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We will have a lot to talk about so make sure you bring a pen and paper!

–Dr. Scott Brown

Ps. If you miss the call check back for video replay!

Health, Wealth, and Cheer!

I hope I am not annoying you too much Dr. Brown, but I am really looking
forward to your analysis of the EUR-USD this month.
I think the EUR-USD is still in some kind of limbo and is not quite sure of
the direction it wants to take…
I took the liberty of attaching another chart to this mail and in 2011 the
EUR-USD has so far bounced around in the triangle (8) created by the
lines 2, 5 + 7, with some additional resistance at line 10.
My guess is that it might bounce around a bit more (= high volatility) in
this area but until it breaches line 5 (+10) or line 7 it is not possible to
discern a real (new) trend. As I said… Limbo…
It was somewhat close a few weeks ago when it spiked in the area between
the lines 2, 5 + 10… but the resistance at this level was apparently strong
enough to push it back down.
What is a bit discomforting is the momentum the EUR-USD is building up
over the past few weeks… (9) …that might push it more towards line 5…
hopefully not over it…
Well, I am definitely looking forward to your insights into the EUR-USD.

ANSWER

Although the EUR/USD is rising it still has not broken it’s long term downtrend…

Look at how different the picture is on a weekly chart!

QUESTION

Kindly comment on the present market direction
specially in light of what is going on in Libya, Tunisia, Bahrain, Egypt
waiting to see what happens next in Iran & Saudi..
Moody has downgraded its rating on Japan and it seems only buyers
for US Treasury notes is Fed and similar situation is going on EU as well.
Kindly review SPXU & SLW , GDX
Do you think the market is going to react to these events adversely ?how Do we prepare
and protect our invested capitals? Should we be long on Energy , Gold
In our last session you covered some advanced concepts as well basics of Forex. Will it be
possible that a advanced class be offered to students who are willing to enroll and learn.

ANSWER

First look at the futures contract for the S&P500 on the daily chart…

Then look at the weekly…

Then look at the weekly on the SPXU…

The market is up!  So you DON’T want to be triple short!

Next look at silver futures….

and the weekly chart on silver…

Next look at SLW…

For GDX first look at gold futures…

ALWAYS look at the weekly in addition to the daily chart…

Now look at GDX…

For energy look at Crude Oil futures…

and the weekly…

QUESTION

I haven’t used a scientific calculator since I was in college. I forgot how to calculate powers on my calculator. Example: Lesson 2 question 4 on net present value and question 5 on future value.

Would you remind me how to use this feature on my calculator?

ANSWER

its the y upperscript x key on most calculators.  Have your grandkids show you! 

QUESTION

On page 172, you use an example to remove parts of your investment in a fast rising
IPO to assure that you safeguard your profits, e.g. sell half of your investment when the IPO is up 20%; when original entry price is up 50%, sell of another half of your position, etc.     Question:  I may be missing a key thought here, but would the trailing stop technique work just as well?

ANSWER

Watch for extreme volatility fluctuations that can destroy stops!

QUESTION

On my way to the Million Dollar portfolio: how much of a portfolio
must I have to generate $2500.00 in income monthly?

ANSWER

Step 1: Convert into annual amount…

$2,500 X 12 = $30,000 per year.  About 2.5% is a good worst case scenario on high quality bond yields.  Hence $30,000 / 0.025 = $1,200,000.

If you can get into to higher yields you are way better off.  At 7% bond yield you only need $428,571 for the same fixed annual return!

QUESTION

I find your lesson on Momentum Investing very interesting (since you reference Alex Green). I have used your criteria to check Mr. Green’s last two recommendations in his Momentum Alert. In his recommendation of DLB he recommended a stock that had a relative strength just over 10 which had fallen well below it’s 50 day moving average in the last couple of weeks. His latest pick, UTHR, has a relative strength of only 62 and fell significantly the week before his recommendation on relatively high volume. DLB is not doing so well. It remains to be seen for UTHR, but in either case it implies to me that he is betting on the come (or other information). That being the case (assumption), how do you get a momentum stock before it takes off? By the way, since I subscribed to the Momentum Alert there have been more losers that winners. The biggest gains have been in options plays, which was not advertised in selling the product. Since I do not trade in options I feel a bit miss led.

ANSWER

Look at the daily of DLB…

And the weekly…

Watch DLB’s fundamentals.  If earning growth and sales growth are still strong when it turns upward again you may be onboard at the beginning!

Now look at UTHR

And the weekly…

Watch for a buy signal on UTHR to see if it will continue upward.  I recommend the Bulls and the Bears.

**************************

STUDENT QUESTION

**************************

I just recently enrolled in the How to Build a Million-Dollar Portfolio and received my information packet a few days ago.  I’ve only had time to read through the 7 Golden Steps to Financial Freedom.

My question is: will this apply to me as I’m already retired and have no earned income, no 401K and no home mortgage?  I hope I’m not too late.

Can one start out by investing $500 in the Gone Fishin’ portfolio?

**************************

Doc Brown Answer

**************************

Start…just start!  Fortunes have been made from starting with one little dollar.

For a small initial amount the Permanent Portfolio Fund is best.  Here’s an article to help you:

http://www.investmentu.com/2006/August/20060825.html

**************************

STUDENT QUESTION

**************************

I first joined Oxford back in the beginning of 2008. And I followed quite a lot of the Club’s recommendations including 25% stops. As you know that Oct. ’08 DJIA did climbed over $14000. Everything was given back and DJIA came down to $6500 level.

I was not different than the general public and I lost over 35% of my portfolios. I, however, actually took some money off the table before the recommended stocks stopped at 25%.

I got out of Oxford and was not sure which way to go. I began to buy some good value stocks that paid good dividends and began to accumulate oil stocks (this was because I worked in the oil industry for over 27 years). Up to this last up turn of DJIA $11,000+ my portfolios have recovered over 80%.

After signed up in your Course, I began to learn how Oxford strategies work. And I have just resigned back into Oxford Club. Here are my questions:

1.      Is the present market trending up or down? Goldman Sach and some other big boys are turning bullish and taking money out from bonds into stocks.

**************************

Doc Brown Answer

**************************

The market is currently trending up.  Notice the weekly chart of the S&P 500 futures contract.  Technicals have become strongly positive in just the last few weeks.

**************************

STUDENT QUESTION

**************************

2.      How can one be sure as a little investor where to invest one’s money?

**************************

Doc Brown Answer

**************************

You can’t.  That’s why I recommend 70% of invested savings into a core passive strategy that you set and forget.  Two excellent candidates are the Gone Fishing Portfolio and the Permanent Income Portfolio.  Other Oxford Club portfolios can also fit the bill for a core passive strategy that you set and forget.  That’s the best way any investor, including a small one, can achieve protection.  Than 30% can go into active investing.

**************************

STUDENT QUESTION

**************************

3.      If the market does have a correction, should one tightens the stops and not to use the 25% stops?

**************************

Doc Brown Answer

**************************

When the market corrects you should definitely tighten your stops.  It can even be wise to completely exit the market until the drop subsides.

