Archive for June, 2007

I’ve had lunch with a few millionaires this week and I’m beginning to wonder if ANYONE out there is actually getting rich via the mutual fund route? It seems to be that if you want to make real money (tens of millions and up), you really need to have a great business idea. I have yet to meet anyone with significant wealth that got there by investing in mutual funds.

I’ve written about this before, the millionaires I know got there by either owning businesses, exercising stock options, or dumb luck (Vegas). I’ve yet to meet anyone who got rich with mutual funds. Yes, I know you can save $1000/year with 10% return for 40 years and get into the millions but with inflation, these millions won’t be worth what most people think they’ll be worth.

Oh well, if anyone knows of any mutual funds millionaires, please let me know. Oh, I do know a people get rich with mutual funds, the guys selling them (Vanguard, Fidelity) rake in hundreds of millions, I’m talking about individual investors.

In the meantime, you can check out http://www.etfcoveredcalls.com to see what my alternative to Mutual Funds is all about.

I didn’t see much coverage of this and I thought it was fairly interesting.  Seems China is opening gold trading to banks through a new exchange.   This bodes well for gold and I might entertain the idea of revisiting one of my favorite ETFs GDX.

The Shanghai Gold Exchange will launch individual gold bullion trading nationwide in July by teaming up with Industrial Bank.

    The exchange will hold a joint briefing with Industrial Bank about the service in the first part of July, said the gold bourse yesterday.

    It will later launch trading through Huaxia Bank. Industrial and Commercial Bank of China is likely be the third player to join the scheme.

    Under the plan, individual investors will be able to trade gold from a minimum threshold of 100 grams, which would require about 16,000 yuan (US$2,099) based on yesterday’s prices on the bourse.

If you would like to read the whole article, click here.

Well the credit card arbitrage game has finally made it to the Wall Street Journal which means it’s pretty much over.  The article also confirms something I’ve always suspected too; the credit card companies have mostly removed the caps on the balance transfer fee (normally $75).  For those people that don’t read the fine print, it means that banks have found a way to sucker people into getting into the balance transfer game yet getting caught (with their proverbial pants down) with the balance transfer fee.

Currently, I have 100k in credit which means if I did a 50k balance transfer with a 3% uncapped fee, I’d pay $1500!

I currently have about 25k in arbitrage and after I unwind this in late July, I’ll be moving on to other arbitrage games I’ve discovered.  I’ll prototype them and if they work, I’ll keep it to myself for a while until it becomes mainstream enough to share with everyone.

In the meantime, happy hunting.

I flew a few days ago and noticed something new that sent a chill up my back.  No, it wasn’t the inept TSA agents confiscating my shampoo bottle because it was 2 inches too big, it was the long line of wheel chairs aligned along the wall waiting to pre-board my flight.  It suddenly hit me that in less than 10 years, there would be 80 million boomers retiring and a large percentage would probably be planning on traveling various places.
If there are a half dozen people waiting to pre-board now, what will happen in 10 years?  How about 15 years?  Will flights be delayed because there’s 30 people waiting in wheel chairs to board a plane?   It wasn’t just the pre-board flight though, it was the long line going through TSA checkpoints that added delays too.

Of course, all those wheelchairs need to be pushed by someone so that means more airport employees cluttering the already overcrowded understaffed TSA checkpoints and other airport walkways.  Perhaps it will mean more airport carts driving up/down the walkways too.

Of course, then I started thinking about all those parking spaces with the wheelchair logo; Will most parking lots be dedicated for handicapped parking?

What about grocery stores and retail outlets?  I recall a couple of older people arguing over who was getting the electric shopping cart at Target one day but didn’t give it a second thought until now.  What happens when there’s 30 people waiting for these?

Of course, this led me to all sorts of investment ideas but I’m not sure if I could capitalize on them yet but it did concern me greatly that the logistics of every retail store, airport boarding line, parking lot and anything else you can think of will have to change radically to accommodate our aging population and the needed wheel chairs.  It’s going to be a different world very soon.

Alright, you can officially call me a flip-flopper.  I saw an opportunity yesterday and I took it.  Earlier this year I was averaging about $750 to $850 a month in ETF Covered Calls and I’ve now tweaked and boosted to $1000 to $1300 so far this summer.  The ETF-Cashinator told me to go for the kill so I picked up 800 shares of USO at $52 and sold in-the-money contracts at $1.70 to rake in $1300. This represents 3.2% return in 33 days. With unrest in Nigeria, hurricane season upon us, geo-political unrest in the middle east (Iran/Iraq) and China firing on all billion cylinders, I had to make a little profit off of energy.

