The Sun's Financial Diary » Book

The Power of Persistence

Sun — Thu, 21 May 2009 14:08:02 +0000

“Always bear in mind that your own resolution to succeed is more important than any other.”
-Abraham Lincoln

A lesson everyone must learn is the need to persist when it is difficult. When we experience defeat and rejection, the easiest and most logical thing to do is to quit, but the successful have learned to persist.

Mark Victor Hansen and Jack Canfield

Before Mark Victor Hansen and Jack Canfield became the bestselling authors of the Chicken Soup for the Soul series, which has now sold over 100 million copies, they were rejected by 140 publishers and told by their agent, “I can’t sell this book—I’m giving it back to you guys.”

The Wright Brothers

Before the Wright brothers became the inventors of modern aviation, they had thousands of failed experiments and glides. Orville Wright wrote, “Our first experiments were rather disappointing. The machine . . . at times seemed to be entirely beyond control” (Wilbur Wright, Orville Wright, Octave Chanute, and Marvin Wilks McFarland, The Papers of Wilbur and Orville Wright: 1899-1905, (McGraw-Hill, 1953) p. 75).

Stephen R. Covey

Stephen R. Covey, author the The Seven Habits of Highly Effective People, created one of the largest leadership development companies in the world. Before the company was worth $160 million, the company endured 11 straight years of negative cash flow. The company had nothing in the bank, they were totally extended on their accounts payable, and their credit lines were maxed out. Their “debt to tangible net worth” ratio was 223 to 1. Over the next two and a half years, the company value grew to a worth of $160 million (Stephen M.R. Covey, The Speed of Trust, (New York: Free Press, 2006) p. 109).

Sam Walton

Before Sam Walton founded Wal-Mart, he lost his first store, a Ben Franklin variety store, after 5 years of hard work. Sam Walton wrote of the experience, “It was the low point of my business life. I felt sick to my stomach. I couldn’t believe it was happening to me. It really was a nightmare. I had built the best variety store in the whole region and worked hard in the community — done everything right — and now I was being kicked out of town. It didn’t seem fair. . . I’ve always thought of problems as challenges, and this one wasn’t any different. . . The challenge at hand was simple enough to figure out: I had to pick myself up and get on with it, do it all over again, only even better this time. . . I had a chance for a brand-new start, and this time I knew what I was doing” (Sam Walton, Sam Walton, (New York: Doubleday, 1992) p. 30-31).

Walt Disney

Walt Disney suffered a devastating setback in 1928; a blow so harsh that his career seemed about to disintegrate. He lost his first successful cartoon creation, “Oswald the Lucky Rabbit,” because he had naively signed away the ownership rights. Emerging empty-handed from the debacle, Disney didn’t quit. He continued to work and his next creation was Mickey Mouse (Daniel Gross, Forbes Greatest Business Stories of All Times, (New York: John Wiley & Sons, 1996) p. 123).

Colonel Sanders

Before Kentucky Fried Chicken (KFC) was one of the world’s largest restaurants, Colonel Sanders drove all across the country from restaurant to restaurant cooking batches of chicken for restaurant owners and their employees looking for someone willing to purchase his chicken recipe. Colonel Sanders persisted through 1,009 rejections until he got a ‘yes’ (Anthony Robbins, Unlimited Power, (New York: Simon & Schuster, 1986) p. 14). After his first ‘yes,’ his franchising idea began to take off. By 1964, at age 74, Colonel Sanders had more than 600 franchised outlets for his chicken in the United States and Canada, and he sold his interest in the U.S. Company for $2 million ($13 million in 2006 dollars). KFC now does billions in sales each year and serves millions of customers daily in over 13,000 restaurants in 80 countries.

Sylvester Stallone

Before Sylvester Stallone was a famous writer and actor, he was rejected by over 600 casting agents and was unable to sell his first 8 screen plays. In 1975, Stallone saw a fight between Muhammad Ali and Chuck Wepner in which Wepner was a 30:1 underdog. Inspired by this fight, Stallone began developing the Rocky screenplay. The script was purchased by United Artists and opened in theaters on November 21, 1976. Rocky took in $117 million ($389 million in 2006 dollars) in U.S. box office sales, with Stallone making more than $5 million ($16.6 million in 2006 dollars).

Conclusion

There are no failures in life, only those who quit before success. Failure is a part of learning. The formula for success is trying until you succeed. If you give up during the struggle, you will never experience the victory.

This is a guest post by Cameron C. Taylor, author of the book Does Your Bag Have Holes? 24 Truths That Lead to Financial and Spiritual Freedom. Find out more at www.DoesYourBagHaveHoles.org

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The Power of Persistence

Book I Read: Come Into My Trading Room by Alexander Elder

Sun — Thu, 26 Feb 2009 20:47:40 +0000

When I bought my first stock Nortel, (NT) which filed for bankruptcy protection recently, more than six years ago, I didn’t know much about investing or trading stocks. The reason I bought NT was simply because it was cheap in dollar amount. That’s right. How much could I lose with a stock at $0.47 a piece?