**************************

STUDENT QUESTION

**************************

4.      The 25 or 30% stops work good for an up market like the last year but surely not very good for 2008. Where will 2011 be?

**************************

Doc Brown Answer

**************************

Again, the trend is officially up on the S&P 5oo as I explained above.  Beginners tend to over-tighten stops from fear.  Then they get knocked out of the market.  So try not to over-tighten your stops.

**************************

STUDENT QUESTION

**************************

5.      I guess I really would like to know how to grow the portfolio but not to take big hits which small investors really can’t afford to lose. What would be a few key indicators one can trend for guide?

**************************

Doc Brown Answer

**************************

The market is currently trending up.  Notice the weekly chart of the S&P 500 futures contract.  Technicals have become strongly positive in just the last few weeks.  Look for a break below the 12 month moving average on the monthly chart of the Vanguard 500 (VFINX) fund as an indicator for market weakness.  Notice how this simple indicator would have kept you out of trouble as long as you had the resolve to follow it.

BTW…The Track n Trade High Finance software is the very best for technical indicators.  And, it’s reasonably priced.  Go here for more info:

http://www.tradementors.com/chartbooks

**************************

STUDENT QUESTION

**************************

Aren’t all the general guidelines for investing in stocks kind of out the window right now? It seems to me all paradigms have shifted in the past couple of years, and most especially in the last couple of months. Is there a new paradigm? And if so, is it a permanent one, or just for the forseeable future? It seems everything I’ve invested in this year is now doing terribly, and I can’t afford to lose.

**************************

Doc Brown Answer

**************************

You been tattered by a nasty sideways market from April of this year to now.  Sideways markets are the very worst for the average investor because they psychologically grind into your psych.  Again, the S&P 500 Futures contract on the Chicago Mercantile Exchange is officially bullish.  As long as that trend continues upward stock investors are likely to have happier results with regard to individual stock returns and core passive portfolios.

**************************

STUDENT QUESTION

**************************

Rob Arnott believes that market indexes based on market caps are flawed in that you buy more of overvalued stocks and less of undervalued stocks.  It has created indexes based on fundamentals (RAFI).    It weights a company in relationship to its economic footprint, as measured by widely accepted measures of company size, including five-year averages of company sales, profits, and dividends This method claims lower volatility and higher returns.  http://www.rallc.com/ideas/pdf/fundamentalIndexation.pdf

Could you review how traditional indexes such as the Dow and S&P 500 are constructed and comment about the various alternate indexing methods such as the RAFI.  Would the Gone Fishing portfolio benefit from switching to alternate indexing methods?

**************************

Doc Brown Answer

**************************

A price weighted index is first computed by summing the prices of individual stocks in the index then that sum is divided by a “divisor” to yield a base index value.  The DJIA is price weighted.

A market-value weighted index is computed by calculating the total market value of firms in the index by market cap (shares outstanding  X share price) as a comparison to the prior day yielding a percentage change in the total index.  Market weighted indexes don’t need adjustments for stock splits and dividends unlike price weighted indexes.  The S&P 500 is a market-value weighted index.

Either way the index is tracking changes in share price.

The first theory of finance in the early 50’s by Professors Modigliani and Miller was an arbitrage argument that yielded the conclusion that the only way to increase share price is to increase bottom line earnings of a firm.  An index is designed to track aggregate changes in share price among different groupings of firms ranging from indexes that track small firms to indexes that track the largest firms to industry sectored and asset class indexes.

By confounding this concept with fundamental factors the RAFI index is camouflaging an investment strategy as an index.  In other words RAFI is not an index and should be ignored in terms of core passive strategies.  No.

**************************

STUDENT QUESTION

**************************

Since investor sentiment is a factor that drives stock prices, in general, is there much growth in the stock price of profitable companies that are not well known (to the public)?  For example, an established company with strong fundamentals would not be a household name if their customers are not the consumers of their products. Does this affect the price of the stock?

**************************

Doc Brown Answer

**************************

You have to delineate between large institutional investors + large insiders + large outsiders and small individual investors.  Investor sentiment has a stronger affect on small investors who don’t drive the market as much as the big boys do.  Plus, newer firms have a much smaller float in terms of shares outstanding.  This means that it takes less buying activity to substantially drive up the stock.  A good product with loyal consumer following is a typical scenario that draws the interest of larger stock investors who buy up the float and drive up the share price.  Yes.

**************************

STUDENT QUESTION

**************************

I had a question relating to discussions on the last teleconference…at what point does one need to incorporate when trading stocks? You said the IRS considers @ $25k as the activity of a “day trader”. Does that mean just that your individually purchased stocks are worth $25k or  do you not  need to worry unless you begin making trades of $25k or more at a time, or totaling $25k in a certain time period? And where can I get more information on this topic?

**************************

Doc Brown Answer

**************************

$25K in initial stock trading account balance.  I need to add comments from my trading as a business CPA Jack Cohen into a presentation I have for you.  I’ll work it up for the next month’s call and make the PowerPoint available to you.  Remind me next month.

I will also analyze the overall condition of the stock market.

QUESTION

Now, for your open call this month I have just one suggestion to make.
I would like to move to introduce a short (max. 10min) analysis and
prognosis of the EUR/USD at the
beginning of each call, since this is a topic which I trust you know
by heart and I (we) am (are) very much
interested in this increasingly important topic. Maybe it might be
possible to also add a few comments
about other relevant or current developments and news in other
currencies or the currency market as a
whole. (e.g. “currency wars”, …)
If you are not sure if this topic is of general interest to your
callers (it should!), you could ask them in the
open call on Thursday. I would obviously like to see it implemented in
the call as a permanent enrichment
to the course.

ANSWER

Daily Euro Currency Futures

Weekly Euro Currency Futures

Daily Swiss Franc Futures

Weekly Swiss Franc Futures

QUESTION

I have been reviewing Lesson V on Takeovers and I must say I am a bit confused. On page 233 you advise to focus on all cash deals but later in the page you tell us not to buy After the takeover is Announced. My question is how do you know if it is an all cash deal Before the Takeover is announced?

Same thing with the motivation behind the deal. Are the motivations from the standpoint of the Target or Acquirer. If they are from the viewpoint of the Acquirer how do you know before the announcement who they are?

How do you learn about takeover rumors. I was looking at Seagate and Western Digital because there P/E was stupidly low. I went with Western Digital when Louis Basenese picked it in The Contrarian Strategist. A few weeks later the Seagate takeover was announced and shoot through the roof. You would think a pro like Louis who used to edit the Takeover Trader would have seen that one coming. But no one sent me the rumor memo on Seagate. Could you highlight some current rumors and how to find them on our own?

The Takeover Trader is now the Activist Trader by Marc Lichtenfeld. Marc claims that stocks with activist investors outperform the market by 21.6%. Seems like that is an anomaly worth some ink on the revision to this course. I would think that an Activist would help identify a takeover target.

ANSWER

The Takeover Trader is now the Activist Trader by Marc Lichtenfeld. Marc claims that stocks with activist investors outperform the market by 21.6%. Seems like that is an anomaly worth some ink on the revision to this course. I would think that an Activist would help identify a takeover target.

