Outstanding Financial Pornography

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor.

Re: Outstanding Financial Pornography

Postby Hammerer » 02 Nov 2011 00:01

Should I hang on to my U.S. currency?
If you want to invest the U.S. dollars you could consider buying an interlisted stock. The major banks do have their shares trading on the TSX and NYSE stock exchanges.
Reasonable advice.
All of this is a benefit if you are of the opinion that the U.S. in future will strengthen.
Nope, it's only good if you'll need the US$ in future and that's about it.
When trading in any currency other than the Canadian dollar you are exposing yourself to foreign exchange risk.
I disagree, especially in this case.
With the uncertainty and volatility in the world these days, the fewer risks the better.
This from an investment advisor...
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Re: Outstanding Financial Pornography

Postby kumquat » 29 Nov 2011 22:41

I thought this was enough to make a vulture puke.
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Re: Outstanding Financial Pornography

Postby kcowan » 30 Nov 2011 10:51

kumquat wrote:I thought this was enough to make a vulture puke.
What is particularly irritating is that you have to click 20 times just to view all the crap and references to other sites. Clearly an attempt to gain favour with gullible investors.
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Re: Outstanding Financial Pornography

Postby deaddog » 30 Nov 2011 14:10

kumquat wrote:I thought this was enough to make a vulture puke.

Kumqut and Kieth;
Any specific rule you found particularly offensive? I thought for the most part they made sense.
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Re: Outstanding Financial Pornography

Postby kcowan » 30 Nov 2011 15:10

deaddog wrote:Any specific rule you found particularly offensive? I thought for the most part they made sense.
I did not throw up on any rule. I just thought the whole thing was an atempt to regurgitate stuff just to generate traffic. IOW like this thread. Gotta see pornography for what it is aiming at. Not just its content.

Did you learn anything new from your 21 clicks? (and Popups which were blocked for me!)
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Re: Outstanding Financial Pornography

Postby Brix » 30 Nov 2011 15:24

just 20 new rules? Pathetic.

Ric Edelman's got 88 for ya right here: The New Rules of Money: 88 Simple Strategies for Financial Success Today.
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Re: Outstanding Financial Pornography

Postby deaddog » 30 Nov 2011 15:30

kcowan wrote:

Did you learn anything new from your 21 clicks? (and Popups which were blocked for me!)

There were a couple of the rules I agreed with that you don’t see to often.

I don’t remember the numbers and won’t click thru again. I agree that part is annoying.

One of the early ones on diversification: Owning too many funds or stocks ensure mediocre results not protection.

I also like the one about managing your advisor. And of course the one about having rules for selling your stock in place before you buy it.

The only one I shook my head at was to pay attention to the politicians.
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Re: Outstanding Financial Pornography

Postby kumquat » 30 Nov 2011 16:16

deaddog wrote:
kumquat wrote:I thought this was enough to make a vulture puke.

Kumqut and Kieth;
Any specific rule you found particularly offensive? I thought for the most part they made sense.

The worst was:
#17 It's OK to Chase Performance, Sometimes
If you get lucky but Vegas has better odds

Another contender:
#19 Don't Dollar Cost Average--Buy on Dips
In other words, time the markets.
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Re: Outstanding Financial Pornography

Postby AltaRed » 30 Nov 2011 20:25

I think more people do some of #19 than they care to admit and/or do as a matter of principle (whether it works on a long term basis or not). A number of FWFers bought stuff during the hiatus of 2008 and 2009 and did very well by it. The question might be: how repeatable might that experience be over ~30 years?
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Re: Outstanding Financial Pornography

Postby kumquat » 01 Dec 2011 11:29

Was buying in, say, March 09 an example of "buy the dips" or "buy when there's blood in the streets"? I vote for the second.
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Re: Outstanding Financial Pornography

Postby deaddog » 01 Dec 2011 14:50

kumquat wrote:The worst was:
#17 It's OK to Chase Performance, Sometimes
If you get lucky but Vegas has better odds

I have to agree with you on that one. If you chase performance you had better have some sort of risk management strategy in place.
kumquat wrote:Another contender:
#19 Don't Dollar Cost Average--Buy on Dips
In other words, time the markets.

To me this makes sense. I’m talking about individual stocks. If you know the value of the company and you are going to put the money to work anyway why not wait for a sale?
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Re: Outstanding Financial Pornography

Postby kumquat » 01 Dec 2011 15:48

How much of a drop constitutes a sale? What if there is no sale?
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Re: Outstanding Financial Pornography

Postby deaddog » 01 Dec 2011 17:42

kumquat wrote:How much of a drop constitutes a sale?
Anything cheaper than todays price is a sale. Anything cheaper than a recent high has been marked down so it could be sold.


kumquat wrote:What if there is no sale?

If there is no sale then buy something else that is on sale.
Is there anything else you buy at the asking price without shopping around for a better price? I’ll bet car salesmen love you. :wink:
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Re: Outstanding Financial Pornography

Postby ghariton » 01 Dec 2011 17:43

deaddog wrote:If you know the value of the company ...

:)

When I was younger and still very foolish, I bought and read Aswath Damodaran's Investment Valuation (2nd ed), all 959 pages of it. While there was a lot of good stuff there, at bottom, value is the net present value of future cash flows, so you have to forecast future revenues, expenses, and so on. But how do you do that? Again, Damodaran has some discussion, but the underlying approach seems to be to extrapolate past trends, adjusting for a few financial parameters such as debt ratios and retained earnings and such.