Since then, I have bought and sold many stocks. Some I have turned over only after holding them for a few days, like those I bought through Scottrade recently, to make a few quick bucks. Some I have been holding for years and have no plan to sell, such as China Life Insurance (LFC) and Visa (V). For all those trades, I applied little, if any, technical analysis in determining when to buy. While timing doesn’t really matter too much if I want to hold the stock for years, it has been proven deadly for some stocks that I never had intention to keep. Then I never seriously learned anything on technical analysis either, except reading pieces of information here and there. The book, Come Into My Trading Room, A Complete Guide To Trading, by Alexander Elder, is the first book I read on technical analysis.

Alexander Elder’s book is really eye opening for me and I wish I had read it early, not until now. Though I ever wanted to be a trader and won’t become one, I do want to improve my trading so my trades can be more profitable. Dr. Elder’s book offers insights from a very successful trader, from whom I can learn a lot. In the book, the author shared what he called the three M’s for successful trading: Mind, Method, and Money, which are described in the book as the trading psychology, trading method, and money management. Dr. Elder spent a lot of time discussing technical analysis in the book.

In the trading method part, the author explained in great details on how to read stock charts and how some widely technical indicators work. Though there are many tools a trader can use to make trading decisions, Dr. Elder cautioned against using too many indicators. If 5 signal can’t make a trader feel confident about a trade, 5 more aren’t likely to help. So in the book, the author focused on 5 indicators: moving averages, channels, MACH-Histogram, Force index, and one from several candidates such as Elder-ray and Stochastic, etc. The goal, of course, is to help a trader develop confidence. Among the five indicators, Force Index is actually Dr. Elder’s own secret weapon, which helps identify market’s turning point by putting price change and volume together.

Though the book has been published for nearly 7 years and the author claimed that Force index has been adopted in many technical analysis tools, I wasn’t able to find it in a few that I am using. So I have to plot it myself to see how it looks and how to use it. I have written a small MATLAB program to do my own analysis using Force Index (the red line in above plot) and other indicators.

In addition to trading method, Dr. Elder also spent a good deal of time discussing trading psychology and money management, two essential pieces of being successful in stock trading beyond the trading techniques. One of the method he suggested every trader do is recorder keeping (write down the purchase price, print out the chart, etc). As a trader learns from the stock market, he/she needs to constantly go back to his/her trades to identify errors so they won’t be made again in the future. He also recommended dividing the trading account into several parts such that the whole account won’t get hurt too badly if one part doesn’t do well.

I am still absorbing some concept from the book and trying some ideas myself, but so far I think the book is a good read.

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How to Talk about Money in any Stage in a Relationship

Sun — Thu, 29 May 2008 14:29:16 +0000

The following is a guest post from Dr. Bonnie Eaker Weil, author of the book, Financial Infidelity: Seven Steps to Conquering the #1 Relationship Wrecker. Dr. Weil has been an internationally acclaimed relationship therapist for thirty years. New York magazine named her one of the city’s top therapists and Psychology Today named her one of America’s best therapists.

It’s imperative to talk about money in some capacity – your opinions, views, habits, etc. early on in the relationship, hopefully before you even cement your relationship by having sex! That may seem extreme, but who wants to go down the road to sexual intimacy only to have it torn apart by a struggle in the realm of financial compatibility?

This is why I’ve created the “Smart Heart Dialogue�? to help you share your financial history with someone you’re becoming intimate with. Many of these conversations can be triggered by a transition in a relationship – use that transition to be open and honest in finding out what you can about the other person’s view of money. Understand that a person’s money habits can be ingrained in them from a very young age, and therefore are usually held to pretty tightly, even if that person doesn’t realize it!

As you transition through a relationship there are a few scenarios that lend themselves to talking about money. Here are a few:

Q: If we move in together, do we split all the bills?

A: This can be a good time to talk about expectations for how to deal jointly with finances outside of a marriage. It’s not usually best to combine everything right off the bat, and a good way to deal with this question can be to suggest having a “fund�? that you both do contribute to equally, that can be used for your fun activities – then, you can make joint decisions about that fund.

Q: I overspent while we were on vacation, can you lend me some money?

A: The person asking for a loan may not take money and budgeting as seriously as you do. Or maybe you overspent too. Whatever the case, you need to evaluate how you deal with money, leisure activities and “spur of the moment�? purchases.

And if you’re in a committed relationship where you’ve had some of the more basic talks there are still ways that money conflict can manifest itself in ways you weren’t expecting!

Q: Do you have to review my credit card bill each month?

A: The person asking this question may feel like a child in the relationship – always being checked up on. If that’s the case, as a couple you need to work hard toward sharing the “power�? of the checkbook. One person shouldn’t feel like they’re less-informed or less-involved in the process. This can lead to contempt and revenge spending.

Q: We can’t afford to go on vacation with your family (or our friends) again this year if they’re going to invite us as their guests, then make us pay for our share of everything.