Takeover traders like Lou try to narrow down the field of possibilities before  takeover announcement.  Warren Buffet only goes for takeover (risk arbitrage) opportunities after announcement.  Both prefer all cash deals.

Motivations are normally either stated in the takeover announcement or there is other news circulating that correctly states the reasons for takeover.  Remember, there are people who are paid nothing else but to find this stuff full time.

Don’t have the expectation that you are going to catch all of them on your own.  You have to develop enough self confidence through practice and experience to have pulled the trigger on Seagate when you saw it before hand.  Bravo but you hesitated.

You have to learn to stick firmly with your convictions.  The OC newsletters are even more helpful when you to.  As far as Marc’s 21.6% return I would have to perform another extensive analysis to verify.  The work I did on the Insider Alert Returns with Professors Powers and Cao took 3 years and did show that Alex Green outperforms the market and it was in the range of Warren Buffet’s performance.

You need to (1) track the insiders Marc identifies as activists (2) create a list of activists like Bill Ackman, Tim Horton, Warren Buffet, etc. and then (3) track them every week by googling their name to see if there are any news releases of new companies they have bought into.

QUESTION

I too, would like to thank you for allowing us the free download of your new forex book, “Your Right to Wealth”. I look forward to trying this. Upon reading the material, you recommend a period of paper trading to “get your feet wet” .With your course you offer a free 14 day trial of Gecko software. How much of the Gecko software and the various plug-ins do you recommend the new trader to subscribe to in order to get acclimated to trading in currencies.

ANSWER

If you are serious about trading currencies I recommend the advanced technical indicator package with the Bulls N Bears for the Forex platform or the futures platform.  Click here to see the platform http://www.thebestbusinessonearth.com

QUESTION

1.  PCBC - Pacific National Bankcorp – is at it’s all time low – looks like a great price.  The fundamentals look terrible but should start to turn around as the economy recovers and cash flows pick up.  The company is coinsidering a reverse split since it’s stock price has been below $1 for too long and they are in danger of being de-listed from the exchange.  The recently appointed Chairman brings hope – check out his bio.

Brief Biography  -Mr. Gerald J. Ford has been appointed as Chairman of the Board of Pacific Capital Bancorp effective August 31, 2010. Mr. Ford is the managing member of Ford Financial Fund, L.P., the parent company of the Investor. Mr. Ford is a banking and financial institutions entrepreneur who has been involved in numerous mergers and acquisitions of private and public sector financial institutions over the past 30 years. In that capacity, he acquired and consolidated 30 commercial banks from 1975 to 1993, forming First United Bank Group, Inc., a multi-bank holding company for which he functioned as Chairman of the Board and Chief Executive Officer until its sale in 1994. During this period, he also led investment consortiums that acquired numerous financial institutions, forming in succession, First Gibraltar Bank, FSB, First Madison Bank, FSB and First Nationwide Bank. Mr. Ford also served as Chairman of the Board of Directors and Chief Executive Officer of Golden State Bancorp Inc. and its subsidiary, California Federal Bank, FSB, from 1998 to 2002. Additionally, he served as the interim Chief Executive Officer of Hilltop Holdings Inc. from January 2010 to March 2010. He currently participates on numerous boards of directors, including Hilltop Holdings Inc. (Chairman), First Acceptance Corporation (Chairman), McMoRan Exploration Co., Freeport McMoRan Copper and Gold Inc., Scientific Games Corporation and Diart Financial Holdings LLC (formerly Triad Financial Holdings LLC) (Co-Chairman). Mr. Ford previously served as a director of Americredit Corp. and Triad Financial Corporation.

2.  PBR – oil is always in demand and the price may rise with “No new offshore drilling” policy after the  BP Spill.  PBR has some advantages in the gulf since they had already started drilling before the BP spill.  On the tecnical side, the price looks pretty good to me.  I’m long in this one 450 @ $34.16 which I bought over the last couple of days

3.  BOM – based on a total return version of the Deutsche Bank Liquid Commodity Index – Optimum Yield Industrial Metals™ (the “Index”), (BOM is double short this position)  which is designed to reflect the performance of certian futures contracts on aluminum, copper and zinc plus the returns from investing in 3 month United States Treasury Bills.  http://dbfunds.db.com/notes/BaseMetals/index.aspx

BOM looks like it’s at an all time low, meaning that the futures in this index are over priced.  I still haven’t taken this position, but I’m thinking about setting a limit entry to go long at $13.50 – $14.00.

ANSWER

PCBC — I NEVER buy into a reverse split.  They are usually designed to rip off investors by artificially changing the appearance of the price chart.

PBR — The price of oil is NOT rising and PBR’s price closely resembles the NYMEX Crude Oil futures chart.

BOM — I hesitate to stray from the Gone Fishing Portfolio allocation.  The metals fund in the GFP has the discretion to move into other metals.

**************************

STUDENT QUESTION

**************************

I just recently enrolled in the How to Build a Million-Dollar Portfolio and received my information packet a few days ago.  I’ve only had time to read through the 7 Golden Steps to Financial Freedom.

My question is: will this apply to me as I’m already retired and have no earned income, no 401K and no home mortgage?  I hope I’m not too late.

Can one start out by investing $500 in the Gone Fishin’ portfolio?

**************************

Doc Brown Answer

**************************

Start…just start!  Fortunes have been made from starting with one little dollar.

For a small initial amount the Permanent Portfolio Fund is best.  Here’s an article to help you:

http://www.investmentu.com/2006/August/20060825.html

**************************

STUDENT QUESTION

**************************

I first joined Oxford back in the beginning of 2008. And I followed quite a lot of the Club’s recommendations including 25% stops. As you know that Oct. ’08 DJIA did climbed over $14000. Everything was given back and DJIA came down to $6500 level.

I was not different than the general public and I lost over 35% of my portfolios. I, however, actually took some money off the table before the recommended stocks stopped at 25%.

I got out of Oxford and was not sure which way to go. I began to buy some good value stocks that paid good dividends and began to accumulate oil stocks (this was because I worked in the oil industry for over 27 years). Up to this last up turn of DJIA $11,000+ my portfolios have recovered over 80%.

After signed up in your Course, I began to learn how Oxford strategies work. And I have just resigned back into Oxford Club. Here are my questions:

1.      Is the present market trending up or down? Goldman Sach and some other big boys are turning bullish and taking money out from bonds into stocks.

**************************

Doc Brown Answer

**************************

The market is currently trending up.  Notice the weekly chart of the S&P 500 futures contract.  Technicals have become strongly positive in just the last few weeks.

**************************

STUDENT QUESTION

**************************

2.      How can one be sure as a little investor where to invest one’s money?

**************************

Doc Brown Answer

**************************

You can’t.  That’s why I recommend 70% of invested savings into a core passive strategy that you set and forget.  Two excellent candidates are the Gone Fishing Portfolio and the Permanent Income Portfolio.  Other Oxford Club portfolios can also fit the bill for a core passive strategy that you set and forget.  That’s the best way any investor, including a small one, can achieve protection.  Than 30% can go into active investing.

