theworldaccordingtochris

what is a stop-loss?

i’m glad you asked. a stop-loss is set so at a certain price so that if your stock drops in values, you will automatically sell at a loss at the stop-loss price to prevent you from losing more.

for example:

buy at $20, set your stop at $18. if the stock hits $18, you sell automatically but be careful because if the price moves after hours, for example if it gaps down to $17, you’ll get sold for 17. it’s not gaurantee that you get 18

take for example xilinx:

bullish flags are good, but they are not 100%. you should wait for it to break out of the flag. usually they break to the north, but for xilinx, this will be hard because north of the bullish flag there are huge amounts of resistance. on that chart xlnx was at this range for a LONG time. it means that the price has had support for a while. it’s hard to bust through

also the 30 and 50 day moving average is there too. stock prices usually bounce off their DMA (daily moving averages). i use the 50, 100, 200 DMA. this guy uses 30,50,90. the 50 DMA is also on the top side. so xilinx has to bust through the 50DMA and also the price support from november to december. if it can do that, then it’s clear sailing.

i disagree with this guy however. why risk buying xilinx now? there is too much risk. listen to the markets. wait for it to break the 50DMA, the flag, and price supports at 22.5. if it gets above that, then buy and set your stop at 22.5. that way the most you can lose is a few cents. if you buy here and set your stop at 18.25 that’s like a BIG loss if you’re wrong. limit your risk.

you can be right 30% of the time and still make money if you limit your risk and let the winners run free.

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I was thinking of moving stuff in my RothIRA. Right now all my money is in one of those timed-to-retirement funds with Vanguard — it’s a fund of index funds that’s 90% stocks and 10% bonds and the mix will get more conservative as I get closer to retirement. It’s dropped 6% since I moved my RothIRA to Vanguard in June 2007. I know 6% isn’t much, but it seems like the stock market is going to continue dropping for the next few quarters.

I was thinking of moving it all to a bond market index fund. Do you think I should? And if so, which one of these four should I pick?

Vanguard Total Bond Market Index Fund
Vanguard Short-Term Bond Index Fund
Vanguard Intermediate-Term Bond Index Fund
Vanguard Long-Term Bond Index Fund

I don’t understand the relevance to my decision of the short-, intermediate-, and long-term elements. I mean, I know what those terms mean …

… but what should do?

oh yeah, here’s the breakdown of my current fund:

many sheeple blindly sock money away in their 401k’s and ira’s without putting much thought into what their hard earned money is purchasing.  when the market is down, they say, they are long term investors.  they spend hours researching what the best $100 blu-ray player they can buy for their money, and almost no time researching what the best investment decisions they can make with their money.

although during my relatively short lifetime, we’ve seen 8+% gains in stocks, 30+% gains in real estate, low 30% tax rates and mild inflation; historically, there have been periods of time when stocks have sideways for more than 10 years, real estate has crashed, deflation has taken hold, and tax rates for the upper bracket have been above 90%.

with that being said, i think we should all be a little more pro active when it comes to managing our next egg.  the last think you want to do is have your retirement plan blow up and end up working at a call center.  the market is unhealthy.  why not ride out this turbulence and preserve your capital

a 6% loss is a big deal, with a 6% loss, it takes a 6.4% gain to recover

it’s great you’re looking to invest in bonds.  i’d park my cash in bonds for the next 6 months.  keep it simple and move your funds to 100% bonds for safety if you don’t want to be an active trade and want to sleep well at night.  you are still adequately diversified because presumably you have savings, and other assets and the bond fund itself is diversified.

regarding which fund to pick, the short, intermediate, and long just mean how long it takes the bond to mature, much like a 5 10 15 or 30 year mortgage.  when the bond stops paying.  a 1 year bond will have a low rate because rates are likely not to go higher vs. a 30 year bond which has it’s yield locked in at ~4%.

i’d also recommend buying a bond ETF versus a mutual fund.  the ETF’s are more liquid, meaning you can trade in and out of them easily, and their expense ratios (the amount it costs to manage the money) usually are less ~0.1-0.2% which is much lower than the 1-2% mutual funds charge to market and manage their funds.

take a look at AGG.  it pays a 5% dividend and is a good way to preserve your capital (money)

