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 Post subject: The Stock Market thread
 Post Posted: Tue Aug 23, 2011 7:50 am 
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Host of the Decibel Show "n00b"/CCLA Member/CC Best Homegrown Coach 2010
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Now that everyone is losing their nest egg on the market, I am strongly tempted to get in on the potential boon that awaits. So just like I obsessed over PU, I'm now studying wealth acquisition, reading books by Warren Buffett and understanding investing and shit like that. If I can get in the heads of billionaires, hopefully I can use that to make fortunes.

One such book I'm reading now is One Up on Wall Street by Peter Lynch. It's a masterpiece, and a very quick read that'll get you up to speed. I'll tell you what I've learned from this book.

To anyone with experience in the market, good or bad: please contribute here so we can all learn what to do or not to do. Include tips in general, or on specific stocks.

In general, the important point is that a stock is a piece of the business. You don't just buy a stock, you buy part of a company. As such, you should look for solid companies, and by this I mean ones that will probably have great earnings over the next 10, 20 years. As earnings go up, so should their stock prices. And if you buy the stock when it's worth 5 bucks, and sell when it's at 50, you've just made a 10 fold profit.

Likewise, if you buy into companies that are not growing particularly well or are doing shitty business, your stock value will drop.

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Street Kings, Gigsaw vs Doc:
http://www.youtube.com/watch?v=ApU-pHp0_Ug

The Chodefest Journals. dB's reports in one spell-binding ebook.

MAN SCHOOL. Let's get this handled.

Coming soon, my directorial debut, Blood Rush.


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 Post Posted: Tue Aug 23, 2011 8:14 am 
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Host of the Decibel Show "n00b"/CCLA Member/CC Best Homegrown Coach 2010
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I like this site for examining companies and stocks:

http://investing.money.msn.com/investme ... &ocid=qbes

It tells you a 10 year history of its value, with all kindsa bells and whistles. I looked up Microsoft for you.

P/E ratio.

Click on fundamentals, then key ratios. Then select price ratios.

The current P/E ratio for Microsoft is 8.9. This is the Price to Earnings ratio. Meaning, a comparison of what the stock price is to how well the business has been doing. All things staying the same, you can use the P/E to predict how long it'll take you to make your money back. In the case of Microsoft, if you invested in it today, it'll take about 9 years to get your money back.

_________________
Street Kings, Gigsaw vs Doc:
http://www.youtube.com/watch?v=ApU-pHp0_Ug

The Chodefest Journals. dB's reports in one spell-binding ebook.

MAN SCHOOL. Let's get this handled.

Coming soon, my directorial debut, Blood Rush.


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 Post Posted: Tue Aug 23, 2011 7:31 pm 
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i work in the industry, and deal with institutions/corporates (v. retail investors). i have a lot of knowledge in this topic.

PUAs w/ backgrounds/interest in finance/equity markets - shuld b interesting!

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 Post Posted: Wed Aug 24, 2011 6:45 am 
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Host of the Decibel Show "n00b"/CCLA Member/CC Best Homegrown Coach 2010
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Jump in with advice any time.

The p/e ratio is used to see how stocks are valued. Most companies live in the 10-25 range. Fast growth stocks tend to hang out around 15-20, and slow growth ones are below this. The goal is to fill your portfolio with stocks that grow quickly, so you make money. Microsoft is stable but a slow grower, so probably not much of a yield.

At the extreme, when the p/e goes really high, say 25 and up, it's often overvalued. Meaning, people are paying more for the stock than what the company is actually worth (high price, low earnings). This usually means people have a lot of faith that the company's stock is gonna take off, but usually this is short-lived and because the company fails to prove itself financially, the value quickly falls and investors lose money unless they sell off in time.

You can also find the industry p/e next to the company p/e, and determine if the company is fast or slow growing relative to its industry.

