ROTH IRA Links

Facts:

– the basic limit for regular contributions to a Roth IRA is $4,000 for people under 50 years of age, and $5,000 for those who are 50 or older. Some conditions apply. Upper limit at annaul income of $94,000?

– Follow the rules and any money you put into one of these retirement-savings accounts grows absolutely tax free — you won’t owe Uncle Sam a dime as you let your savings accumulate, or when you cash it out in retirement.

– you can take out your contributions at any time — not your earnings. If you withdraw any of your earnings before age 59, you’ll trigger a tax bill on the money, plus you’ll have to pay a 10% penalty

http://moneycentral.msn.com/content/Savinganddebt/Savemoney/P147209.asp

http://www.fairmark.com/rothira/contrib.htm

On CXTIE

Rhinophobia, that I am right now. But CXTIE is beggin me to buy it. (Editted: This is no longer true, read my last paragraph) Here is the break down.

Annaul Report here: http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001137050-07-000075&Type=HTML

First off, they have $257mil on contract, using current just return on on assets at 19%, we have fair value of $48.8mil. But don’t forget all the assets. The current market cap is at $82.5 mil, only twice as much.

I will ignore all the current financial numbers, like the current ratio, lets skip this. I am not saying its not important, this is the very basic, if they don’t look bright in this, I won’t even consider wasting my time.  Here some points in the report.

“The Company is the first private enterprise with the authority to provide technological achievement appraisal services for IT.

The Company conducts its principal business operations through its subsidiary ENS which is based in Shenzhen and Fujian, the PRC.  Since its establishment in 1999, ENS has obtained 23 contracts with 12 city or county governments in the Fujian province of the PRC for the provision of large-scale e-government infrastructure construction, consulting, training and maintenance services and 1contract with a city government in the Zhejiang province for the provision of service of design and planning of an e-government system.

The Company does not own any real property.”

Ok, also, with the underlying growth in China, goverment will spend more money to provide the internet infrasturcture. So the industry is sound.

 There is one thing i see in the report, that I don’t like. They are issusing half million of stocks to all of these consultant, not only diluting the shares, but also, this doesn’t reflect as operating or business expense on the finianical statement. If the consulting comissions were paid out of business operating, the net income will be lowered. Also, I smell corruption. Constuant, ya right, more like free stock for gaining favors, much too common in chinese businesses.

Also, Ben Graham probably would not approve this, due to its lack of history. And since its an IT company provides e-goverment service, they don’t really have any good moat around the company. The one upside I see is its the first company got its foot in the door.

So conclusion, I think CXTIE is bargin company with potenital for growth, but its lack of intellectual properties doesn’t provide any barriers for compentation. Until it has more customer base, I think this is a rather risky investment. I should rather stick with Great Business at resonable price, than average company at bargin price.

 I started this post favoring the CXTIE, but after reading the quarter and annual report and some research, they don’t look so attractive to me. bah, selling at limit $3 what I brough it for. Memo to myself, post a report before buy stock next time and stop get influenced by analyists with fancy words and catchy numbers. Research yourself. If they can do it, I can do better. On a good note, it’s good to learn lessons early.

FAST Money on CNBC on China

OMG, that’s all I got to say, I am watching fast money on CNBC right now, and guess what the topic is today? Buy China !! and what else!! Each of them recommend a stock, and guess what the “experts” said?? YZC, PTR, CHL, Baidu, and the9. Guess what? I covered and looked into all of those company report long ago. The9, I haven’t not mention on my blog at all, is a gaming internet company. I don’t like service companies, I like companies that can see the growth, so i dimissed it earlier. There are better choices. Now, I don’t want ride the wave, we want to lead the wave, let the expert follows me around, and raise my stock value after I buys them. what’s next???? Beijf, which I already said. next as big as Coal or YZC is the China Timber, only trade in HK stock exchange. Timber is my next big bet. But I don’t have cash right now 🙁

Chapter – Lots

Outline (to be revisited later)

– min and max of lots

-min: commission rates, transaction numbers, value

-max:limit the max number, concentrated, too many too diversified.

