Bad Review for "Stock Trading Riches" on Amazon.com

Today, I noticed that someone had recently reviewed my book Stock Trading Riches on Amazon.com.

They mentioned that it was a "solid trading system" and was "not a scam", but it appears that the reviewer was disappointed that my system was not more aggressive, and was not designed to short stocks or trade leveraged instruments like futures or currencies.

The reviewer did not think my system could give a great return, and he only gave my book one star (out of five).  Well, at least it wasn't zero stars ;-)

I don't agree that my system does not give a good return.  My real life trading results refute that.

But, I figured that my system would be controversial because most people either talk about buy and hold investing or aggressive trading.  My system falls in between.  In my opinion, it has the best risk / reward trade-off.

That is not just my opinion.  I have several testimonials on the Stock Trading Riches website, and two people have included my book on their recommended lists at Amazon.com.

Anyway, I published my own review as a response.  It is not up on Amazon.com yet.  Here is what I wrote:

I wanted to respond to the above review.

I am pleased that the reviewer mentioned that my system is not a scam and is based on a solid principle. I am also glad that he or she mentioned that my system is intended for non-leveraged stocks, funds, and ETFs.

It seems that the reviewer is a more aggressive trader and looking for systems that can be used on leveraged futures and FX trading vehicles, as well as a system that can trade short and profit in bear markets.

My system does not use leverage, and does not go short. It "profits" from bear markets by taking profits in rising markets and then reinvesting at lower prices.

I disagree with the reviewer about my system having a lower level of return. He mentions that I admit my system does not have a high rate of return.

In my book, I actually said that "when I was younger, I would not have used it [my system], because I wanted to get rich quick - I wanted "action" and triple-digit returns. Now I understand that those kinds of systems are unsustainable."

In my book, I also say that "While I'm no financial genius like Warren Buffet, I have made a double-digit annual return for years now."

I am down 19% so far in 2008 but, from 2005-2007, I made 13%, 14%, and 22% a year, respectively.

If I finish 2008 at -19%, then I would have earned 6.22% per year from 2005-2008. So, I will no longer have an unbroken string of double digit annual returns, but I still beat the S&P500 and savings accounts for that period.

If the reviewer feels those are low returns, then I guess the reviewer is looking for triple digit returns and aggressive systems.

I really take issue with the idea that a bank account could earn more.

My book is recommended on two different Amazon lists:

Contrarian Stock Investing Systems

Alawys successful formula

The creator of the first list writes that he tested my system against buy and hold on the SPY (S&P500 ETF) from 2001-2008, and my system returned 2% while Buy/hold returned 1.7%.

So, yes, a bank could beat that return but that is because of market conditions. I beat the market.

Also, I wouldn't recommend using my system on a diversified index fund. It should be used on a portfolio of stocks or narrowly focused funds, because the formula is applied independently to each portfolio component. Then, we take advantage of volatility - while still having the overall diversification.

I made my double digit returns because I was trading each stock on its own. Trading a diversified portfolio as a single unit (like the SPY example) dampens out volatility.

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High Gas Prices Turn Car Rentals Upside Down

I read in the Chicago Tribune that, due to high gas prices, rental car companies are seeing their business model flipped over.

Traditionally, car rental companies are organized such that their cheapest cars are the small subcompacts. Larger sedans and SUVs cost more to rent, or require an upgrade.

Now, with $4 gas, the rental companies are having a shortage of small cars, while the larger cars are less popular.

One business traveler mentioned in the article was renting a car for a 400 mile business trip. He said that, after seeing that he was assigned an SUV, went back in and demanded a smaller car.

The rental agent then ironically claimed that the SUV was an upgrade!

The businessman then said "I sure don't want an upgrade if it means driving an SUV."

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Credit Card Reward Programs - Airlines Out, Cash is King?

I have a lot of miles with American Airlines, and use an American Airlines mileage credit card, but I am re-thinking it after reading a recent article in the Chicago Tribune business section.

The article said that, with U.S. airlines making their frequent flier programs less attractive (less available seats, increase required mileage, fees, etc), it might be time to start using a cash-back card.

The article went on to give some tips for choosing a rewards card:

1. Go online - Sites like CardRatings.com, IndexCreditCards.com, and LowCards.com can help you choose a rewards card.

2. Prefer cash - it can be used in more places than miles, points, and gift cards. Also, unlike miles or points, cash cannot be arbitrarily devalued.

3. Get more than 1% back - it is possible to get a rewards card offering more than 1% back (at least on some merchandise like groceries or gas).

4. Consider other factors - no annual fee, automatic rewards payments, no reward limit. Signing bonuses are good, but watch out for introductory offers that expire after a couple of months.