Each company exists within a sector, and an industry. Back to Microsoft, it is a company in a technology sector, and an application software industry. Here's how it compares to the app software industry:

http://biz.yahoo.com/ic/821.html

Look at the right column where it lists industry stats.

The p/e of app software is now about 17. Microsoft is a slow-growth company in a fast-growth industry. This typically isn't as profitable as a fast-grower in a slow industry.

_________________
Street Kings, Gigsaw vs Doc:
http://www.youtube.com/watch?v=ApU-pHp0_Ug

The Chodefest Journals. dB's reports in one spell-binding ebook.

MAN SCHOOL. Let's get this handled.

Coming soon, my directorial debut, Blood Rush.


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 Post Posted: Wed Aug 24, 2011 7:01 am 
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Picking the right stocks is a matter of luck, imagination, and having your pulse on the needs and desires of society. It isn't about going after hot tips from Mad Money, or established entities that are struggling to thrive.

It comes down to recognizing a strong company before Wall Street catches on. Because once they do, it's game over. The value rises and it's no longer as great a deal.

Each investment option should have a "story," as Lynch puts it. You should be able to give a 2 minute talk on why that stock is worth buying, based on the company's earnings, growth, losses, etc. The story needs to make sense, and it's helpful to get as much info on that company as you can (Lynch had the luxury of interviewing CEOs and touring plants before deciding to invest in them, but you can get a limited amount of info by googling and reading the WSJ).

An examples I thought of last night.

My friends were talking about Groupon. I thought, maybe this would be a great company to invest in, because everyone's using it. So I checked it out online and found they were in the process of going public (as in, trading...privately or closely held companies don't trade).

Sounded good, til I started reading about how it was bleeding money, and the value will probably be overvalued and how only a select few will have the option of buying early at a reduced price (same concept as a ticket scalper; certain firms have access to the cheap stocks when they get introduced, and they pass them on to select clients, leaving the rest of us with the higher priced scraps). Plus I kept reading commentaries listing reasons NOT to buy Groupon stock when it goes public. Long story short, the story here makes no sense. Yes, people will jump on this stock when it goes public, and a few will profit, but without a proven track record of success, this company is likely to yield a crappy stock over the long haul. And the key is long-term investment in a hot company, that's where you get 10-fold or more profits.

_________________
Street Kings, Gigsaw vs Doc:
http://www.youtube.com/watch?v=ApU-pHp0_Ug

The Chodefest Journals. dB's reports in one spell-binding ebook.

MAN SCHOOL. Let's get this handled.

Coming soon, my directorial debut, Blood Rush.


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 Post Posted: Wed Aug 24, 2011 1:35 pm 
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This might be a little off topic, but I have no confidence in stocks or anything dealing with the monetary system. After I watched these two movies. I truly believe the globalists like the Rothschild's and the Rockafella's are purposely imploding the whole system. To establish a One world government and one world currency. I was actually really into all of this before I joined the community. I was quite frankly getting unhealthy to think about all day long. I really investigated these two movies, just like a investigative journalist would. My conclusion. We are fucked!

The Obama Deception

http://www.youtube.com/watch?v=eAaQNACwaLw

Fall Of The Republic

http://www.youtube.com/watch?v=VebOTc-7shU

Check out Infowars.com


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 Post Posted: Wed Aug 24, 2011 2:59 pm 
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I too have knowledge of this subject.

You want to learn about fundamentals. Buffett should have good advice about the whole thing. But don't expect to rob the bank unless you really get deep into it as a career and do something new that people haven't figured out yet.

However you should stay encouraged as even outperforming the market by a few percent will make you thousands of dollars in a short time.

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 Post Posted: Thu Aug 25, 2011 6:09 am 
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Company worth

I hate math, but we gotta do some here to figure out how well the company you want to invest in is doing.