-concept: manageable, scalability, performance, sectors, percentage

Chapter – Investment is a religion

Outline (to be revisited later)

-Books of Mark, Luke, John, Matthew, all have a central point vs. books of graham, Fisher, blah blah

 -A dedication with study groups, analysis, research. Deep understanding

-devotion and contribution

-Character, morals, how to treat your neighbors vs treat stocks as individual. abandon ship when neighbor when friend get moody?

-Religion achieved through yourself, not through your priest or broker.

blah blah

Oneonian First Investment Book – Intro

Ok, I am going to dedicate this section to the random chapters I am going to compose for my first book. The intend of the book is not to describe a magic formula nor re-cap the sound strategies that were set forth in so many great books before us. I want to contribute new sound ideas, oneonian ideas, that were not previously covered. Recall in the movie Wall Street, there was a phrase that really stick onto me of something like, “Instead buy or selling other people properties, go produce something.” However, one simply cannot round off any good investment book without mention some of the most basic building blocks, such as Mr. Market, Margin of Safety, Great Company at bargain price, so forth.

At this time, I think I will compose three main categories in the book: mental, emotion, attitude, perception of Mr. Market, rhinophobia, etc. category; technical category like understanding overall economics, big and small picture, how to research company, financial statements, marginals, options, future, limits, investing, speculating, etc. category; and a third category that I have not noticed in any book but I think it’s essential if you wish to become a GREAT investor, not a profitable investor but a great investor, is the wisdom, personal well-being, up-bring, training, social skills, ethics, character, category.

Anyway, this is of my initial concept how the book will be divided. The content of the book will be in a series of short chapters or stories. My aim is to give each chapter a single point and write some wits to attest it, hopefully I am able to make it easy and fun to read, maybe like as in “Where are the customer’s yachts?”

I don’t like the idea of re-word other people’s idea, readers should pay great respects to those forefathers that originated and had share their great wisdom with us. But like I mentioned, fail to mention these wisdom, would simply render my book incomplete. As a compromise, if the chapter is not of an oneonian (my originated) idea, I will reference the original work in text following the chapter name, and eager readers to read the original context to fully grasp the idea and respect the original author. Maybe leave some catchy lines that would elude the readers to buy or read the original books themselves.

I will continuing to edit these pages, these posts may change from day to day. Please critic freely so I don’t embarrass myself when I finally publish it.

I think the total time-line for writing this book will be around three years as of today August 28th, 2007.

Big Gain on ACH Premarket and China

It seems ACH will gain up 25% in one day today. I know know I sold 1 Lot last week, but I don’t regret it. I need to get out of margin. ACH was my single largest stock by percentage, I wanted to reduce its exposure. If you been following my blog, you know i am big on ACH, I brought 7 lots since June 2007, 2 of those were in margin when market was crushing. Remember you should never allow any past transactions or current Mr. Market to effect your emotions.

Anyway, BUY China, I’ve been saying that for a long time now. To those I know personally, buying Force Protection, or investing in the US war, I say forget it about it. China growth out-weight the stupid war any day. Now that China government had finally allowed its citizens to invest in Hong Kong listing stocks, this will pour HUGE volumes, China Stock regardless, HongKong listing or H share ADR will soar. There, I put my neck out there for someone to chop.

So what to buy? I have ACH, CEO, PTR, YZC, CXTIE, BEIJF in my portfolio right now. CHL, LFC, CPHI on my watch list. If you brought BEIJF with me this past month, it’s going to double by aftermarket today, for some weird reason, I’ve notice it, it only trade in the extended market. 

Sold 1 lot ACH and 1 lot RIMM

ACH 35   08/15/2007 41.00   1444.99   S    08/24/2007 51.04   1778.05   333    
ACH 7   08/06/2007 43.45   306.15   S    08/24/2007 51.04   355.61   49    

 (333+49)/(306.15+1444.99)= 22% gain.

RIMM 15   08/10/2007 70.5429   1068.13   S    08/24/2007 79.38   1180.69   113

(113)/(1068.13)= 11% gain

I don’t want to sell it, but I got to reduce my margin. This take my marginal down to 15%, I brought too much in margin during last week dip.  I need to sell 2 more lot to get out margin. I am going to pour some cash in next month and sell 1 lot of MT in september to get fully out of margin. MT has div pay at 8/31 and going to be listed in another euro index in september, which will create demand. Going to catch that wave before I sell it.

