40 years ago, Motorola had not invented the cellular (mobile) phone.
Today, wherever you are in the world, you've probably heard of the mobile phone - unless you're a member of a recently discovered ancient "tribe" in the Amazon rainforest. There are now almost as many mobile subscriptions in the world as there are people.
Imagine if you knew today what could be a business phenomenon like the mobile phone 20, 30, 40 years from now. Even better, imagine if set yourself and/or your dependents up now to make money from such a phenomenon.
Well, fellow self-directed (retail) investors, one way to discover future business gems is to research and study trends. A trend simply is the progressive tendency or inclination of something.
I have identified the following six global trends that are facilitating the emergence of companies and businesses likely to make their investors very rich years from now:
Showing posts with label strategy. Show all posts
Showing posts with label strategy. Show all posts
Wednesday, February 20, 2013
Wednesday, February 13, 2013
WHAT’S WRONG WITH NIGERIAN STOCK MARKET REPORTS?
The short answer is that they are useless for stock market investors.
Whenever I read a local newspaper report on market activity on the Nigerian Stock Exchange (NSE) I’m just frustrated. All you get is that the market gyrated by some basis points and who the gainers and losers were. That’s it.
There’s hardly any mention of what moved - or could have moved - the market or a stock. Nothing inspires or motivates you to look deeper into the market or a stock for possible investment. Nothing makes you curious about stocks or the stock market. It’s like the journalists are too lazy to write something insightful.
For example, look at the stock market report for Monday, February 11, 2013, from Nigeria’s Business Day. Now compare that report to this report for Tuesday, February 12, 2013 from Reuters on U.K. market activity. See the difference? Nigerian commentators don’t try to connect the dots for uninitiated readers.
It’s no different when I hear a market report on radio.
Maybe this lack of easily-accessible and insightful stock market information is why most Nigerians don’t care about investing in stocks, which remains one of the easiest and fastest ways to make money wherever you are in the world.
I’m amazed at the increasing number of Foreign Exchange (forex) trading seminar ads I see in Nigerian newspapers. I doubt Nigerians trade forex in droves. Nonetheless, if Nigerians can take to forex trading then they can take to stocks trading because the forex market is a lot more complex than the stock market and Nigerians love simplicity.
Nigerian stock market commentators and writers need to do more than report statistics. The Financial Times and The Wall Street Journal are dailies yet they certainly try to get behind the numbers.
The regulators should take note. There’s no point in the Central Bank of Nigeria and/or the Securities and Exchange Commission compelling companies to list on the NSE when a majority of Nigerians don’t have the financial education to invest in the stock market.
I became a self-directed investor in 2006 - a year after I got out of B-School in the U.S. At the time I knew nada about investing in stocks, other than what I’d learned at B-School.
I learned the basics of stock market investing mostly from reading financial dailies and periodic magazines – Fortune Magazine is great for investigative journalism. I also frequented educational sites like the Motley Fool (www.fool.com) and Investopedia (www.investopedia.com).
I was so excited about what I was learning that I started this blog to share as I learned.
Monday, September 08, 2008
eBay Fees Were Killing Me So I Bought the Stock
The Chief Financial Officer (CFO) position at eBay should auction to the highest bidder, hopefully a linear programmer, because the company just cannot make up its mind how much to charge sellers for listing items. The latest ‘renovation’ of prices – the second of the year - happened about two weeks ago and takes effect on September 16. This time the firm cut the fees it charges sellers for fixed price listings.
I do more selling than buying on eBay. Therefore, I have often wondered if the CFO, or whoever is in charge of pricing, has a clue. I have been trading on eBay since 2005 and I don’t remember a year when there was no tweaking of seller fees. It has become an increasingly irritating ritual.
I guess eBay is trying to attract more buyers by encouraging sellers to list items at fixed prices, rather than letting buyers go at it via auction. However, eBay will cease to exist if it kills auctioning. Auction sales are what make eBay fun and enticing for sellers. A fixed price sale cannot give a seller the adrenalin rush of watching buyers snipe one another as an auction reaches a crescendo.