Lynch looks at two numbers: cash and long term debt. If I have 10$ in cash and owe 5$ in long term debt, subtracting the two gives a net worth of 5$. I'm in good shape. If I wind up owing money, I'm in bad shape. I'd rather invest in the company that has more cash than debt.

Here's microsoft again....

http://moneycentral.msn.com/investor/in ... mtView=Ann

Click Financials, then Balance Sheet, then click annual below this. This will show you how much cash they have and how much long term debt.

I look at the past couple years, so I write down 08, 09 and 10. Under each header I put cash and then debt, and then I subtract the two. I then look to see if a) I'm left with a plus or a minus in each column, and b) where the company is going. If the trend over the past few years is greater cash at hand, and less debt, then the books look good. I'd consider investing in that company. Otherwise, if I arrive at a negative number or things are moving in the wrong direction, I'd avoid the stock.

In the case of msft:
08 Cash and Short Term Investments = 23662 (in millions of dollars)
09 = 31447
10 = 36788

So the company is accruing more cash every year. This is a good thing. How about debt?
08 Total Long Term Debt = 0
09 = 3746
10 = 4939
The company is taking on more debt every year. Not a good thing.

But what you really want to know is can the company manage its debt with cash at hand. Obviously, msft has a shitload more cash than debt...
2010 = 32000 (or 32 billion dollars net worth)

Msft is doing well. It has 32 billion sitting around in cash. Stable company.

This little calculation is a pain in the ass, but it should paint a decent first picture about the health of the company you want to invest in.

_________________
Street Kings, Gigsaw vs Doc:
http://www.youtube.com/watch?v=ApU-pHp0_Ug

The Chodefest Journals. dB's reports in one spell-binding ebook.

MAN SCHOOL. Let's get this handled.

Coming soon, my directorial debut, Blood Rush.


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 Post Posted: Thu Aug 25, 2011 12:11 pm 
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Read The Intelligent Investor. It's pretty well accepted as the best book on investing for the laymen. It was written by Warren Buffet's mentor Ben Graham.


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 Post Posted: Thu Aug 25, 2011 5:24 pm 
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Host of the Decibel Show "n00b"/CCLA Member/CC Best Homegrown Coach 2010
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Thanks it's already sitting on my coffee table. I'll get to it next.

K, lemme start looking at some specific stocks...

Bank of America (trades as BAC)

This was a company that was doing well, til it took over Countrywide, and the economy went to shit. It's stocks plummeted from 54 to the current $7.50. Looking at its balance sheet, it's clearly taking on more debt and making less cash every year. It's holding onto a bunch of foreclosed homes it can't sell. Even at the bargain price of $7.50, it is so overvalued it has a NEGATIVE P/E ratio.

This week (during a bath), Buffett agreed to invest 5 billion. That's a clear indicator that he feels the bank will turn around. Maybe the government will step in, maybe the housing market will rebound and people will start buying back those homes. Whatever miracle happens, he feels he can make his money back with interest over the coming years.

This would be what's called a turn-around company. If you invested at 7 (assuming the bank has hit its bottom), and it returns to trading at 50, then you've got a 7x profit. Investing $1000 could give you $7000.

Oh and before I forget, I'll mention that I'm putting my money in the market as a SEPIRA. This is a retirement account that lets you defer taxes on that money, and reduces your tax payment for the year you invest it. You can invest somewhere around $49000 a year this way, and can pull it out before you retire, but with a 10% penalty and taxes.

The other thing I'd point out is there are many online companies you can use to trade with, with commissions as low as $5 a trade. I first went with Merrill Lynch, but they so far have had crappy customer service, and when I went to trade online wanted about 15% on that transaction. I then went with a small company called TradeKing.com.

_________________
Street Kings, Gigsaw vs Doc:
http://www.youtube.com/watch?v=ApU-pHp0_Ug

The Chodefest Journals. dB's reports in one spell-binding ebook.

MAN SCHOOL. Let's get this handled.

Coming soon, my directorial debut, Blood Rush.


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