**************************

STUDENT QUESTION

**************************

3.      If the market does have a correction, should one tightens the stops and not to use the 25% stops?

**************************

Doc Brown Answer

**************************

When the market corrects you should definitely tighten your stops.  It can even be wise to completely exit the market until the drop subsides.

**************************

STUDENT QUESTION

**************************

4.      The 25 or 30% stops work good for an up market like the last year but surely not very good for 2008. Where will 2011 be?

**************************

Doc Brown Answer

**************************

Again, the trend is officially up on the S&P 5oo as I explained above.  Beginners tend to over-tighten stops from fear.  Then they get knocked out of the market.  So try not to over-tighten your stops.

**************************

STUDENT QUESTION

**************************

5.      I guess I really would like to know how to grow the portfolio but not to take big hits which small investors really can’t afford to lose. What would be a few key indicators one can trend for guide?

**************************

Doc Brown Answer

**************************

The market is currently trending up.  Notice the weekly chart of the S&P 500 futures contract.  Technicals have become strongly positive in just the last few weeks.  Look for a break below the 12 month moving average on the monthly chart of the Vanguard 500 (VFINX) fund as an indicator for market weakness.  Notice how this simple indicator would have kept you out of trouble as long as you had the resolve to follow it.

BTW…The Track n Trade High Finance software is the very best for technical indicators.  And, it’s reasonably priced.  Go here for more info:

http://www.tradementors.com/chartbooks

**************************

STUDENT QUESTION

**************************

Aren’t all the general guidelines for investing in stocks kind of out the window right now? It seems to me all paradigms have shifted in the past couple of years, and most especially in the last couple of months. Is there a new paradigm? And if so, is it a permanent one, or just for the forseeable future? It seems everything I’ve invested in this year is now doing terribly, and I can’t afford to lose.

**************************

Doc Brown Answer

**************************

You been tattered by a nasty sideways market from April of this year to now.  Sideways markets are the very worst for the average investor because they psychologically grind into your psych.  Again, the S&P 500 Futures contract on the Chicago Mercantile Exchange is officially bullish.  As long as that trend continues upward stock investors are likely to have happier results with regard to individual stock returns and core passive portfolios.

**************************

STUDENT QUESTION

**************************

Rob Arnott believes that market indexes based on market caps are flawed in that you buy more of overvalued stocks and less of undervalued stocks.  It has created indexes based on fundamentals (RAFI).    It weights a company in relationship to its economic footprint, as measured by widely accepted measures of company size, including five-year averages of company sales, profits, and dividends This method claims lower volatility and higher returns.  http://www.rallc.com/ideas/pdf/fundamentalIndexation.pdf

Could you review how traditional indexes such as the Dow and S&P 500 are constructed and comment about the various alternate indexing methods such as the RAFI.  Would the Gone Fishing portfolio benefit from switching to alternate indexing methods?

**************************

Doc Brown Answer

**************************

A price weighted index is first computed by summing the prices of individual stocks in the index then that sum is divided by a “divisor” to yield a base index value.  The DJIA is price weighted.

A market-value weighted index is computed by calculating the total market value of firms in the index by market cap (shares outstanding  X share price) as a comparison to the prior day yielding a percentage change in the total index.  Market weighted indexes don’t need adjustments for stock splits and dividends unlike price weighted indexes.  The S&P 500 is a market-value weighted index.

Either way the index is tracking changes in share price.

The first theory of finance in the early 50’s by Professors Modigliani and Miller was an arbitrage argument that yielded the conclusion that the only way to increase share price is to increase bottom line earnings of a firm.  An index is designed to track aggregate changes in share price among different groupings of firms ranging from indexes that track small firms to indexes that track the largest firms to industry sectored and asset class indexes.

By confounding this concept with fundamental factors the RAFI index is camouflaging an investment strategy as an index.  In other words RAFI is not an index and should be ignored in terms of core passive strategies.  No.

**************************

STUDENT QUESTION

**************************

Since investor sentiment is a factor that drives stock prices, in general, is there much growth in the stock price of profitable companies that are not well known (to the public)?  For example, an established company with strong fundamentals would not be a household name if their customers are not the consumers of their products. Does this affect the price of the stock?

**************************

Doc Brown Answer

**************************

You have to delineate between large institutional investors + large insiders + large outsiders and small individual investors.  Investor sentiment has a stronger affect on small investors who don’t drive the market as much as the big boys do.  Plus, newer firms have a much smaller float in terms of shares outstanding.  This means that it takes less buying activity to substantially drive up the stock.  A good product with loyal consumer following is a typical scenario that draws the interest of larger stock investors who buy up the float and drive up the share price.  Yes.

**************************

STUDENT QUESTION

**************************

I had a question relating to discussions on the last teleconference…at what point does one need to incorporate when trading stocks? You said the IRS considers @ $25k as the activity of a “day trader”. Does that mean just that your individually purchased stocks are worth $25k or  do you not  need to worry unless you begin making trades of $25k or more at a time, or totaling $25k in a certain time period? And where can I get more information on this topic?

**************************

Doc Brown Answer

**************************

$25K in initial stock trading account balance.  I need to add comments from my trading as a business CPA Jack Cohen into a presentation I have for you.  I’ll work it up for the next month’s call and make the PowerPoint available to you.  Remind me next month.

I will also analyze the overall condition of the stock market.

QUESTION

Now, for your open call this month I have just one suggestion to make.
I would like to move to introduce a short (max. 10min) analysis and
prognosis of the EUR/USD at the
beginning of each call, since this is a topic which I trust you know
by heart and I (we) am (are) very much
interested in this increasingly important topic. Maybe it might be
possible to also add a few comments
about other relevant or current developments and news in other
currencies or the currency market as a
whole. (e.g. “currency wars”, …)
If you are not sure if this topic is of general interest to your
callers (it should!), you could ask them in the
open call on Thursday. I would obviously like to see it implemented in
the call as a permanent enrichment
to the course.

ANSWER

Daily Euro Currency Futures

Weekly Euro Currency Futures

Daily Swiss Franc Futures

Weekly Swiss Franc Futures

QUESTION

I have been reviewing Lesson V on Takeovers and I must say I am a bit confused. On page 233 you advise to focus on all cash deals but later in the page you tell us not to buy After the takeover is Announced. My question is how do you know if it is an all cash deal Before the Takeover is announced?

Same thing with the motivation behind the deal. Are the motivations from the standpoint of the Target or Acquirer. If they are from the viewpoint of the Acquirer how do you know before the announcement who they are?

How do you learn about takeover rumors. I was looking at Seagate and Western Digital because there P/E was stupidly low. I went with Western Digital when Louis Basenese picked it in The Contrarian Strategist. A few weeks later the Seagate takeover was announced and shoot through the roof. You would think a pro like Louis who used to edit the Takeover Trader would have seen that one coming. But no one sent me the rumor memo on Seagate. Could you highlight some current rumors and how to find them on our own?

The Takeover Trader is now the Activist Trader by Marc Lichtenfeld. Marc claims that stocks with activist investors outperform the market by 21.6%. Seems like that is an anomaly worth some ink on the revision to this course. I would think that an Activist would help identify a takeover target.