A related issue to listing fees is the “Final Value Fee (FVF)”, which is eBay’s cut on an item’s sales price. Try selling pricey items like gaming devices or multimedia storage devices and watch these fees snowball.
In 2007, I’d finally had enough of the incessant tweaking and bleeding fees and decided there was only one way to fight back: buy the stock. Dividends should soothe the pain of high sales fees. Yes, I know eBay, like many growth tech stocks, has never paid a dividend but that’s another matter. If you intend to trade on eBay for a long time, buying the stock is a good way to hedge against the tweaking and bleeding. If you do not intend to trade for long, eBay still is not a bad stock, so long as they have PayPal.
Friday, February 29, 2008
The Central Bank is Killing Us!
Unemployment or Inflation: Which is the better of these two evils? Put another way, if you were the governor of a Central Bank what would concern you the most: average Joe losing his job today - unemployment - or average Joe paying much higher prices for bread and milk tomorrow - inflation? That’s a tough one, isn’t it? Well, that’s the choice Federal Reserve Chairman (or U.S. Central Bank governor) Ben Bernanke and his posse of regional governors – collectively known as the Fed - have now faced for a year.
You would probably say it’s better for average Joe to pay a higher price for bread tomorrow than to lose his job today. Well, guess what. The Fed agrees with you, which is why it’s been cutting interest rates since September 2007. Lately, the Fed has got very aggressive on rate cuts and this is making me nervous. Chairman Bernanke reportedly has reduced interest rates faster than any Fed Chairman since 1982.
However, when the subprime slime started around this time in 2007 the Fed saw things differently. Back then, the Fed was more concerned about inflation than job losses and was more reluctant to cut interest rates. So what changed the mind of the Fed? I don’t know. Perhaps it’s politics, since it’s an election year. Whatever it is the Fed has blown it. It’s now trying to prevent a recession at the risk of higher inflation tomorrow. Big mistake.
Interest rate cuts fuel inflation by weakening the dollar and thus making imports more expensive. Rising oil and food grain prices, which the Fed cannot control, also fuel inflation. So hasn’t it noticed that oil is now over $100 a barrel and that the price of wheat, which is a principal ingredient in many food products, reached a record high last week? Gold, which is a natural hedge against rising inflation, is fast approaching a record $1,000 an ounce and the price of Silver is up almost 34% year-to-date (YTD), a run-up not seen since 1980. By the way, if you don't already have some commodities in your portfolio now is not the right time to buy.
Laugh Now, Cry Later
Maybe the Fed knows something the market does not but it seems to me we already have enough inflation coming our way. In 2007, inflation jumped 4.1%, reportedly the fastest pace since 1990. No wonder the price of milk at my local organic store has crept up. Why aggressively cut interest rates to put the economy on a K-leg only for inflation to crush it two or three years from now?
I think the Fed’s fear of a recession is misplaced. A mild recession today is better than hyperinflation tomorrow because inflation can do much more damage to the economy than a recession. Inflation can cause a recession but a recession cannot cause inflation. The recession this year probably will be short-lived because of the “economic stimulus” tax rebates the government just approved.
Even if consumers don’t spend the bulk of their rebates businesses will reinvest their tax credits, which will boost the economy and stave off a brutal recession. So the chances of average Joe being unemployed for a long time if he lost his job today are slim. However, if we get hyperinflation in a few years…..well, just look at what is happening with food prices in Zimbabwe. Even Wall Street fears inflation more than a recession.
Yes, I know the housing sector is bleeding and the lending department at your local bank won’t give you the time of the day even with good credit. However, it was the aggressive rate cuts by former Fed Chairman Alan Greenspan that partially caused this mess we’re in today. The inflation signal is now flashing red. The Central Bank should stop leading us to the slaughterhouse again with aggressive rate cuts.
Sunday, November 05, 2006
Mind over Matter: Rotation
Once again it’s time to get into the mind of the manager; to examine my investment tactics and strategies.