With any luck, I’ll get called in July and move on to what the ETF-Cashinator tells me to move on to. No emotion trading here, the ETF-Cashinator crunches the numbers and tells me where to go to make money with my specified targets (1.5% to 3.5% per month). With this last trade, my portfolio is now up 15.2% from December 06 through July 07.

This past Friday I got called on OIH at $170 and GDX at $39 so I pocketed $1300 and am now sitting in 100% cash.  This is all part of the plan since I’m concerned about end of the month’s Fed meeting.  I have been waiting for an interest rate hike and I suspect we’re getting close to one.  Once that happens, the markets are going to tank.  The 10 year Treasuries have been spiking up and this is a bad warning sign.

I’m sitting high and tight in cash until something happens with Treasuries or the Fed meeting.  My return for the past 30 days was 3% so I’m happy and met my goal.

One of the shows I’ve been watching this summer is Donnie Deutch’s The Big Idea. Each show, Donnie interviews a person who had a great idea, started a business and made millions. It’s always interesting to see all the simple ideas that translated into millions of dollars for many people.

Although I frequently watch the show, I’m sure I’ve missed a few episodes such as:

1. The episode where Donnie interviews a guy whose path to millions was “I spent less than I earn”

2. The episode where Donnie interviews a gal whose path to millions was “I invested in mutual funds over the long term”

3. The episode where Donnie interviews a person whose path to millions was “I opened an HSBC account and saved my way to millions, 5.05% at a time”

4. The episode where Donnie interviews a person whose path to millions was “I skipped the Latte every morning”

I’m sure I’ll eventually catch it on a re-run.  Hopefully, I’ll land on the Big Idea and talk about how my ETF-Cashinator filled a need out there that was desperately needed as an alternative to mutual fund gouging investment firms.

In the meantime, you can check out the ETF-Cashinator over at http://www.etfcoveredcalls.com where you can find some pretty useful information.

There’s a great article over at seeking alpha that led me to this great report about a case study from Ibbotson Associates detailing how SPY Covered Calls beat S&P 500 index investing with less volatility as an added benefit.  The article focuses on the Buy/Write S&P 500 Index (BMX) and compares it to S&P 500 returns.  Whereas the article sticks to  BMX and the S&P 500,  I go a step further and seek, through the ETF-Cashinator®, the optimum high yield covered calls on any ETF that meets my special criteria:  1.5% to 4% return in a 30 to 45 day period, 100k+ volume,  Dividend potential, growth potential, and volitility.

Ironically, the BMX historically has returned 12.34% annually while I’ve been averaging 18% to 22% returns annually with up/down volatility proven beneficial on each of my trades!

Of course, despite the increasing evidence that this is a pretty darn good way of investing, the caution and reluctance to recommend it is still there. That’s perfectly fine by me. The more I can profit from this by myself the better for me. Although I’m already looking at the next great thing since the media seems to be giving this attention more and more as more articles on this methodology seem to keep coming out now.

What’s the next great thing? Shh…..it’s a secret for now as I model and study it further.

I’ve finally figured out why I get so annoyed at most PF Bloggers. I often find most of the advice given too simplistic, unrealistic or contrary to common sense but those aren’t the reason I get annoyed. I get annoyed because there aren’t enough PF Bloggers out there that I could actually consider “peer” bloggers. Being frugal is something that I’ve been way beyond for a while now; My money calculations always favor TIME over MONEY. I won’t spend an hour looking to save $10 on something because I don’t want to lose an hour. And while I’m sure someone will say that I’m wasting $200/month in dry cleaning or $100/month in lawn service or squandering nickels and dimes here and there, I really don’t need to be lectured on TVM calculations; Plain and simple, I don’t want to spend hours ironing pants and shirts or hours out in the hot sun mowing my lawn. I’ve already done the calculations and concluded that I want to OUTSOURCE these functions.
Today, I’m paying homage to key PF Bloggers that, in my opinion, make the PF Blogger world a great place.
What makes these PF Bloggers great?

A few things:
First, these folks have FOCUS. They have a passion for what they do and you can read it in almost every post they write. Some go to great details to focus on details, analysis and most importantly EXPRESS THEIR OWN INDEPENDENT THOUGHTS. These bloggers don’t tend to dwell on political correctness or trying to appeal to mass audience too much.