That struck me at the time as highly dangerous. (I work mostly in telecom, where past trends are worth squat.) I'm not sure if that is what is meant by "fundamental analysis", but if it is, a chimp throwing darts seems about as useful.

And if you interpret "fundamental analysis" as going out and surveying future market size, and your company's share of that future market given existing competitors and new entrants, and the likely prices that will result, and the operating expenses required to produce that revenue, and capital expenditures to achieve sufficient capacity -- if you estimate all of that for the next ten years -- then you and the company's CFO (and maybe Warren Buffett) are the only ones that will have done it. Which means that you will be in possession of an important piece of information which, unfortunately will be of no use to you as an individual investor -- since nobody else will know it or, more importantly, act upon it.

But some find the spread sheets pretty.

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Re: Outstanding Financial Pornography

Postby deaddog » 01 Dec 2011 17:53

ghariton wrote:
Which means that you will be in possession of an important piece of information which, unfortunately will be of no use to you as an individual investor -- since nobody else will know it or, more importantly, act upon it.
George


I wait until someone else realizes the value and acts on it.

Just keep an eye on supply and demand. Buy when the price is down and sell when it's up. Why make it any more complicated than that. Be prepared to make a mistake, admit it and try again. It's holding on to your mistakes that kills you.
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Re: Outstanding Financial Pornography

Postby Shakespeare » 01 Dec 2011 18:05

But some find the spread sheets pretty.
I remember getting a book from the library (perhaps one of the editions of The Intelligent Investor) that had those impressive-looking formulae. I played with them for a while and decided that they were so sensitive to assumptions when calculating present value that they were effectively worthless - although the reverse calculation (growth rate from present stock price) is sometimes useful.
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Re: Outstanding Financial Pornography

Postby kumquat » 01 Dec 2011 18:18

deaddog wrote:Buy when the price is down and sell when it's up. Why make it any more complicated than that.

I think Will Rogers said it best:
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it.
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Re: Outstanding Financial Pornography

Postby deaddog » 01 Dec 2011 19:57

kumquat wrote:I think Will Rogers said it best:
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it.

Will almost had it right. It should have been if it don't go up don't hold it. :wink:
Thats the only way you can lose a lot of money is by holding on the stocks that go down.
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Re: Outstanding Financial Pornography

Postby ghariton » 01 Dec 2011 23:31

deaddog wrote:Just keep an eye on supply and demand. Buy when the price is down and sell when it's up. Why make it any more complicated than that. Be prepared to make a mistake, admit it and try again. It's holding on to your mistakes that kills you.

Fair enough. But then what does "fundamental value" have to do with it? That's a form of technical analysis.

Again, when I first traded individual shares, I tried your method. I would buy, and if the stock price went down by 10% I would sell. I missed a lot of very big gains that way -- Hewlett Packard, IBM, and especially Qualcomm.

On the other hand I chased Ericsson and Nokia up about 20%, bought, and went on to double my money in each.

That was about when I attributed my gains (and my could-have-beens) to dumb luck.

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Re: Outstanding Financial Pornography

Postby DenisD » 01 Dec 2011 23:46

Relying on dumb luck is okay as long as the odds are in your favor. :wink:
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Re: Outstanding Financial Pornography

Postby Shakespeare » 02 Dec 2011 00:04

DenisD wrote:Relying on dumb luck is okay as long as the odds are in your favor. :wink:
Does that mean the "dumb" or the "luck"? :wink:
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Re: Outstanding Financial Pornography

Postby DenisD » 02 Dec 2011 00:31

Personally, I'd rather rely on smart luck than dumb luck. 8)
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Re: Outstanding Financial Pornography

Postby deaddog » 02 Dec 2011 01:24

ghariton wrote:
Fair enough. But then what does "fundamental value" have to do with it? That's a form of technical analysis.

Again, when I first traded individual shares, I tried your method. I would buy, and if the stock price went down by 10% I would sell. I missed a lot of very big gains that way -- Hewlett Packard, IBM, and especially Qualcomm.

On the other hand I chased Ericsson and Nokia up about 20%, bought, and went on to double my money in each.

That was about when I attributed my gains (and my could-have-beens) to dumb luck.

George

Fundamentals are a tool to compare the perceived value of a stock. Investors need a reason to buy. Here are a bunch of numbers you can use to compare different stocks.

Here is what the company earns; here is what Mr Market wants to sell the company for. If you think it’s a good deal then you buy, if not you can wait for a better deal.

What was your reason for buying the stocks that went down 10% at the price you paid? How about the ones you chased?

You would make a good trader if you have the discipline to cut losses at 10% and ride your winners to a double. With that kind of risk reward you only have to have 2 winners to come out ahead after 10 trades.
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Re: Outstanding Financial Pornography

Postby adrian2 » 02 Dec 2011 10:13

deaddog wrote:You would make a good trader if you have the discipline to cut losses at 10% and ride your winners to a double. With that kind of risk reward you only have to have 2 winners to come out ahead after 10 trades.

That's the theory. In real life, how many times did you get a double and how often did you get a 10% loss?
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Re: Outstanding Financial Pornography

Postby kcowan » 02 Dec 2011 10:32

adrian2 wrote:That's the theory. In real life, how many times did you get a double and how often did you get a 10% loss?
With the VIX these days, 10% losses are so frequent that I would guess 100:1 unless you are playing penny stocks. :cry:
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