Oh, also I am selling now is to seek cover, since I will be going on a week and half trip.

More on CFC and Mozilo

Ok, after listening to Mozilo interview with CNBC, I decide to buy 1 more lot of CFC. This is why.

1.  My  interpretation of him is that he is a good CEO and on the shareholder side. He is the largest share holder. If the stock is down, he is down. Yes he is selling, only because he doesn’t want to dump all of them at once when he leave the company.  His min. selling price is $28. So I am betting CFC will go as high as $28. I think he chose that number for a reason.

2. In time of crisis, I think he hit the money by clearly identify the problem. It’s not the numbers, it’s the people, the panic people, who are rushing to take the money out of bank, forcing CFC to tap into its credit line. I believe he came on the interview for the biggest of reasons, to re-ensure confidence, which address the core problem. An insight of showing, he knows what he is doing.

2. 4 or 5 major institutes had faith in CFC and willing to make major investments. I know Buffet would not invest in anything that’s not well run. and i am sure the bank went through all the numbers.

3. One down side is, it seems Mozilo is thinking about retirement. CEO has alot to do with the performance. So CFC might not be a long hold, not sure when he is leaving. But if he is a man of integrity, I believe, he will only leave after CFC recovers from this crisis. So within a year or two, I am willing to invest in CFC

4.  A catch thou, of course, he could be so smart and conceivable, he is selling for his own good, blah blah, its a cover up for a big mess underneath. But i believe if BAC can dump $2B into, I am willing to go with Risk.

5. Remember BAC $2B is like purchase the stock at $18, meaning their measured margin of safety is about another $4 from the current $22. Definately buy at $18, but even at $20, maybe $22, with smaller margin of safety is a good choice of us small investors, since we don’t have a big price tag next to our yet-to-know prominent name.

CFC a closer look

I know I know, Spirit of Graham probably frown upon me, and I should of done this prior to buying  CFC, but better late than never.

The initial quick look at CFC  market cap : $12B;  Equity:$14B; Net income:$2B is still valid.  In this post I went to perform some stress test. 

The net earning for Q2 2007 is about $0.5B, assume the same rate, we’ll probably get to $2B mark. But lets assume a 20% decrease, that would take us to say ~$1.5B, which is still cheap with cap at $12B.

If you take a closer look at the cash flow for Q2, you notice the big differences are increase of “origination and purchase of loan held for sale” from negative $209.60B, in Q2 2006 to negative $242.78B in Q2 2007. These are offset by “the proceeds from sale and principle repayments of loans held for sale”, which is also increase from 2006 to 2007, $212.01B and $237.00B respectively. Let’s assume market worsens, the other financials are unwilling to purchase CFC mortgage bond, loans, and further more, due to increase number of defaults, the repayments of loan are also decreased, lets give a total of 20%. Now assume, CFC makes less loans out due to tightening the credit checks, instead of 14% increase ($242B/$209) , lets assume 5%.   okay so new purchase of loan held equal to $242.78B * 1.05 = $254.92, proceed and repayment equal to $237.00B * 1.05 *0.8 = $199.08B. The difference is -$55.84B(20% stress) or -$30.96B(10% stress), compare to -$5.78B for Q2 2007, and +$2.41B for Q2 2006. With current cash level at $1.15B and equity at $14B,  clearly, CFC is not doing well with the stress test.

Now let’s look how valid the stress test is. the Prime mortgage are increase from $93B to $114B, but non-prime decreased 50% from $11B to $5.7B. So they are not that exposed.

I want to conclude by first saying that, financial institutions are little beyond my comfort zones, opposite from Buffet, I prefer to buy companies that offer material products rather than service. CFC is a bargain if it maintain its current status, else it worsens I think it has a chance to tumble dramatically. Given its #1 mortgage company, I doubt FED will allow it to go under, and given the crisis is only temporary, can be offset with a large pool of cash, which CFC currently do no have, but hey Buffet has, and so do many other financial institutes. This is a risky call. I think you should either go long, or totally ignore it.