ANSWER

The Takeover Trader is now the Activist Trader by Marc Lichtenfeld. Marc claims that stocks with activist investors outperform the market by 21.6%. Seems like that is an anomaly worth some ink on the revision to this course. I would think that an Activist would help identify a takeover target.

Takeover traders like Lou try to narrow down the field of possibilities before  takeover announcement.  Warren Buffet only goes for takeover (risk arbitrage) opportunities after announcement.  Both prefer all cash deals.

Motivations are normally either stated in the takeover announcement or there is other news circulating that correctly states the reasons for takeover.  Remember, there are people who are paid nothing else but to find this stuff full time.

Don’t have the expectation that you are going to catch all of them on your own.  You have to develop enough self confidence through practice and experience to have pulled the trigger on Seagate when you saw it before hand.  Bravo but you hesitated.

You have to learn to stick firmly with your convictions.  The OC newsletters are even more helpful when you to.  As far as Marc’s 21.6% return I would have to perform another extensive analysis to verify.  The work I did on the Insider Alert Returns with Professors Powers and Cao took 3 years and did show that Alex Green outperforms the market and it was in the range of Warren Buffet’s performance.

You need to (1) track the insiders Marc identifies as activists (2) create a list of activists like Bill Ackman, Tim Horton, Warren Buffet, etc. and then (3) track them every week by googling their name to see if there are any news releases of new companies they have bought into.

QUESTION

I too, would like to thank you for allowing us the free download of your new forex book, “Your Right to Wealth”. I look forward to trying this. Upon reading the material, you recommend a period of paper trading to “get your feet wet” .With your course you offer a free 14 day trial of Gecko software. How much of the Gecko software and the various plug-ins do you recommend the new trader to subscribe to in order to get acclimated to trading in currencies.

ANSWER

If you are serious about trading currencies I recommend the advanced technical indicator package with the Bulls N Bears for the Forex platform or the futures platform.  Click here to see the platform http://www.thebestbusinessonearth.com

QUESTION

1.  PCBC - Pacific National Bankcorp – is at it’s all time low – looks like a great price.  The fundamentals look terrible but should start to turn around as the economy recovers and cash flows pick up.  The company is coinsidering a reverse split since it’s stock price has been below $1 for too long and they are in danger of being de-listed from the exchange.  The recently appointed Chairman brings hope – check out his bio.

Brief Biography  -Mr. Gerald J. Ford has been appointed as Chairman of the Board of Pacific Capital Bancorp effective August 31, 2010. Mr. Ford is the managing member of Ford Financial Fund, L.P., the parent company of the Investor. Mr. Ford is a banking and financial institutions entrepreneur who has been involved in numerous mergers and acquisitions of private and public sector financial institutions over the past 30 years. In that capacity, he acquired and consolidated 30 commercial banks from 1975 to 1993, forming First United Bank Group, Inc., a multi-bank holding company for which he functioned as Chairman of the Board and Chief Executive Officer until its sale in 1994. During this period, he also led investment consortiums that acquired numerous financial institutions, forming in succession, First Gibraltar Bank, FSB, First Madison Bank, FSB and First Nationwide Bank. Mr. Ford also served as Chairman of the Board of Directors and Chief Executive Officer of Golden State Bancorp Inc. and its subsidiary, California Federal Bank, FSB, from 1998 to 2002. Additionally, he served as the interim Chief Executive Officer of Hilltop Holdings Inc. from January 2010 to March 2010. He currently participates on numerous boards of directors, including Hilltop Holdings Inc. (Chairman), First Acceptance Corporation (Chairman), McMoRan Exploration Co., Freeport McMoRan Copper and Gold Inc., Scientific Games Corporation and Diart Financial Holdings LLC (formerly Triad Financial Holdings LLC) (Co-Chairman). Mr. Ford previously served as a director of Americredit Corp. and Triad Financial Corporation.

2.  PBR – oil is always in demand and the price may rise with “No new offshore drilling” policy after the  BP Spill.  PBR has some advantages in the gulf since they had already started drilling before the BP spill.  On the tecnical side, the price looks pretty good to me.  I’m long in this one 450 @ $34.16 which I bought over the last couple of days

3.  BOM – based on a total return version of the Deutsche Bank Liquid Commodity Index – Optimum Yield Industrial Metals™ (the “Index”), (BOM is double short this position)  which is designed to reflect the performance of certian futures contracts on aluminum, copper and zinc plus the returns from investing in 3 month United States Treasury Bills.  http://dbfunds.db.com/notes/BaseMetals/index.aspx

BOM looks like it’s at an all time low, meaning that the futures in this index are over priced.  I still haven’t taken this position, but I’m thinking about setting a limit entry to go long at $13.50 – $14.00.

ANSWER

PCBC — I NEVER buy into a reverse split.  They are usually designed to rip off investors by artificially changing the appearance of the price chart.

PBR — The price of oil is NOT rising and PBR’s price closely resembles the NYMEX Crude Oil futures chart.

BOM — I hesitate to stray from the Gone Fishing Portfolio allocation.  The metals fund in the GFP has the discretion to move into other metals.

Scott Barrie is on the right in the photo…

Suicide is the leading cause of death on our planet.  Watch your loved ones for signs and talk about it…the true silent killer since nobody talks about it.

QUESTION

I have sent questions earlier after our last call to remind you on your presentations in San Diego? You also mentioned BIOF & PWER as compelling stocks, I looked at BIOF and do not see anything that jumps out. The company has a Corn Ethanol Plant in my area even the ethanol plant is barely making it.

Please show me what I am missing?

ANSWER

These were both energy plays by industry and fad.

QUESTION

I recently finished another book that focuses on buying stock as if they were business which I enjoyed very much. The book is 

F Wall Street: Joe Ponzio’s No-Nonsense Approach to Value Investing For the Rest of Us

What do you think of cash yield as a measure of value for slow growing or stable companies?

ANSWER

Cash yield is simply the free cash flow per share.

Free Cash Flow Yield = Free Cash Flow by Share / Share Price

Since this takes into account capital expenditures it can give a truer view of earnings.

Free cash flow yield is used to measure GAAP earnings per share divided by share price. The idea is that the lower the ratio, the worse the investment is and vice versa. The idea is that investors pay as little price as possible for as much free cash flow earnings as possible.

QUESTION

In “The 7 Golden Steps to Financial Freedom” you say to put safe money in
the “Gone Fishin” portfolio.

In the Sept 9 Investment U E-Letter, Alexander Green talked about “The
Evergreen Portfolio” book. I haven’t picked up a copy yet, but it sounds
like some new recommendations.

My question…Is the “Gone Fishin” portfolio still the right choice for safe
money?

ANSWER

I have not read it but the line-up looks solid.  The Gone Fishin’ Portfolio still makes sense from a core passive stand-point.

QUESTION

Health Care REIT (HCN) recommended by Lou in Oxfords Ultimate Retirement hit a 52 week high this month. I just can’t figure out why. It has a price to earnings of 46, a peg of 12. So it doesn’t seem cheap. Even worse, the dividends look twice as high as the earnings. Doesn’t that mean the company is self-liquidating? I have noticed that many REITS have his kind of pricing. Are REITS worth that much more or are they overpriced?