5. Big spenders - if you can charge over $1,000 per month, consider the American Express Blue Cash card. It has a tiered system, with bigger rebates after $6,500 is spent.

6. Small spenders - find a card that gives 1% back right away, gives you the most rewards for your spending pattern, and pays after only $25-$50 cash back is earned.

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Slydial - The Simplest Ideas are Found While You Work on Something Else

I saw an article in today's Chicago Tribune about a new service called Slydial.

This service is if you need to call someone, but don't want to actually talk to them.

So, when you call their cell with Slydial, you are guaranteed to reach their voice mail.

This way, you can leave them a message - so you can avoid talking to them, while still getting credit for calling them ;-)

The service is free, and they make their money with 30 second ads you have to listen to.

The company behind Slydial, Boston-based Mobile Sphere, found the technology while working on a problem involving roaming voice mail in Europe. 

This lead to the founder saying, "the greatest and simplest ideas are found when you're working on something else."

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Minimum Wage vs. Cost of Living

Last Thursday, the Federal minimum wage went up from $5.85 to $6.55. This was the second of three annual raises required by a 2007 law.

After next year's raise, the minimum wage will reach $7.25

Unfortunately, this raise does not keep up with inflation. Last week, the Labor department reported the highest inflation rates since 1991: 5% for June (compared to June 2007). Energy costs were up 25%, while food was up more than 5%.

Today's minimum wage is lower than in the past (when adjusting for inflation):

1968 $10.06

1997 $7.02

2008 $6.55

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Incredible Shrinking Packages

Food inflation is currently running at its highest rate since the early 1990's.

This is being caused by a combination of soaring prices for commodities like wheat, and high oil prices (affecting transportation and plastics packaging).

Food companies, however, are not increasing the prices of their products.

Instead, they are quietly reducing the packaging and/or amounts.

Last year, for example, Coca-Cola began putting a smaller cap on its plastic bottles. This was a major design project because their engineers had to ensure the new caps did not leak or blow off.

The new cap is 24% lighter. Last year, Coke cut plastic use by 4 million pounds. This year, with the new cap roll-out complete, Coke should save 40 million pounds.

Kraft redesigned its 16-ounce dressing bottles to use 19% less plastic. This will save 3.4 million pounds per year.

Unilever is reducing the quantity of their products.

A jar of Hellman's mayonnaise has gone from 32 ounces to 30 ounces. A package of Country Crock spread has gone from 3 pounds down to 2 pounds, 13 ounces.

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Zimbabwe Running Out of Paper Currency

I was reading an article in the Chicago Tribune about how Zimbabwe may soon run out of paper to print currency.

Their German supplier halted shipments because of concerns about the recent election violence.

The state owned printing company then laid off 2/3 of its workforce - cutting from 3 shifts down to 1.

This company, Fidelity Printers and Refiners, is a key to Mugabe's power because he uses the money they print to pay his police, soldiers, and agents.

Zimbabwe is currently experiencing extreme hyperinflation. Last year, they were printing 1 million dollar notes. Today, the highest bill is 50 billion Zimbabwe dollars (equal to 1 dollar on the street).

One beer now costs 150 billion Zimbabwe dollars.

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U.S. Government Waste in Iraq

http://news.yahoo.com/s/ap/20080728/ap_on_re_mi_ea/iraq_vacant_prison

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Killer Barbies - Downtown

The Spanish punk band "Killer Barbies" version of the classic "Downtown":

http://youtube.com/watch?v=QIMht3iZ-rM&feature=related

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Richard Simmons on Capitol Hill

Powerful testimony about P.E. classes in schools:

http://youtube.com/watch?v=B3g6s7NTnDE

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Government Needs to Be Made Simpler

http://www.cnn.com/2008/US/07/21/katrina.supplies/index.html

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Broadway Mogul Philip Smith and His YouTube Divorce

A Manhattan judge ruled in his favor during the divorce trial because the wife totally embarrassed him by hiring a film crew to make an angry You Tube video.

She even calls up his administrative assistant on the speaker phone, shows their wedding album, and makes fun of his relatives. 

It's weird...

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He Threw Out A $65 million Lottery Ticket

He accidently threw out a $65 million lottery ticket - after he knew it was a winner.

But he had a receipt. He had taken a whole batch of tickets to the store and they scanned them.

I'm thinking he tried to throw away the others and accidently threw out the winner.

He finally collected now, after a year.

He had the receipt, but he had to wait for a whole year because, by law, anyone who turns in the ticket gets the money.

So he had to wait until the deadline expired and hope nobody pulled the ticket out of the garbage.

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Batman: Dead End

http://www.youtube.com/watch?v=fUm0Te-SGMY

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I'm Thinking About Buying Southwest

I have avoided owning airline stocks because they are money-losing businesses.

