World Collapse Explained in 3 Minutes!
Peter Lynch: 8 Simple Investing Principles
Peter Lynch ran Fidelity’s Magellan Fund from 1977 to 1990, beating the S&P 500 in all but two of those years. He averaged annual returns of 29%. That’s a mind-blowing figure. It means that $1 grew to more than $27; if you invested as little as $37,000 with him in 1977, you were a millionaire in 1990.
Fortunately for us, he’s willing to share his secrets. To achieve his stunning track record, he clung to 8 simple principles. Here they are:
1. Know what you own
Seems elementary, right? But as someone who talks to lots of investors, I can report that you’d be shocked at how few investors actually do their research. Scroll down to No. 7 for a good first step in getting ahead of the game.
2. It’s futile to predict the economy and interest rates (so don’t waste time trying)
After 2008’s crash, I noticed a distinct increase in armchair economists. We financial types do enjoy water cooler talk about interest rates, trade deficits, debt levels, etc. But there’s a danger in converting thought into action.
The U.S. economy is an extraordinarily complex system, with 300 million people acting in their own self-interest and responding to each others’ actions, government incentives, and external shocks. And that’s before we factor in our increasingly frequent interactions with the rest of the world.
Trying to time the market is futile. Set up a financial plan that allocates your assets based on your risk tolerance, so that you can sleep well at night.
3. You have plenty of time to identify and recognize exceptional companies
Lynch mentions that Wal-Mart was a 10-bagger — i.e. its stock rose to 10 times its initial price — 10 years after it went public. Even if you had gotten in after waiting a decade, though, you’d be sitting on a 100-bagger.
Some would argue that it’s still not too late to get in on Wal-Mart, decades after going public. While the company’s no longer a monster growth story, it continues to crank out 20% returns on equity year after year. That type of consistent ROE is a huge positive indicator of management’s ability to effectively allocate capital.
A similar tale can be told about Microsoft’s early growth years, right on down to its still-impressive current return on equity (42%).
And Amazon.com, though only 13 years old as a public company, has seen its stock double since its 10th birthday. Of these three, it’s the only company still trading at growth-stock valuations. Bulls are hitching their wagon to Amazon.com’s ability to expand its role as the premier online retailer, and its upside in the cloud-computing space.
The lesson of Wal-Mart, Microsoft, and Amazon.com? You don’t need to immediately jump into the hot stock you just heard about. There’s plenty of time to do your research first. See No. 1.
4. Avoid long shots
Lynch claims he was 0-for-25 in investing in companies that had no revenue but a great story. Remember, the guy who averaged 29% returns went oh-fer on long shots. You and I are unlikely to do much better.
Use companies with proven track records as our baseline. ExxonMobil, IBM, and Procter & Gamble are selling for 9, 11, and 16 times forward earnings, respectively. This is what the market is charging for solid, low-to-moderate-growth companies that dominate (or at least co-dominate) their spaces. Expect to pay more for higher-growth prospects, but make sure the risk-reward trade-off on an unproven company is worth it.
5. Good management is very important; good businesses matter more
The pithier Lynchism is: “Go for a business that any idiot can run – because sooner or later, any idiot is probably going to run it.”
For a prototypical example of a so-easy-a-caveman-could-run-it company, think the aforementioned Procter & Gamble.
6. Be flexible and humble, and learn from mistakes
Lynch has said: “In this business, if you’re good, you’re right six times out of 10. You’re NEVER going to be right nine times out of 10.”
You’re going to be wrong. Diversification and the ability to honestly analyze your mistakes are your best tools to minimize the damage.
7. Before you make a purchase, you should be able to explain why you’re buying
Specifically, you should be able to explain your thesis in three sentences or less. And in terms an 11-year-old could understand. Once this simply stated thesis starts breaking down, it’s time to sell.
8. There’s always something to worry about.
Lynch noted that investors made a killing in the 1950s despite the very new threat of nuclear war. There are plenty of fears to choose from right now, but we’ve survived a Great Depression, two world wars, an oil crisis, and double-digit inflation.
Always remember, if our worst fears come true, there’ll be a heck of a lot more to worry about than some stock market losses. Lynch’s parting shot is that investing is more about stomach than brains.