BRK.B as Safety

In Intelligent Investor, Graham suggested have anywhere between 25 to 75 ratio between bonds and stocks in portfolio. While I believe this time has past, some high-yield saving account can offer up to 5% rate with cash in hand, a better choice than bonds (well most bond, bond with stock option are different story. Recall the deal where Buffet brought a large of Salomon brothers bond with stock option was definately a win win situation. 9%?, forgot, bond yield with option). But the concept of bond provides a safety if stocks turn bearish still mingles in mind. I wanted to find a index, fund, or stock to have similar movement as bond to stock, that moves opposite of stock movement. I believe the answer is BRK.B. Due to nature of Buffet investment strategy and the extreme low PE ratio with its intrinsic value closely set around the market cap, vice verse actually, its stock seem to have little or even opposite effect when entire stock market goes down. Plotting, the BRK.A or .B vs major indexes, you would notice, as major indexes head lower, BRK goes up, as investors pours money into the fund seeking for asylum. Of course, this goes against Buffet ideology, which is to avoid short-term investors. Nevertheless, when the world provides an opportunity, it’ll be dumb not to take advantage of it.

CHL and BIDU hot stocks but not worth the price

CHL and BIDU the largest wireless phone carrier and the the largest search engine like google, both of them in China. With expansion in rural and with business booming, no doubt the these two companies are going to explode. but I haven’t brought any, even during the the past week, which offered the best entry point. Why? While they are great companies, they darn overpriced. BIDU at 120x P/E? comon 120x times? while it might be realistic to their growth, but that’s way over my comfort zone. CHL on other hand, while price is lower, Market cap at $240B; Equity at $45B; average income at $4.5, the ratio is too big to be a bargain. Nevertheless, I think these 2 are great stocks. I just think they are better bargain elsewhere.

someone give me a pat on my back

Ok so i didn’t buy on last thursday auguest 16, the worest day before FED Cut, but I came close, the buy limits I set prior to 15th, 2 of them got hit, CXTI and YZC. One up 15% one down 5%. The low liquidity BEIJF got brought on 17th, up +10% also. The Tech buys I mentioned, GRMN and RIMM, at early august are up 22% and 11% respective. The game plan is unchanged hold till 4th quarter or 1st  quarter of 2008.

Ok so I am braggin a little, remember short term don’t mean a thing, unless you a Cramer fan, ya i am look at you Dan, he would suggest to take some out of your big gainers, like GRMN, but I think its got plenty room to roar.

BUY CFC

I am buying  CFC for 1 lot on margin. I hate to buy in margin but I think its the right timing for CFC. With net income averaging over 2 billion, its only valued at 11billion, meaning within 5 years you get your money worth. I think Buffet sees this and going to buyout CFC as well. The risk on this, which I doubt it, is that it might file bankruptcy. I don’t think the FED will allow its number one mortgage loaner to go under. So got buy some 🙂 If its not a good buy, I would not think about buy in margin.

Current CFC  market cap : $12B;  Equity:$14B; Net income:$2B

Exit when Buffet or BAC buys it or when market cap hits $20B or up 50%. Hold through any major dip, even on bankruptacy rumors. Someone is going to pick up all of these mortgage bonds if company go under.

Big Money Making Idea during the Mortgage Turmoil

My one million dollar idea during the time of turmoil is, if you have a good credit, offer rent-to-own options for home owner seekers. Generally these are the people with bad or below par credit scores. While they might not able to get a large loan to cover the 80% mortgage, but they can scram some say $5,000 dollars as their down-payments for your rent-to-own business. Of course this will be yours to keep, if renter decide not purchase the house after the grace period.  The good part is you don’t need to purchase the house until you find a renter, the flip side, the reason I am not able to do this right now is, I consider this as a long-term investment, if renter relinquish the properties, now you have to find additional renters, and I prefer to do this type of real estate once I find a more permanent residence.

Averager Percent change on Option Expiration Day is -0.08% vs 0.03% daily average

Quote from http://usmarket.seekingalpha.com/article/44874?source=feed

“Today is the third Friday of the month, and that means options expiration day. We went back 15 years to see how the Dow Jones Industrial Average has typically performed on options expiration day. The average percent change on all options expiration days has been -0.08% versus an average percent change of all days over the past 15 years of 0.03%”