The money-losing exception, however, has been Southwest Airlines (LUV). They have made money every year for decades.

I've flown them a lot in the last few years, and I love their philosophy of simplicity - no hub/spoke models, fly only one type of aircraft, and no assigned seating.

Southwest's stock looks like a great value. Despite it's rapid market share growth this decade, the shares are still $10 below its January 2001 peak.

But, the stock is acting strong. It is up 7% this year, while the Dow Jones airline industry index has fallen 46.5%.

Now, in the next few years,I think that Southwest has a good chance to explode and dominate the U.S. airline industry.

Why? one reason: fuel hedges.

Their CEO, Gary Kelly, was ahead of his time when, as CFO at the time of the first Persian Gulf war, he got the airline involved into fuel hedging.

During the low oil prices of the late 1990's, he talked the Board into expanding the fuel hedges into the future.

Now, Southwest will pay about 1/3 of the going rate for fuel through 2011.

This should save them about $5 billion, compared to the other airlines.

Now, Kelly is going to try a balancing act: expanding Southwest (including internationally) without losing their culture.

For example, Southwest will probably not buy any airlines but, they would take advantage of a troubled airline by buying gates, routes, and/or planes.

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Buffett Bitten By The Bear

A few days ago, the Chicago Tribune had an article that the current bear market has even caught Warren Buffett.

Berkshire Hathaway stock is down more than 20% since last December.

This was his company's worst first half of a year since 1990.

The stock closed last Thursday at $116,700 a share - down from $149,200 on Dec. 10.

Many Buffett fans see this as a buying opportunity. They have history on their side because the stock has advanced in 17 of the last 20 years. The last full year decline was 3.8% in 2002.

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Buffett vs. the Hedge Funds

Warren Buffett has been vocal in his criticism of hedge funds and their fees.

He calls hedge fund managers the "2 and 20" crowd because they typically charge 2% of the principal and 20% of the profits each year.

Buffett says "Investors, on average and over time, will do better with a low cost index fund then with a group of funds of funds."

He recently backed up his stance by agreeing to a wager with Ted Seides, a co-founder of hedge fund Protege Partners LLC.

The bet will compare, from 2008-2017, the performance of the S&P 500 index vs. five portfolios of hedge funds (including all fees, costs, and expenses).

The bet is being held by the Long Bets website.

At stake is $1,000,000 to the winner's favorite charity.

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Build A Business - Not a Job

On his DiegoNorte.com blog, internet guru James Brausch has a great article about how people should build businesses, instead of jobs.

Brausch has always taught that the "secret" to internet success has always been simple: products, traffic, and copywriting. He has mentored a lot of online entrepreneurs, and many of them have learned his secret and started to make money online.

Recently, however, Brausch learned that some of his students were working hard, but still were not making a lot of money. After investigating, Brausch realized that they were trying to do the work themselves.

Brausch has always been a advocate for hiring out tasks, so that the entrepreneur can build a "freedom" business, where his or her earnings are not tied to the hours they put in.
In the "company or J.O.B.?" post, I think Brausch states a great piece of advice very clearly: "These instructions are meant for you, but they are NOT meant for YOU to carry out. They are meant as a roadmap to start a company."

I have to admit that I have not hired out as much as I should. I still do a lot of things myself. This limits what I can accomplish because there are only so many hours in a day.

I guess I hesitate because I'm worried that I will lose money if I have to pay to get work done. The truth is that, if I design tasks properly, I should be able to make a net profit. The trick is for me to test and measure.

Once you have a profitable task that is performed by someone else, it becomes easy to scale up and make a lot of money.

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This is Cool - Voyagers Show Solar System is not Round

Back in 1977 (when Star Wars came out), NASA launched the Voyager space probes to travel beyond the solar system.  Voyager 1 went north, and Voyager 2 went south.

Now they both reached the heliosheath (the edge of the solar system), and astronomers were startled to learn that they are different distances from the sun.

This indicates that the solar system is dented, not a circle.

Surprised astronomers said they will have to change their models for what the solar system looks like.

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U.S. Says Nelson Mandela is No Longer A Terrorist...

This is surprising - until Bush signed a law today, in honor of his 90th birthday, Nelson Mandela and the African National Congress were considered terrorists, and had to get special permission to enter the country.

They were labeled terrorists in the '80's, due to a law passed during the Reagan administration...

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Doesn't It Really Sound Like We Are Now "In the Future"?

California lab will clone the dog that sniffed out 9/11 survivors from the ruins of the World Trade Center...

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History of the Libertarian Party

http://www.youtube.com/watch?v=MYQRzXd1UvQ

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Ron Paul Video Fox doesn't want you to see

http://www.youtube.com/watch?v=EZ1Litmd92g&feature=related

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