Peter’s principles in action
So there you have it. These are the 8 principles Peter Lynch used to bring the market to its knees. They seem simple, but trust me, sticking to them is harder than it sounds.
Source: Motley Fool
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
1 Person Has Something To Say Add Your Comments Too!Michael Maloney :The Tipping Point is Upon Us!!
The tipping point is upon us!
A “tipping point” in sociological theory is defined as “the level at which the momentum for change becomes unstoppable.” An idea or a movement has reached “critical mass.”
I believe the global economy has reached that point.
During my travels, one of the most remarkable phenomena I have observed is the extent to which the people of the world have been transformed, in the course of a generation or two, into investors.
This tipping point corresponds to the beginning of the second phase of the current bull market in gold and silver. In almost any bull market throughout history, the second phase of the cycle, when the public really becomes aware a bull market is occurring, is the longest phase in duration and also the phase when the greatest gains are made.
Over the past year I have had the privilege to take part in various speaking tours in numerous countries throughout Latin America and Asia-Pacific. During my recent partaking in the first Silver Summit in Singapore I had a strong sense that the second phase of the greatest gold and silver bull market in history is beginning. Here’s why:
Never before in history have all the world’s currencies been fiat currencies at the same time. Remember fiat currencies are established by government decree and have no intrinsic value. Because every currency in the world is a fiat currency, there is no place to run to protect your wealth against government confiscation by continuing to print more and more currency—nowhere to run, except to gold and silver.
The same phenomenon exists, everywhere in the world. The number of Australian dollars in existence has multiplied 180 times since 1960. There are 389 times more Taiwanese dollars in existence today than there were in 1962. Every government in the world is pursuing the same policy of currency debasement—and as a result—there is more than 10 times the currency circulating world-wide than there was in the 1970’s.
Here’s another big change between then and now: In the 1970s, during the last great gold and silver boom, 90 percent of the global population had no way of participating in the bull market. That’s because in the Communist Soviet Union and in Mao’s China, no markets existed, and there was not a single individual investor among those enormous populations. It was only America and Western Europe that drove gold and silver prices to their stunning heights.
This time around, the world is very different: there are billionaires in Russia, China, India, South America—every continent (except Antarctica) has its billionaires. The richest man in the world, Carlos Slim, lives in Mexico City.
Today, there are 10 times more people on the planet who have the freedom and the means to chase the next big thing, driving up market prices in the process.
Not only are there 10 times more people with the ability to participate in the market, there are somewhere between 10 and 100 times more people today who have an investment mentality than in the 1970s. Back in those days, before Nixon took us off the gold standard, people were savers. You could go to work in your teens or early 20s, save 10 percent of your income each month, and by the time you were in your 60s, you could retire and live the rest of your life off the interest on your savings.
That saver mindset evaporated the second Nixon ended the gold standard. From that day on, if you planned to enjoy your retirement, you were forced to become an investor or a speculator. The NASDAQ tech bubble of 1999 turned everyone into a day trader. The real estate bubble turned everyone into a flipper. Today, I hardly know anyone who doesn’t have an investment mentality.
This philosophical shift didn’t just occur in the United States; it happened everywhere. In modern China, investing is a sport, and Shanghai has its own riotous stock exchange.
And with the explosion of deficit spending and fiat currency creation, all over the planet, the next great bubble is destined to be precious metals. As people rush back to gold and silver to protect their wealth, they are going to drive precious metals into a bull market the likes of which the world has never seen. Those on the right side of the bubble will profit immensely.
The 2010s will be an exciting decade. For years I have been saying we have been presented with the greatest opportunity in the history of humankind, because global economic conditions are setting up the greatest transfer of wealth in history.
So, in a nutshell, in the gold and silver bull market of the 2000s compared to the metals bull market of the 70s, you have 10 times more people able to invest, of whom 10 to 100 times more possess an investment mentality and ready to pile onto the next big thing, and there’s 10 times the money (currency) in existence.
A critical mass of world investor’s are recognizing the unsustainable nature of the fiat system. And the second phase of this bull market is beginning right now.
The tipping point has been reached!
