock intentionaly, but publicly declares he sold it out of margin call. He is lying. Again I would not trust him.

It’s more or less like the Bill Clinton 1998, either way his reputation will be tarnished, and people will doubt his judgement for a long long time.

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Business

Amazon and Jeff Bezos

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Saw this from Yahoo Tech-ticker. While I would not necessarily compare Amazon/Bezos to Apple/Jobs, I admire Amazon the company and Bezos as a business leader. That being said, the stock (Nasdaq: AMZN) is still not cheap, with a PE (ttm) about 40. As a customer, some of the features I like about Amazon over the years include: suggestions “you may also like”; user reviews (5 stars); over $25 free shipping; wish list. As a techie (and analyst) I like Amazon’s investments in cloud computing a few years back (when this thing was not as popular as today). It seems their investments will pay off over time.

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Categories
Stocks

Chesapeak Energy CHK: hedge fund or natural gas producer ?

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A while back I bought some Chesapeak Energy stock (NYSE:CHK) after it dropped from high of $75 to around $50, I knew its Q2 2008 results are not good because of its hedging loss. The following was an interview of its CEO McClendon on CNBC on Aug 19.

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401k and Personal Finance Investing

What to DO and NOT_TO_DO in this market?

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NOT TO DO list first
1) Watch CNBC and other financial news and got confused, and worse got panic. Same goes to checking your brokerage acct or 401k acct every day;

2) Try to be the hero: pick up “cheap” financials, commodities, technology stocks simply because you think they are “cheap” compared to 2 weeks ago (without any own research);

3) Sold all the stock fund postions in 401k, and put it to cash. The chance is you will not be able to buy them back at the bottom;

4) Put the Greenbacks under your mattress 🙂

Things to do
1) Have some emergency cash and credit line (credit card and HELOC if possible);

2) Do the homework: reading words of Buffett and Munger (my list here). Find some quality name we can understand (or model using Munger’s word). I am thinking AMZN, RIMM now, not buying just watching. When the dust settles, and I have some free money, I will buy them at bargain price;

3) Continue to contribute to 401k, IRA: depends on your risk tolerance, put it in bond or stock funds you have trust in management.

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Investing

Wall Street’s Shadow Market by CBS

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I am a big fan of CBS 60 minutes. This weekend it explains the Credit Default Swap (CDO) market, and how it backfired and brought down the Bear, Lehman, and AIG. One nice thing about this CBS video (link here), is one does not need formal finance education to understand it. The video lasts 12 min.

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Categories
Economy

What recession?

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Maybe things are not as bad as it seems. This afternoon we visited West County mall to check out things. We have not been to the malls for quite a while.

Apple Store
At the Apple store, I saw a big crowd as usual. This made me wondering: what recession? Although I am happy with my 2nd gen iPod Nano (refurbished), and have no plan to buy iPhone, I am sure there are plenty of people checking out the MacBook, new iPod Nano etc.

Maybe all these recession and 1930 depression talk was to get Congress pass the $700 b rescue bill?

Warning: don’t jump into AAPL stock simply from my observation. You could get hurt badly and I could not help you. Also, I don’t think we can judge the soundness of economy just by going to one mall. We need more economy and market data: job, interest rate, stock market and most importantly the credit market.

Categories
Master Series

Buffett talked about rescue plan on Charlie Rose

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Here is the Google video. He also talked about the financial crisis, human psychology in terms of bubble, herd mentality etc. which is my favorite part (but I have to admit I am one of the herd). The interview last about 54 min.

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Categories
China

China Mobile Group got robbed

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According to Chinese news, China Mobile’s ultimate parent, the China State Asset Management Co. (CSAM), took 50 billion Chinese Yuan (about 7.30 billion USD) from China Mobile Group (the parent of China Mobile Limited, NYSE: CHL; HKSE:0941), and gave it to China Telecom. For CSAM, this is merely put money from left pocket to right pocket, because both China Mobile and China Telecom are majority owned by CSAM. But for CHL shareholder like me, this is merely another highway robbery, orchestrated in the name of “balance of power in China telecom industry”.

China Mobile Limited CHL

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Categories
Investing

Stock lesson VIII: WaMu fiasco

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Think you are unlucky being US tax payer, paying $700 billion to bail out wall street. Think the poor Washington Mutual (NYSE: WM) shareholder and bond holder, they are left with almost nothing.

And yours truely, after been in the US stock market for almost 5 years, is one of the WM shareholders. Looking back, this is a mistake largely self made and I could avoid it if I used more brain a bit more. Here was my rationale and how I did it:

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