My 1st Million At 33 - yes, you can do it too

Market is too complacent about financial sectors and economy for the next year. The participants seem to be like Wile Coyote to me.

I’m ready to increase my short positions.

The story of Rodrigues family in money magazine reaching a potential networth of $2.9 million by 40 is the prime example of how “easy” one can become a millionaire.

How does that work? Gina and John Rodrigues have a combined income of $174000. But that is not the biggest reason that they will make it to 7 digits, from their current net worth of $380000 at age of 27. After all taxes and expenses, they save $91000 a year! As I have repeated many times, it’s not how much you earn, but how much you save that counts. Their frugality is certainly beyond any ordinary couples would undertake. However, at the rate of almost $100K saving a year, you can become a millionaire in about 10 years, even assuming that your money compounds at close to 0%.

Obviously, if you have kids, you will be in an entirely different league of saving competition. So don’t feel too upset about your own saving level.

The pre-requisite to a high saving amount is certainly a high income. Dual income usually helps, if you can justify the visible childcare and tax expenses, and invisible human cost. Otherwise, a career in doctors, lawyers, accountants, architects, engineers, and financial industries are usually a faster track to a high income.

For obvious reasons, Rodrigues will most certainly exceed my net worth at the age of 40. This will be an ongoing trend partly due to inflation. It will simply be easier and easier to become a millionaire for the people whose wage rides on the inflationary wave. Probably 90% plus of the people cannot grow their net worth at a rate that exceeds inflation rate due to taxes and other reasons. Therefore, a new fresh graduate in the right career will always have a much better chance in joining the millionaire status and beating the older people who may have not accumulated and grown their assets faster. For those people who are in their twenties, grab your chance and make your own heydays. There will be people who are left behind. Don’t be one of them.

Social networking + Instant Messaging + GPS ?

I can see this company (loopt.com) becomes the next youtube, if not bigger. If you are lucky to join this company because of my post, please give me some IPO shares when you get rich, .

This is another Stanford’s start-up (after Google and Yahoo), where I graduated too. I don’t mean to glorify Stanford, but it is a school with a lot of great high-tech start-up.

You can get loopt’s service already. Their service allows you to keep in contact with your friends & family constantly without calling everybody. Surrenpidity becomes a routine of life. Yeah, how about running into your friends constantly at will. Or even better, locate your dream girl through her friend’s loopt?

I also thought about this idea of locating your friends & family thru GPS services independently. But ideas are cheap, and mean nothing in the world of entrepeneurship. Only actions count.

As of yesterday afternoon, US mint stops producing gold eagle coins. No more sale until further notice. This is not to mention an existing silver eagle coinc shortage.

Yes, both gold & silver prices are breaking new low on Thursday in Asian market. But barely any major dealers are selling them. How weird? On silver, tulving.com ran out ALL kinds of silver products. ColoradoGold.com ran out everything except 10 oz silver. There are still some gold products left. But I imagine that they may run out very quickly. I’ve bought some recently at prices above $15. But it’s really hard to get any. First of all, you can barely get through the phone lines. And then, the silver products are usually running out in 2 days at tulving.com.

I don’t know what is going on. But if they are LOTS of sellers as shown from the spot market. They should be LOTS of physical products available. The fact is most of those are running out quite quickly. Silver eagles are rationed among all precious metal dealers since March of this year. If you can get them, the premium over spot on the buy price is increasing all the time. And as in a free market, the premium over spot when you sell back is ALSO increasing now. The only thing that doesn’t increase is the actual spot price. But where the hell are the goods?

I have tried my local dealer, and practically everything runs out and they run out very fast. No gold or silver eagles. Nothing.

I think monex.com still have eagles. Their prices are higher. But if that’s the only place that I can get, I may just get it from them.

I have been observing the recent drops in the US markets. About 95% of the sharp drops occur either at about 1 hour before/after the market opens, or at 12pm EST. Again, such market actions doesn’t make much sense, especially centering at a certain time. Even stocks are not this volatile.

Anyway. I’m definitely going to scoop up some if I can. I have also planned to transport my physical gold & silver back to Asia where I think it would be safer from the Big Brothers, when I go back home to visit my parents. By custom laws, one can take out $10,000 per person. So I think I should be okay.

My preferred techinical indicator is MACD which is more reliable in detecting the trend. Here are just two charts that I’m looking at, both have a bullish cross in MACD:

Financials are over-bought & turning down. Natural gas stocks are over-sold & turning up.

P.S. I hold positions in the above charts through the component stocks and/or call/put of the options.

I recently tried to look at a short-sell property. There is no lock-box at the property. It is by appointment-only. But the seller simply doesn’t return any phone calls. Nothing. You can’t get in at all.

The property has been on the market for 100+ days. It seemes that the sellers are simply trying to buy time to live inside the property. I wonder how much the bank is aware of the situation.

Well, come to think of it, banks probably want a longer short-sell & foreclosure process anyway. This way they don’t need to write down the losses immediately, and show a big red ink in their quarterly reporting. Banks are trying to buy time too. Unfortunately, the longer the process takes, the bigger the losses. Unless the wages of homeowners suddenly increase a lot through a hefty inflation, the same unaffordability exists before and after the foreclosure/short-selling. Nothing is going to change.