Source: GoldSilver.com
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Do You Have Something To Say? Add Your Comments Here!Warren Buffett’s Top 10 Investing Tips
Below is Warren Buffett’s top 10 nuggets focusing solely on his area of unquestioned expertise – investing, NOT trading:
1. The Snowball
Buffett’s definitive biography, “The Snowball,” is titled so because it sums up his life in two words. Over everything else, Buffett believes in the power of patiently compounding over time. In investing, that means starting as early as possible (he started as a pre-teen), avoiding short-term risks even if it means lower possible returns (rule No. 1: never lose money), and letting investing returns build upon itself.
2. The concept of a “moat”
Buffett looks for companies with moats, or sustainable competitive advantages. The strength of Coca-Cola’s moat (its brand) is why he believes a ham sandwich could run it. The stronger a company’s moat, the more likely it will be a leader for decades rather than years. For examples, see some of the other companies Berkshire Hathaway owns a significant stake in: Johnson & Johnson, GEICO, Procter & Gamble, and Wells Fargo.
3. “Leverage is the only way a smart guy can go broke.”
Buffett believes debt is dangerous. That’s why you can have banks rife with Harvard MBA’s (hello, Goldman Sachs and JPMorgan) that are always a few days away from bankruptcy via a crisis in confidence.
4. The concept of inner scorecard vs. outer scorecard
“If the world couldn’t see your results, would you rather be thought of as the world’s greatest investor but in reality have the world’s worst record? Or be thought of as the world’s worst investor when you were actually the best?” Those who answer the latter have an inner scorecard. They’ll have the ability to be a true contrarian, ignoring the world’s judgment and focusing on long-term results.
5. “Intensity is the price of excellence”
When asked what the most important key to his success was, Buffett answered “Focus.” Microsoft founder Bill Gates answered the same way. Buffett reached his current heights not only because of his brilliant mind, but also because of a focus that has had him analyzing stocks for hours on end, just about every day, for decades.
6. A stock is the right to own a little piece of a business
Buffett’s mentor Benjamin Graham’s idea. We frequently divorce a stock from its underlying company, especially when Mr. Market is delivering up a volatile stock price. Remember, though, that in the long run, a stock is only as good as the company backing it up. Kind of like how a promise is only as good as the person making it.
7. Don’t fall into the false precision trap
“We like things that you don’t have to carry out to three decimal places. If you have to carry them out to three decimal places, they’re not good ideas.” It’s important to keep the big picture in mind. A 20-tab Excel model that calculates a company’s value on a discounted cash flow basis is useless unless you understand the business enough to feed in good assumptions. When Buffett made a killing on PetroChina earlier in the decade, the mispricing was so obvious that his only due diligence was reading its annual report. Not recommended for mere mortals, but you see his point.
8. “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Remembering the Buffett concept of an inner scorecard, and the Rudyard Kipling admonition to “keep your head when all about you are losing theirs,” can lead to outsize returns as Mr. Market sways back and forth.
9. Margin of safety
As with many of his most beloved tenets, Buffett got this one from his mentor, Benjamin Graham. A margin of safety simply means buying in at a price well below your best estimate for a stock’s intrinsic value. In other words, don’t just buy names like Visa and Johnson & Johnson because they are great companies with strong moats. Go the extra step, and only buy them when they are great companies selling for good to great prices.
10. “A ham sandwich could run Coca-Cola.”
Believe it or not, that’s a compliment to Coke. It speaks to why it’s Berkshire Hathaway’s biggest stock holding. As Peter Lynch put it, “Go for a business that any idiot can run — because sooner or later, any idiot probably is going to run it.”
Source: Motley Fool
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
2 People Have Something To Say Join In The Discussion!Jim Rogers: U.S. Government Spending Is Like Tiger Woods Dating
Jim Rogers, chairman of Jim Rogers Holdings, shared on CNBC on a wide range of issues ranging from the FED chairman Ben Bernanke, Timothy Geithner, gold, silver, copper, commodities, agriculture, U.S. dollar, Yen, Swiss Franc ..etc. Jim Rogers for the first time says that he is temporary bullish on the U.S. dollar because there might be a rally soon. He confirmed that he is not buying nor selling any gold at this point but he might buy some more if the gold goes back again to US$1000/ounce. Jim Rogers does not see any bubble in the gold at this stage because he says most investors still never owned any gold…. He also mentioned that he prefers silver and palladium to gold because silver is still 70% below its all time high. Jim Rogers is as usual still very bullish on agricultural products and commodities.