ANSWER

It is in an uptrend…

QUESTION

I recently finished The Little Book That Beats the Market by Joel Greenblatt. I found it very readable and tackles complex subjects in an easy to understand format. It was on the reading list of many people I respect. Did you read the book and did you find it useful? What do you think of his magic formula that ranks stock by return on capital and earnings yields? Could you explain each? Over time his system seems to outperform the market by a wide margin. Do you think it will continue to do so in the future? Do you think that understanding the theory behind the magic formula would make us better investors.

ANSWER

I have not read his book.  Understanding the theory behind an authors assertions is always good.

QUESTION

I read in interesting piece on momentum investing recommended by Meb Faber.

It stated that combining momentum investing with value investing is very powerful because they are inversely correlated. Is the take away that using both lowers risk because when one is performing poorly, the other is likely to shine? Should we be looking for value stocks that are truly cheap AND moving up? How would you go about finding such stocks?

I also found it interesting that momentum on a stock seems to have a shelf life. Stocks that outperform for 6-12 months continue to do so for another 6-12 months, but after that they tend to be overpriced and revert to the mean. Is that one of the reasons Alex Green tends to tighten stops after a big move? If we tend to sell to soon on winners and too slow on losers is tighten stops on winners a mistake or great protection when overshooting the mean?

Could you highlight the difference between a growth, value and momentum strategy? How does one implement these strategy? The article indicated that value combined with more momentum and less growth should have higher returns with less volatility. Sounds good to me.

Is rebalancing a subtle form protection against reversion to the mean? Those asset classes that have momentum working for them have a shelf life, so move excess gains out of the class that has momentum into underperforming class that may have the next move and are under the mean.

Why does momentum do well when the market is illiquid and poorly when the market is very liquid. How can you tell if the market is very liquid? Should we pass on recommendations in Alex Greens Momentum Alert during those times?

ANSWER

On call.  Listen to recording.

QUESTION

As I am going to be heading to China & Japan soon hence may forget my questions for next conference call.Hence sending this note bit too early. Appreciate if you will kindly pass on the question below which doc Brown suggested I write to him.

> Share Doc Brown’s presentation he gave at the San Diego Oxford club conference in March 2010.

> To review and point out when to enter and exit the market using the Gecko software using the BNB signals and also the advantage line.

> He has saved books for all Oxford club recommendations which could be downloaded to the Gecko Software – IU Course students.

I am truly grateful to Dr. Brown for this course and learning to think for myself and not my financial advisors who basically churned my portfolio and reducing it to unsustainable level threatening my financial future. I am doing everything to regain my financial freedom.

ANSWER

1.        Here’s my San Diego presentation:

2.       Lan decided to gift IU Course members his Stop Loss Secrets specifically to show how to use the BNB signals and the advantage lines:  http://www.stoplosssecrets.com/lessons-az3695.htm

Here’s the files with old recommendations…  I do not update these since you have to subscribe to the Oxford Club newsletters then follow my lead:  http://www.tradementors.com/tntstocks2

QUESTION

As I am going to be heading to China & Japan soon hence may forget my questions for next conference call.Hence sending this note bit too early. Appreciate if you will kindly pass on the question below which doc Brown suggested I write to him.

> Share Doc Brown’s presentation he gave at the San Diego Oxford club conference in March 2010.

> To review and point out when to enter and exit the market using the Gecko software using the BNB signals and also the advantage line.

> He has saved books for all Oxford club recommendations which could be downloaded to the Gecko Software – IU Course students.

I am truly grateful to Dr. Brown for this course and learning to think for myself and not my financial advisors who basically churned my portfolio and reducing it to unsustainable level threatening my financial future. I am doing everything to regain my financial freedom.

ANSWER

1.        Here’s my San Diego presentations:

How to Invest Like a 22% Super Endowment.ppt

http://dbffoa52archive.s3.amazonaws.com/45705471793189645.ppt

The Ivy League Portfolio.ppt

http://dbffoa52archive.s3.amazonaws.com/985115297138691.ppt

2.       Lan decided to gift IU Course members his Stop Loss Secrets specifically to show how to use the BNB signals and the advantage lines:  http://www.stoplosssecrets.com/lessons-az3695.htm

3.        Here’s the files with old recommendations…  I do not update these since you have to subscribe to the Oxford Club newsletters then follow my lead:  http://www.tradementors.com/tntstocks2

QUESTION

I do not know how to express you my profound gratitude
for your generous gesture of Thursday , August 5^th.
Receiving your gift , “ Your Right to Wealth “ forex course ,
touched and thrilled me so much that I could not get any
sleep over the night . Finally , when the sun started to
rise , I was as excited as a young child finding himself
in front of a fully decorated Christmas tree for the very
first time . Thanks to you from the bottom of my heart !
Any stock and probably more so , any option , at the
market opening , can show , for a very short time lapse ,
an extremely wide spread , so that the much lower bid
price will trigger your stop loss or trailing stop order ,
resulting in a huge loss .
Similarly , when the forex market re-opens after the
weekend pause , can the spread of a currency pair show ,
for a very short time lapse , a much lower bid price which
will trigger your stop loss or trailing stop order , resulting
also in a huge loss ? If so , apart from closing the posi-
tion and running for cover , just before the forex market
closing on Friday afternoon , if there is some profit to be
taken , can you recommend some protective measures ?

ANSWER

Gecko Financial Service accounts have a no negative account balance guarantee by the clearing firm.  Remember, that Forex is your training wheels for moving up to futures.  But you have to start with very small amounts of money and then carefully proceed in a way that you never lose such that it causes financial pain to you or your loved ones.  Watch Stop Loss Secrets for protective measures:

http://www.stoplosssecrets.com/lessons-az3695.htm

QUESTION

Also… THANK YOU VERY MUCH for the TnT-Package you negotiated!
I am sure it will be a very useful addition to my trading success which is getting
better by “the month”. Thanx!
And I already sent a mail to Steven King at Oxford Club “SKing@oxfordclub.com <mailto:SKing@oxfordclub.com>“
to start a petition for your attendance at their tour in Europe this fall. I encourage
all other European participants to do so as well.

Andreas Hoffmann
Austria / Middle East

P.S.: – Editorial…
As always…
If you think it’s necessary you can of course edit/rephrase/shorten my questions for your blackboard.
Thanks.
And I am really curious on how you might do that. I believe that’s going to be quite a challenge.
I am not sure what I am looking forward to the most. Your answers or how you will try to tackle this
truckload of questions. Have fun.

ANSWER

A huge thanks to Andreas Hoffmann in Austria.  I am revising the course for 2011.  Andreas’ edits and comments are solid gold.  If I meet him in the upcoming Investment U Conference I will by him lunch or dinner in gratitude!  His edits and comments are so extensive that I will pick questions from what I can find in the various pages of thoughts he sent.  Again, a big thanks and I’m looking forward to more.  Again here’s the package Andreas mentions:

http://www.tradementors.com/tntstocks2

QUESTION

“…if you pass up on the deal with your buddy, you’ll earn 26.970,40$ more
just letting your cash sit in your GFP.”
… ok, now you got me scratching my head…
You would actually earn up to 312.468$ more by just leaving your money in
the GFP, right?