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it’s important to distinguish between the effects of inflation/deflation and relative exchange rates. the us dollar has been on the decline relative to other world currencies but during the recent january rate cuts, it has been relatively stable

http://quotes.ino.com/chart/?s=NYBOT_dx

so you’re right, the us$ has less purchasing power overseas and we import some of our goods which will have an upward pressure on our domestic prices,

however, if you look at the United States as a closed system, specifically to investigate the inflation/deflation question and control for foreign exchange effects, you might have noticed that equity prices have corrected dramatically and real estate prices have come down as well, wages have stayed relatively flat. the last asset price to fall would be energy and commodity prices which are influenced by foreign exchange rates. does my dollar buy more house or more stock than it did last year? yes.

have a look at the 10 year treasury note. the yield is 3.5%. if inflation was alive and well in this country, then the real rate of return on those 10 year securities would be 0. now why would the bond market, a market who’s participants are mostly institutional investors, be willing to buy 0% yielding bonds? you may have your opinions on whether or not they are truly smart money, however when it comes to trading, i’d rather be with the big elephants, than with j6p (joe six pack). “smart” money doesn’t have to be correct because due to their size, often times their trades are a self fulfulling prophecy.

and finally, you might be thinking, where should i invest. well the multi-trillion dollar question of the day, is where is the money going? in 2000 it was tech, in 2006 it was real estate. what’s next? bonds. why?

all the gold ever mined in history has a value of $3 trillion. it is estimated that in 2005, only 20% ($600 billion) of the worlds gold was held in reserve. the gold market is simply not large enough for global equities to park themselves in.

bonds? $14 trillion market size…

http://en.wikipedia.org/wiki/Official_gold_reserves
http://en.wikipedia.org/wiki/Gold
http://en.wikipedia.org/wiki/Government_bond

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returning to work from a group lunch and talking about passing the spot where a dead black cat had been laying on the road.

me:  hey, did you see that cat the other day?
tony:  yea…
tony:  but i didn’t see…
me:  see what?  see it in time?  you murderer!
tony:  no no
christian:  oh man, that’s jacked up
helen:  you cat killer
tony:  wasn’t it a black cat?
christian:  yea a black cat’s bad luck
helen:  if it crosses your path
chris:  not if he doesn’t make it all the way across
christian:  that’s why he sped up

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did you know that the qwerty keyboard was designed to slow people down?  they were typing too fast and it jammed typewriters.

ever consider learning the dvorak keyboard?  it is designed for speed
with the most common letters on the home row.  windows and macs have it built in.  it’s like learning a new
language for your fingers.

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there is something uniquely refreshing to drinking some ice cold milk from a small cardboard carton.  pull-push-drink

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http://baboot.com

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ahh, the learning channel, aka TLC . you used to be one of my favorites, up there with discovery, history, and animal planet.  that is, until you went and gone soft on me.

lately, i can’t help but notice that all you’ve been doing is “trading spaces” with networks
like oxygen and lifetime.  you’ve aired shows like “what not to wear” and as a result, become what not to watch.  a true “makeover story”. 

perhaps the execs at discovery networks deemed you to be to too similar to your cooler older brother “the discovery channel” and you needed to establish your own niche.  don’t envy discoveryHD and his award winning documentaries such as “planet earth”.  don’t be jealous.

i’m onto you.  TLC stands for “tender love and care”.

you have been removed from the “auto program” on my tv.

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i knew, i could see it in your eyes.   you knew that we would never see each other again.

mickey
1989 - 2007

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a black father and his black 8 year old son sat across from me on the subway. the son’s mouth was curled up at the edges, as if he had a perpetual smile on his beaming face. the father held his son tightly; you could feel they were a warm family.

we were passing through manhattan now. the ridership slowly changed to i bankers and other full length wool coat wearing, wealthy individuals. from my peripheral vision, a woman walked into the scene. she looked like reese from legally blonde. same hair, same face, same body type.

the father taught his son to be a gentleman and made a seat for the lady. she took it. small talk ensued.

father: “you have nice calves”
reese: “thanks, it runs in my family”

after some more small talk, the father and son leave the train.

reese proceeds to check out her calves, flexing them, looking at them, admiring them. as if it was the first time she was complimented on them.

then, 30 minutes later, she stands up to get off the subway. she uses her new found position to once again, check out her calves, thinking nobody is watching. but i was. the effect a small compliment can have on a stranger. maybe like patch adams, we should all pay it forward.

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