The worst-known manager essentially follows the "dollar cost averaging" (DCA) principle. In DCA the same amount of dollars is periodically invested in a stock so it really doesn’t matter when it is purchased. If a stock is riding high at the time of purchase, your dollars get you less of it; if the stock is momentarily getting beat up in the market you pick up more of it.
So to a large extent DCA avoids the necessity to time the market to “buy low, sell high” – at least the buy part. Unless you are a day trader, which I am not, timing the market can be difficult.
Also, DCA is much better than periodically purchasing a set number of shares; it doesn’t make economic sense to buy the same number of shares when a stock is trading at $50 and when it’s trading at $20.
I build on the principle of DCA by having a pool of dollars to invest each month. But rather than invest an equal amount of dollars in each stock, I take the pool and slice it to take advantage of seasonal changes.
For instance in Q4 - the holiday season – consumers tend to spend more on tech products. So this quarter I’m likely to put more money in techs and discretionaries – MSFT, EBAY, ADBE, and COST – than in consumer staples – PG or health-care. When the weather is about to get colder or during the summer driving season - when demand for crude oil typical rises - more dollars will be rotated into IGE and SLV.
Furthermore, when the economy slows large caps like PG, EFA, MSFT will see more green than smaller caps and emerging markets – IJR, IWR, and EEM. Large caps do better when the economy slows because they have the market share and resources to weather a slowdown.
As an active investor, this strategy just suits me fine. Since the economy constantly changes it’s only right that the folio take advantage of these changes. So far the strategy has served me well. As of Friday, only ADBE and PBW had posted negative returns to date on a cost basis.
The worst-known manager essentially follows the "dollar cost averaging" (DCA) principle. In DCA the same amount of dollars is periodically invested in a stock so it really doesn’t matter when it is purchased. If a stock is riding high at the time of purchase, your dollars get you less of it; if the stock is momentarily getting beat up in the market you pick up more of it.
So to a large extent DCA avoids the necessity to time the market to “buy low, sell high” – at least the buy part. Unless you are a day trader, which I am not, timing the market can be difficult.
Also, DCA is much better than periodically purchasing a set number of shares; it doesn’t make economic sense to buy the same number of shares when a stock is trading at $50 and when it’s trading at $20.
I build on the principle of DCA by having a pool of dollars to invest each month. But rather than invest an equal amount of dollars in each stock, I take the pool and slice it to take advantage of seasonal changes.
For instance in Q4 - the holiday season – consumers tend to spend more on tech products. So this quarter I’m likely to put more money in techs and discretionaries – MSFT, EBAY, ADBE, and COST – than in consumer staples – PG or health-care. When the weather is about to get colder or during the summer driving season - when demand for crude oil typical rises - more dollars will be rotated into IGE and SLV.
Furthermore, when the economy slows large caps like PG, EFA, MSFT will see more green than smaller caps and emerging markets – IJR, IWR, and EEM. Large caps do better when the economy slows because they have the market share and resources to weather a slowdown.
As an active investor, this strategy just suits me fine. Since the economy constantly changes it’s only right that the folio take advantage of these changes. So far the strategy has served me well. As of Friday, only ADBE and PBW had posted negative returns to date on a cost basis.
| Stock | FirstBuy | LastBuy | RTD (11/03/06) |
| SLV | 9/12/06 | 9/12/06 | 12.97% |
| EBAY | 9/29/06 | 10/23/06 | 9.05% |
| IGE | 9/12/06 | 10/23/06 | 5.88% |
| EEM | 9/29/06 | 10/23/06 | 4.64% |
| MSFT | 9/12/06 | 10/23/06 | 4.52% |
| EFA | 9/12/06 | 10/23/06 | 3.18% |
| PG | 9/12/06 | 10/23/06 | 2.07% |
| COST | 9/29/06 | 10/23/06 | 1.83% |
| IWR | 9/29/06 | 10/23/06 | 1.36% |
| IJR | 9/29/06 | 10/23/06 | 0.30% |
| ADBE | 10/23/06 | 10/23/06 | -0.84% |
| PBW | 9/29/06 | 10/23/06 | -1.54% |
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