Even if I only pay 173.029,26$ I would still just make the same money as I
would with the GFP, but that is not the same as calling it a loss… more like
overpayment that has bad consequences because of compound interest.
I guess with your equations, one can figure out a price that matches the
returns of e.g. the GFP and is therefore the maximum price you should pay
in comparison to the GFP (= what it is worth to you), but it doesn’t calculate
the actual loss you would endure if you paid the asked price.

Ok, now that I have chewed on this for some time, how about some insight
from you? I know we don’t NEED all this stuff, but I would really like to get
a better handle on this.
What did I not understand or mix up? Which conclusions are right or wrong?
Isn’t the actual loss of the NFVs the important difference?
***

You can just as easily send me an e-mail with the answers that are too specific,
extensive or embarrassing for the call.

***

At page 62 you say that issuing debt in form of bonds doesn’t hurt the book-to
-market ratio, but isn’t debt included in the book value and is therefore present
in the ratio as well?
Maybe the impact is not that big, but it should be there…
Actually, you pretty much say just that at page 74. “… dividends are even worse
because increasing debt decreases shareholder value!” (…since they (dividends)
make it easier for companies to issue bonds (=debt))

***

Or what do you think of eIBD? They offer the RS indicator, but do you
know which other data is available through their system? Or which is missing…

***

You say we should use 5-year averages with the ROE and that we can find it at
yahoo, but yahoo only seems to offer a 1-year ROE… So, where can we find the
one with 5-years?
*Q-06*
At yahoo they mostly show “diluted EPS” in the data sheets. What is the difference
to the “regular EPS”?
*Q-07*
As for the RS indicator, you mentioned IBD and another site, but which one would
be better and would the RS also be available within the TnT software?
*Q-08*
And IBD also offers an “EPS Rank”… what do you think of that one?
So, what is the best (single?) source for the market share, the book-to-market ratio
and actually every other data we need?
*Q-09*
At Step 4 of the 10-Minute Hot IPO Scan you use the “Horsehead”
company as an example for the calculation of insider selling and
your calculation using the given numbers are logical, but I am not
sure I follow your underlying logic about the insider selling itself.
According to the Hot IPO 50% rule on page 156 you want the CEO
(all insiders?) not to sell more than 50% of the company to the
public which would mean that 2,085,608 shares should be held by
them in the end. If you put this in relation to the 369,571 shares
they actually held you get a pretty clear picture.
On the other hand, you say there on page 169 that “the insider
should retain at least a 25% stake in the company.”
Which one is it?
Also, I wonder about the number of shares outstanding.
In the “Offering” the total shares outstanding are more than 34
million and today the shares outstanding sum up, according to
Google Finance, to more than 43 million.
Was that offer from “Horsehead” a secondary offer for more shares?
Shouldn’t we calculate the total insider ownership of shares in mind
of the 50% (or 25% ?) rule?

*Q-10*
Where and how can we identify a “Green Shoe”? Is the mentioned
somewhere on EDGAR or just visible through the volume? If so,
how is it possible to determine between “usual” high volume, 115%
and 135% high volume?
Also, how do we identify “high volume” with an IPO? In percentage
terms of shares outstanding?

ANSWER

On call or recording if you missed the call.

Scott Barrie is on the right in the photo…

Suicide is the leading cause of death on our planet.  Watch your loved ones for signs and talk about it…the true silent killer since nobody talks about it.

QUESTION

I have sent questions earlier after our last call to remind you on your presentations in San Diego? You also mentioned BIOF & PWER as compelling stocks, I looked at BIOF and do not see anything that jumps out. The company has a Corn Ethanol Plant in my area even the ethanol plant is barely making it.

Please show me what I am missing?

ANSWER

These were both energy plays by industry and fad.

QUESTION

I recently finished another book that focuses on buying stock as if they were business which I enjoyed very much. The book is 

F Wall Street: Joe Ponzio’s No-Nonsense Approach to Value Investing For the Rest of Us

What do you think of cash yield as a measure of value for slow growing or stable companies?

ANSWER

Cash yield is simply the free cash flow per share.

Free Cash Flow Yield = Free Cash Flow by Share / Share Price

Since this takes into account capital expenditures it can give a truer view of earnings.

Free cash flow yield is used to measure GAAP earnings per share divided by share price. The idea is that the lower the ratio, the worse the investment is and vice versa. The idea is that investors pay as little price as possible for as much free cash flow earnings as possible.

QUESTION

In “The 7 Golden Steps to Financial Freedom” you say to put safe money in
the “Gone Fishin” portfolio.

In the Sept 9 Investment U E-Letter, Alexander Green talked about “The
Evergreen Portfolio” book. I haven’t picked up a copy yet, but it sounds
like some new recommendations.

My question…Is the “Gone Fishin” portfolio still the right choice for safe
money?

ANSWER

I have not read it but the line-up looks solid.  The Gone Fishin’ Portfolio still makes sense from a core passive stand-point.

QUESTION

Health Care REIT (HCN) recommended by Lou in Oxfords Ultimate Retirement hit a 52 week high this month. I just can’t figure out why. It has a price to earnings of 46, a peg of 12. So it doesn’t seem cheap. Even worse, the dividends look twice as high as the earnings. Doesn’t that mean the company is self-liquidating? I have noticed that many REITS have his kind of pricing. Are REITS worth that much more or are they overpriced?

ANSWER

It is in an uptrend…

QUESTION

I recently finished The Little Book That Beats the Market by Joel Greenblatt. I found it very readable and tackles complex subjects in an easy to understand format. It was on the reading list of many people I respect. Did you read the book and did you find it useful? What do you think of his magic formula that ranks stock by return on capital and earnings yields? Could you explain each? Over time his system seems to outperform the market by a wide margin. Do you think it will continue to do so in the future? Do you think that understanding the theory behind the magic formula would make us better investors.

ANSWER

I have not read his book.  Understanding the theory behind an authors assertions is always good.

QUESTION

I read in interesting piece on momentum investing recommended by Meb Faber.

It stated that combining momentum investing with value investing is very powerful because they are inversely correlated. Is the take away that using both lowers risk because when one is performing poorly, the other is likely to shine? Should we be looking for value stocks that are truly cheap AND moving up? How would you go about finding such stocks?

I also found it interesting that momentum on a stock seems to have a shelf life. Stocks that outperform for 6-12 months continue to do so for another 6-12 months, but after that they tend to be overpriced and revert to the mean. Is that one of the reasons Alex Green tends to tighten stops after a big move? If we tend to sell to soon on winners and too slow on losers is tighten stops on winners a mistake or great protection when overshooting the mean?

Could you highlight the difference between a growth, value and momentum strategy? How does one implement these strategy? The article indicated that value combined with more momentum and less growth should have higher returns with less volatility. Sounds good to me.

Is rebalancing a subtle form protection against reversion to the mean? Those asset classes that have momentum working for them have a shelf life, so move excess gains out of the class that has momentum into underperforming class that may have the next move and are under the mean.