And loan modification will work only if the lenders are writing down the loan value. Otherwise, when the loans get sold back to Fannie Mae or Freddie Mac, taxpapers will foot the final bill.

Stock markets usually lead the economy by 9 to 12 months. In Chinese stock markets, this is no different.

If you look at Shanghai index, it peaked in October of 2007, about 10 months earlier than 8/8/8 of the Chinese Olympic game opening. The rise of the stocks was also parabolic. Starting from the double bottom of about 1074 (Dec 6th, 2005, and Nov 1st, 2005), it doubled to 2148 on Dec 4th, 2006, about 1 year later. The next double to 4296 only took half as long on May 29th, 2007, about 6 months later. However, with Chinese government actions to control the stock market bubbling action, the next double simply didn’t come. Market peaked out at 6124.04, and has dropped by a hefty 60% to 2470 on Monday 8/11/09. Market participants are very afraid of a post-olympic slowdown.

However, I believe that most market participants will be wrong again. I believe that the bottom for Chinese stock markets is right around here and 2000 level.

The Chinese have made a great progress towards prosperity. Even though there has been many political maneuvers against a high inflation, the government will simply not allow Chinese economic prosperity to disappear overnight. In fact, billions of Chinese people will continue their climb onto the international stage. The trend is simply unstoppable.

Having said that, the next climbing up of Chinese stock market is probably going to be slower than the previous rise. There should be plenty of time to catch on to the rising dragon. Hopefully, the future growth will be more healthy and sustainable. The next biggest hurdle for Chinese economic development will be facing both a US and European slowdown in 2009. And domestic consumption will need to make up the short-fall. Another corollary from this is that a commodity bubble burst is probably not in the cards, as long as Chinese continue to absorb international natural resources.

I’m just going to introduce a web site to you at futurecasts.com.

It’s really good, and there are a ton of information. The author of that site has had a pretty good prediction record. I mainly stuided the site for economic histories. So far it looks like US is tracking the financial crisis after 1929 depression. Certainly, though, the current crisis won’t evolve to a great depression in my belief. But the political reactions so far are quite similar.

Anyway, I don’t have much time today. So I’m going to cut short.

You can imagine how bad the downturn will be numerous times, but not until it hits you, you won’t feel the full effect. The sell-off in mining sectors have truly shaken me. In fact, I have started considering to bail out the sector.

My original thesis of investing in precious metals and commodity in general has always been the following:
1. Peak oil
2. Demographics changes in combination with the heavy US debt/future obligation.
3. A serious US housing downturn, inducing a credit crisis, and thus driving up the value of the “good money” or gold.
4. Emergence of BRIC (Brasil, Russia, India, and China) and third world countries to participate in the consumption of natural resources.

For the above factors, some are near term, and some are longer term. It is still hard to say whether how soon the peak oil will occur or has occurred even. However, some of other trends are probably unavoidable. The financial crisis I believe is still ongoing, and will unfold until mid-2011. It is arguable whether capital will seek safety in gold. But as far as I can see, it should be “natural” for it to occur. As Bob Hoye has explained, a rising gold price is the mother nature’s way of encouraging gold production, which “increases” money supply to offset the deflationary crisis.

For obvious reasons, #3 should be the most immediate driving force (if it’s still there). #4 BRIC is obviously going down to the drain temporarily. Whether #4 or #1 prevails, at least one of the factors is bound to either increase the demand of natural resources or decrease the supply of natural resources. #2 factor is purely monetary on a longer term horizon. But of course, the reckoning day for US deficit gets closer everyday. Although it is more likely that it unfolds gradually, market confidence is often quite fragile and easily shatterred. For now, this factor may not kick into high gear for another 10 years.

While Bob Hoye is still predicting an upcoming turmoil in stock markets, Todd Harrison has moved on to the long side. For now, I am betting with Bob Hoye.

Regardless, the timing of those above four factors will affect greatly on the performance of my portfolio. If the timing of the events is off by some 3 to 5 years, I will be looking at a sub-par return for sure.

By the way, abiotic oil does appear to have truth to it. I will be googling more on it to see if I can refute peak oil theory.

Nearing the Fed meeting, precious metals have entered another sell-off. It’s almost predicable, but brutal too.

Is this the time to buy? Probably not.

By the way, if you ever want to buy, 12pm EST is probably the best time to buy. I can never explain why, but 12 pm EST almost always tend to get a big drop on the down days. The other best time to buy is right before the market opens, near 8am EST to 9:30am EST. This is from my personal observations in the past years.

I think HUI has broken the shoulder on the head & shoulder pattern. Therefore, it’s conceivable technically speaking that HUI may drop all the way to 300 level. My personal guess is that it could drop to 325. However inconceivable it is, the pattern is still consistent with Elliot wave labeling. That is we are in the wave 2 of wave 3. And wave 2 CAN correct majority of the gain made in wave 1 which started at HUI=285.

For long term investors, I think one can add to the stakes at the coming low point. Of course, the pain for holders (and myself) will be very high. Unfortunately, I think that there may be just no way around it.