Investing 101

I hope you had a good weekend. As for me, I spent a quality time with my family(my son Ace), saw a movie (Vendetta-quite good), weather was beautiful and on top of that I had a profitable week( :-}). After getting my thoughts together, I am now sitting in front of my computer (9:15pm Sunday) trying my best to advise all of you regarding what to expect in this sea of information. I believe, there are too many people who places $ in the market without any form of understanding as to what to expect in the market. Therefore, I named this article "Investing 101". This will help set your expectations.

During the last 100 years, I mean the 20th Century (for those of you who are confused its the year 1900-1999), the Dow (come on, you know the Dow30) went from 66 to 11,500. Pretty impressive eh? Guess what this comes out to on an annualized basis. Any guess? The answer is 5.3% compounded annually. (You probably need to add about 3% of dividends to this number for the total return). Now, how about the 21st Century? From the year 2000-2099, if we were to just simply perform at the same rate as the last 100years, the Dow would become - 2,000,000. Yes, that's two (2) million on the Dow. Can you now sneez at 5.3%? Most investors I know, do sneez at 5.3%. It's as if 10%+ is a god given right. Oh, by the way, if you think 5.3% seems too small, guess what we have had so far in the 21st Century? (January 2000 to today)? During the last five (5) year and three (3) months, we have had basically less than 1% annualized gain on the Dow. We need to get 10%+ for the next five years to simply perform at the average rate of, again, 5.3%. Now, please adjust your expectations.

As a private investor and a trader, our goal is to beat the above number. Believe me, this can be done. Although for many people, this may be too much work. Most people simply do not have the patience or the knowledge to do this. In fact, most do not even enjoy trying this at all. If you are reading this, congratulations, you probably enjoy learning this process. I will try my best to educate as well as entertain you. Why? Because it makes me happy knowing that I can share some of my knowledge hoping it can help them in some way. I thank god everyday for this opportunity. I am blessed in more ways than you can imagine.
(P.S: The numbers above were calculated by none other than Mr. Buffett. Yes, Warren Bueffett, the CEO of Berkshire Hathaway. Oh, by the way, I will be attending his annual shareholders meeting in May in Ohmaha, Nebraska. Trust me, this is one more reason I love America. )
(PPS: Mr. Bueffett's record is about 22% compounded annually for the last 40 years! For those of you who do not know how to calculate 22% comp. for 40 years; it is simply too big a number for most people to comprehend. Mr. Bueffett is a superstar, an american idol as far as I am concerned).

We are approaching a short term top soon. Be careful not to be too risky with your trades. Always have a mental stop to protect your investments. As for upcoming actions:

I will be Shorting HYTM $8.75 (refer to my 4/3/06 blog; updates are coming soon).
I will be Shorting KRY $6.07 (Gold will take a rest after a big run and this will fall).
Oil will be taking a rest as well. If you are thinking of adding Oil realated stuff (OIH $150.8), wait for the discount to enter. Expect a tough week or two. Happy trading...