Source: CNBC
Helicopter Ben
Federal Reserve Chairman Ben Bernanke, whose academic research when he was a professor of economies at Princeton was on Japan’s recessionary woes, in his now infamous speech in 2002, talked about dropping money from helicopters if need be to prevent an economic downturn such as the one Japan experienced. He revealed how far the Fed is prepared to go to prevent deflation. His solution is to keep throwing more and more currency, NOT money, at the problem. Isn’t that what he is doing right now?? Printing SO MUCH U.S. dollars to get U.S. out of the BIG MESS that it is in?!! This continuous devaluing of the greenback will in turn drive up the prices of gold, silver and other U.S. dollar-denominated commodities.
I.O.U.S.A. – One Nation. Under Stress. In DEBT.
U.S. IS IN VERY VERY SERIOUS DEBT PROBLEM!!! It has 4 serious deficits, namely: Budget, Saving, Trade and Leadership Deficits. Take a look at the 30 minute documentary below and you will understand why the days of U.S. been the world’s most powerful economic nation are numbered and we are seeing the giant slowly bleeding to death right in front of our eyes…………
Do You Have Something To Say? Add Your Comments Here!Marc Faber: U.S. Dollar Will Eventually Go to “Value of Zero”
Marc Faber, publisher of the Gloom, Boom & Doom Report, appeared on Bloomberg, stating his view on the inflation/deflation, strong and weak US dollar debate. According to him, during inflationary periods, the losers will be cash and treasury bond; the winners will be foreign currency, commodities and equities have some power to hedge inflation.
Source: Bloomberg
2 People Have Something To Say Join In The Discussion!Gerald Celente-There Is NO Economic Recovery – Its A COVERUP!!
Gerald Celente, a trend expert, visionary, keynote speaker, is trusted worldwide as the foremost authority on forecasting, analyzing and tracking trends. Celente is the publisher of the Trends Journal® and author of Trends 2000 and Trend Tracking. He is on the record for accurately forecasting and naming the current “Great Recession”; for forecasting the 1987 Stock Market Crash, the Dot-com bust, Gold Bull Run to Begin, 2001 Recession, the Real Estate bubble, the “Panic of ‘08″, Tax Revolts, the coming “Greatest Depression” and many more social, economic, business, consumer and geopolitical trends…
Do You Have Something To Say? Add Your Comments Here!China May Overtake Japan As The World’s 2nd Largest Economy in 2010
Currently, U.S. is the world’s largest economy, followed by Japan and China respectively in the 2nd and 3rd placing. Because of this financial crisis, economists point out that China may have a chance to overtake Japan as the world’s 2nd largest economy in 2010, 5 years ahead of what the experts have anticipated. With China slowly conquering Japan’s export market and a reduction in productivity due to the aging population, this will cause a further decline in the Japan’s economy. The outlook for Japan for the next 10 or 20 years maybe quite bleak. Look at the Nikkei 225 chart below, the index for Japan stock market is still way way below the highest level in the 1990’s because of the famous “lost decade”.
In the 80’s, Japan’s GDP had surpassed that of U.S. once but now, Japan’s GDP is only 75% of that of U.S. and it is ranked No. 19 in the whole world. Japan’s unemployment rate is at 5.7% currently. For the 1st quarter of 2009, Japan’s economy has contracted 11.7% y-o-y, 2nd quarter GDP has only managed a 2.3% growth. Economists predicted that the Japan’s economy may decline by 3% this year and expand by only 1% next year; whereas China’s GDP is fore-casted to grow 8% this year.
At this point of time, China’s net income per capita is not even 10% that of Japan, but China’s economy has already overtaken that of Japan in terms of other economical factors. In fact, the purchasing power of the Chinese has already surpassed that of the Japanese in 1992, it is expected to overtake that of the American in 2020.
Will China overtake U.S. as the world’s largest economy by the year 2020? It is highly possible. Maybe China’s renminbi will replace U.S. dollar as the new world reserve currency by then too. Only time will tell.
Cheers 
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