A: You need to lay out expectations for big ticket items and expenses at the on-set. Together, decide what you can afford and if necessary inform the other party, and present it as a unified decision.

By being honest and respectful you can get through these dialogues and relationship transitions and grow with your relationship as it continues to change over time!

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From Rich Dad’s Increase Your Financial IQ: What’s your Financial IQ?

Sun — Thu, 06 Mar 2008 15:36:15 +0000

Over the weekend, I received a copy of Robert T. Kiyosaki’s new book, Rich Dad’s Increase Your Financial IQ: Get Smarter with Your Money from Jeffery Anderson, a publicist from FSB Associate. Kiyosaki is no stranger to many people. He is the author of the popular book, Rich Dad, Poor Dad. I myself never read that book, though I did finish the first couple of chapters from an audio file two years ago and what I still remember is how Kiyosaki argued that house is really a liability, not an asset. Somehow, I kind of agree with his argument because until I pay off the mortgage, I don’t really own the house. By the time I really own the house, what I have paid for it may exceed its value. And if I decide to take profit and sell the house, the money I make from it may not be more profitable than, say, investing the money in the stock market while renting over the years.

Anyway, while I am still trying to finish up the book (too many things to do and too little time), I got the following financial IQ quiz from Jeff yesterday that I would like to share with everybody.

What’s Your Financial IQ?

1) Which of the following is not an asset?

Gold
The Corvette you bought for your 40th birthday
A business
Wheat

2) On average, Americans save how much of their income?

Enough to buy a new flat screen TV
Why save when you own a house?
They don’t save. They owe.

3) A retirement plan that is paid for by your employer is known as a:

Defined benefit plan
A miracle
Both

4) What kind of income is the hardest to protect from financial predators such as taxes?

The dividends that just got cut from the financial stocks you bought
The $50 and rocking CD collection you inherited from your uncle Craig
The forty hours worth of cash your company pays you for sixty hours of work

5) What is the best way to create a budget surplus?

Cut down on expenses by buying a fuel efficient car
Get a higher paying job to make more money
Saving and investing before paying your bills

6) An example of leveraging your money is:

Putting money in an interest bearing savings account
Buying investment real estate with a bank loan
Going to a local casino.

7) The best way to invest is in a diverse portfolio of stocks, bonds, and mutual funds. True or False?

8 ) The key to becoming wealthy is:

Only having two scotches per night
Buying high and selling low
Selling the CD collection you inherited from Uncle Craig
Increasing your financial intelligence

What are your answers?

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Book I Read: An American Hedge Fund

Sun — Thu, 22 Nov 2007 15:47:32 +0000

Early in the summer, I received a book, An American Hedge Fund, from Timothy Skyes, the author of the book. I intended to finish the book as soon as I could at the time when I got it, but seemed never have the time until recently.

The book is actually an autobiography of a young man, Tim Skyes, and how he became a millionaire by trading stocks in the late 90s and early this decade, which had turned his $12,415 trading account into a fortune of $1.65 million in just 3 years. After finishing the book, I have no doubt that Tim is very successful in picking and trading stocks and making money out of them. His experience is quite inspirational as not a lot of people can make a ton of money and start their own hedge fund at the age of 22. However, I didn’t find too much value in this book, partly because I am not a trader. In fact, for an average Joe or Jane who would rather take a get-rich-slowly approach to their money, then this book doesn’t offer many insights on the fundamentals of investments.

The majority of the book was devoted to details of how Tim traded stocks during the dot com bubble. Starting to follow the stock market at 12 when he bought his first stock, Tim discovered what he called “patterns” of how the stock prices moved and believed that he could make money from what he observed. And indeed he did. What I noticed the major theme from his trading days when he was then a college student was the pattern. The pattern that guided him to make the buy and sell decisions.

During the early days as a trader, he bought penny stocks whose prices were almost entirely driven by “press release,” whether there was a business or not didn’t matter at all. Like many people were just crazy about hot tech stocks, Tim spent his school days scrolling through news sources, discussion forums, and bulletin boards to find stocks he could profit from. Later, he shifted his focus on IPO tech stocks and kept testing and applying new trading techniques while watching his money grew. At that time, it was not rare to see prices of internet stocks doubled or even tripled in the first day of trading, though those companies never made a penny. This paragraph from book could best describe what was happening in the peak time of day trading:

The actual business execution was irrelevant. Traders didn’t care about the fundamentals of these companies; their only concern dealt with these companies’ ability to issue press releases that would influence other traders to bid the stock higher.

That could be true back then. However, I am not sure how the techniques that helped Tim make his first million could be applied to today’s market for investors like me who prefer buy and hold. The market has changed and lessons have been learned.

I have read quite a few books on finance and investing and this book is different from all the others. Though in the book Tim used quite some examples to demonstrate how he made, and sometimes lost, his money, not much was talked about investing. If that’s what you are looking for, then you will have to look something else.

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