Second, in addition to having focus, these bloggers are keen on achieving greater wealth through their own investment strategies and blog about it appropriately. Their primary goal is to make MORE money sometimes taking aggressive risks and sometimes being cautious. They tend to have a balanced approach.

Lastly, these bloggers don’t regurgitate recycled material over and over again. There is always something interesting to read at these sites and I often come away learning something new or seeing things from a different perspective.
It is no surprise that many of these bloggers have high net worths and I’m guessing that if there were some way to rank all PF Bloggers by net worth, this group would be in the top 10% if not top 5%. I don’t have any way to back that up but I simply get a sense that they are the top of the class “A” bloggers.

So to the following, I want to say THANK YOU for your blogging efforts. Although I don’t comment too frequently on other blogs, I have periodically stopped by to post one or two here and there. Without further a due:

http://www.1stmillionat33.com/

http://www.thedividendguyblog.com/

http://www.thesunsfinancialdiary.com/

http://trishasblogsite.blogspot.com/

http://redhotresources.blogspot.com/

http://moneyshaker.blogspot.com/

An honorable mention to:

http://oneguysinvestments.com/

http://www.gracecheng.com/

http://www.peridotcapitalist.com/

http://bankdeals.blogspot.com/

http://www.lazymanandmoney.com/

And a very special mention to http://www.pfblogs.org which I came to love and become somewhat addicted. I’m sorry to say however, that I’ll be dropping it from my bookmark list and won’t be visiting the site too often any more. The site has become too cluttered with “Headliners“, “Finance 101” and “Debtor” blogs. Where there were perhaps 100 of these 6 months ago, there now seem to be 300 to 400. I also frequently get the dreaded “PF BLOG DOWN FOR MAINTENANCE” every time I click onto the next page on the site.
I’m sure that eventually the site will be improved and I’ll come back but it’s just too time consuming to find good content for me these days. Remember how I favor TIME over MONEY? If I could pay for improvements I’d do it! I feel like I’m panning for a nugget of gold through 400 tons of sand when sifting through the links at PFBlogs but I still love the site it’s just eating up too much of my time!

There is a grand conspiracy to keep you from getting rich and I’m about to reveal it. It’s so sinister that I debated for days on whether or not I should tell all my readers but I decided that it was in the best interest of everyone to reveal this secret.

Before I tell you though I need to give you a little bit of context. The best way to give you the context is to describe a scenario that I’ve seen over and over again that has confirmed the sinister yet subtle conspiracy to keep your from getting rich.

I first learned about this sinister conspiracy as a young kid; when I look back now I realize how ignorant and dumb I was for not seeing it then but it’s all perfectly clear to me now. As I grew older, I saw the same thing happening over and over again. By the time I was a teenager and going off to college I knew that this little sinister plot I had learned about would help and hurt me. I’ve NEVER revealed this to anyone except a friend last week and now I’m telling all of you.

Ok, here’s the scenario that I’ve simplified to make sure it’s easy to understand: First, you take about 100 people and you put them in a room. You ask these hundred people to do various tasks and you secretly test and record their activities.

The first task is to find out which of the 100 people have book smarts. You administer a math and science test and realize that out of 100 people, 10% were really smart, 10% were really dumb and the rest were average.

The second task is to find out which of the 100 people have aptitude for sports activities. It turns out that 10% are great athletes, 10% are horrible athletes and the rest were average.

I hope you can begin to see the pattern here; the sinister conspiracy!

The third task is to find out which of the 100 people have artistic capabilities. It turns out 10% are great artists, 10% are horrible artists and the rest were average.

The fourth and final task is to find out which of the 100 people have an aptitude for finance. It turns out that 10% are great finance gurus, 10% “below average” and the rest were average.

The Real and ONLY Reason People Aren’t Getting Rich is because these people mostly fall into the “average” or “below average” categories. The people that are getting rich are in the top 10% category. It’s plain and simple. It is a sinister conspiracy discovered over and over again by kids in school during athletic play, academic testing, social interaction and many other places. This sinister conspiracy actually has a name, it’s called Normal Distribution and it is embedded into every living creature, every material object, every aspect of the universe. There is no escaping the Normal Distribution but there is always a chance for you to move ever so slightly from one part of it to another.

There you have it and I hope you’ll accept it. You can deny it all you want but the universe operates in this manner and I give you my 100% Iron Clad Guarantee that this is so. Because I learned this secret years ago, I’ve had a head start by constantly working to move toward the right part of the distribution curve. I’m nowhere near the top, just slightly above everyone else and that has made all the difference.