Sep 27
(Picture is from stock.xchng.)
After I wrote a posting “How I come into Trading World“, a friend of me asked how I lost $25,000 this year.
First of all, I would like to disclose how I made $25,000 profit in the stock market last year. There were three of my stocks that hit home-run last year, i.e.:
- VMW (VMWare). VMWare is probably the most successful IPO in 2007. My profit from VMWare is about $6,000.
- AAPL (Apple). Apple made home-run last year by releasing iPhone. My profit from Apple is more than $5,000.
- TIM (Timminco). Timminco is one of the stars in Toronto Stock Exchange last year. It is a mining company specializing in solar grade silicon used in the solar photovoltaic energy industry. My profit from Timminco is almost $5,000.
I made a couple of thousands more on other stocks, such as SPWR (SunPower), a company who sells high-efficiency solar power systems for home and business, and BIDU (Baidu), a Chinese Internet search engine.
When year 2008 started, I was so greedy. I was trapped in a “rich-quickly” scheme. I bought some call options of Apple. I knew that Apple is going to release iPhone 3G. Besides that, Mac is eating PC’s market share slowly. Btw, If you have no idea about options, there is a nice article from Wikipedia.
After I bought Apple’s options, suddenly Apple’s stock dropped 40% in less than a month. If I hold Apple’s stocks at that time, I might not be so worried. The thing is I hold options; so I have to fight against time-decay. At the end of the day, I sold my Apple’s options for a total loss of ~$15,000. I lost another a couple of thousands more from my other stocks that tumbled as the global stock market crashed.
Bottom line: Do not be so greedy. There is no such thing called “rick-quickly” scheme. Lastly, be careful when trading options. It is very risky business.
Sep 26
(Picture is from stock.xchng.)
If you are following news about “financial disaster” in the US, you should know that the government is currently debating $700 billion bailout plan. If you are not following financial news recently, I recommend you to read this controversial plan from Wikipedia. This is going to be the biggest bailout in American history!
How much is $700 billion?
- It is $150 billion more than what the US government have spent on Iraq war (as of August 2008).
- We can buy more than 1 million Ferrari with the money.
- We can buy 2,000 planes of Airbus A380, the largest passenger airline in the world.
- It is almost twice as much as GDP of Indonesia. I am not kidding… it is as much as the total market value of all good and services produced within the country for almost 2 years.
- I may have to work 10 million years to get this amount of money.
It is indeed a lot of money. That’s why many Americans do not agree with the plan. However, this plan is needed to save the world economy; otherwise we’ll be in Great Depression part 2.
Bonus Links
- The Subprime Mortgage - an interesting comic explaining how this financial disaster happened. Very interesting comic and highly recommended!
Sep 09
Many Canadians, who invested in the Canadian stock market, may be very nervous now. The TSX (Toronto Stock Exchange) composite index has dropped almost 20% in the last 2 weeks. This is probably the biggest decline I have ever seen since I came to Canada.
Interestingly, many rich people are still getting richer. Why? Many rich people give their money to hedge fund managers to invest. Most hedge fund managers are able to make money in the bull or bear market. They can go short if the market is very bearish like today. Short means selling equities that they don’t own and buying back later when the values have decreased.
When the market is like today, most (if not all) hedge fund managers are taking short position. They probably make more money than taking long position. Why? When the market is down, people are fear of losing money. That’s why many investors are likely to sell their positions too, which makes the decline is even sharper. At the end of the day, the rich people are even getting richer.