Why does momentum do well when the market is illiquid and poorly when the market is very liquid. How can you tell if the market is very liquid? Should we pass on recommendations in Alex Greens Momentum Alert during those times?

ANSWER

On call.  Listen to recording.

QUESTION

As I am going to be heading to China & Japan soon hence may forget my questions for next conference call.Hence sending this note bit too early. Appreciate if you will kindly pass on the question below which doc Brown suggested I write to him.

> Share Doc Brown’s presentation he gave at the San Diego Oxford club conference in March 2010.

> To review and point out when to enter and exit the market using the Gecko software using the BNB signals and also the advantage line.

> He has saved books for all Oxford club recommendations which could be downloaded to the Gecko Software – IU Course students.

I am truly grateful to Dr. Brown for this course and learning to think for myself and not my financial advisors who basically churned my portfolio and reducing it to unsustainable level threatening my financial future. I am doing everything to regain my financial freedom.

ANSWER

1.        Here’s my San Diego presentation:

2.       Lan decided to gift IU Course members his Stop Loss Secrets specifically to show how to use the BNB signals and the advantage lines:  http://www.stoplosssecrets.com/lessons-az3695.htm

Here’s the files with old recommendations…  I do not update these since you have to subscribe to the Oxford Club newsletters then follow my lead:  http://www.tradementors.com/tntstocks2

QUESTION

As I am going to be heading to China & Japan soon hence may forget my questions for next conference call.Hence sending this note bit too early. Appreciate if you will kindly pass on the question below which doc Brown suggested I write to him.

> Share Doc Brown’s presentation he gave at the San Diego Oxford club conference in March 2010.

> To review and point out when to enter and exit the market using the Gecko software using the BNB signals and also the advantage line.

> He has saved books for all Oxford club recommendations which could be downloaded to the Gecko Software – IU Course students.

I am truly grateful to Dr. Brown for this course and learning to think for myself and not my financial advisors who basically churned my portfolio and reducing it to unsustainable level threatening my financial future. I am doing everything to regain my financial freedom.

ANSWER

1.        Here’s my San Diego presentations:

How to Invest Like a 22% Super Endowment.ppt

http://dbffoa52archive.s3.amazonaws.com/45705471793189645.ppt

The Ivy League Portfolio.ppt

http://dbffoa52archive.s3.amazonaws.com/985115297138691.ppt

2.       Lan decided to gift IU Course members his Stop Loss Secrets specifically to show how to use the BNB signals and the advantage lines:  http://www.stoplosssecrets.com/lessons-az3695.htm

3.        Here’s the files with old recommendations…  I do not update these since you have to subscribe to the Oxford Club newsletters then follow my lead:  http://www.tradementors.com/tntstocks2

QUESTION

I do not know how to express you my profound gratitude
for your generous gesture of Thursday , August 5^th.
Receiving your gift , “ Your Right to Wealth “ forex course ,
touched and thrilled me so much that I could not get any
sleep over the night . Finally , when the sun started to
rise , I was as excited as a young child finding himself
in front of a fully decorated Christmas tree for the very
first time . Thanks to you from the bottom of my heart !
Any stock and probably more so , any option , at the
market opening , can show , for a very short time lapse ,
an extremely wide spread , so that the much lower bid
price will trigger your stop loss or trailing stop order ,
resulting in a huge loss .
Similarly , when the forex market re-opens after the
weekend pause , can the spread of a currency pair show ,
for a very short time lapse , a much lower bid price which
will trigger your stop loss or trailing stop order , resulting
also in a huge loss ? If so , apart from closing the posi-
tion and running for cover , just before the forex market
closing on Friday afternoon , if there is some profit to be
taken , can you recommend some protective measures ?

ANSWER

Gecko Financial Service accounts have a no negative account balance guarantee by the clearing firm.  Remember, that Forex is your training wheels for moving up to futures.  But you have to start with very small amounts of money and then carefully proceed in a way that you never lose such that it causes financial pain to you or your loved ones.  Watch Stop Loss Secrets for protective measures:

http://www.stoplosssecrets.com/lessons-az3695.htm

QUESTION

Also… THANK YOU VERY MUCH for the TnT-Package you negotiated!
I am sure it will be a very useful addition to my trading success which is getting
better by “the month”. Thanx!
And I already sent a mail to Steven King at Oxford Club “SKing@oxfordclub.com <mailto:SKing@oxfordclub.com>“
to start a petition for your attendance at their tour in Europe this fall. I encourage
all other European participants to do so as well.

Andreas Hoffmann
Austria / Middle East

P.S.: – Editorial…
As always…
If you think it’s necessary you can of course edit/rephrase/shorten my questions for your blackboard.
Thanks.
And I am really curious on how you might do that. I believe that’s going to be quite a challenge.
I am not sure what I am looking forward to the most. Your answers or how you will try to tackle this
truckload of questions. Have fun.

ANSWER

A huge thanks to Andreas Hoffmann in Austria.  I am revising the course for 2011.  Andreas’ edits and comments are solid gold.  If I meet him in the upcoming Investment U Conference I will by him lunch or dinner in gratitude!  His edits and comments are so extensive that I will pick questions from what I can find in the various pages of thoughts he sent.  Again, a big thanks and I’m looking forward to more.  Again here’s the package Andreas mentions:

http://www.tradementors.com/tntstocks2

QUESTION

“…if you pass up on the deal with your buddy, you’ll earn 26.970,40$ more
just letting your cash sit in your GFP.”
… ok, now you got me scratching my head…
You would actually earn up to 312.468$ more by just leaving your money in
the GFP, right?

Even if I only pay 173.029,26$ I would still just make the same money as I
would with the GFP, but that is not the same as calling it a loss… more like
overpayment that has bad consequences because of compound interest.
I guess with your equations, one can figure out a price that matches the
returns of e.g. the GFP and is therefore the maximum price you should pay
in comparison to the GFP (= what it is worth to you), but it doesn’t calculate
the actual loss you would endure if you paid the asked price.

Ok, now that I have chewed on this for some time, how about some insight
from you? I know we don’t NEED all this stuff, but I would really like to get
a better handle on this.
What did I not understand or mix up? Which conclusions are right or wrong?
Isn’t the actual loss of the NFVs the important difference?
***

You can just as easily send me an e-mail with the answers that are too specific,
extensive or embarrassing for the call.

***

At page 62 you say that issuing debt in form of bonds doesn’t hurt the book-to
-market ratio, but isn’t debt included in the book value and is therefore present
in the ratio as well?
Maybe the impact is not that big, but it should be there…
Actually, you pretty much say just that at page 74. “… dividends are even worse
because increasing debt decreases shareholder value!” (…since they (dividends)
make it easier for companies to issue bonds (=debt))

***

Or what do you think of eIBD? They offer the RS indicator, but do you
know which other data is available through their system? Or which is missing…

***

You say we should use 5-year averages with the ROE and that we can find it at
yahoo, but yahoo only seems to offer a 1-year ROE… So, where can we find the
one with 5-years?
*Q-06*
At yahoo they mostly show “diluted EPS” in the data sheets. What is the difference
to the “regular EPS”?
*Q-07*
As for the RS indicator, you mentioned IBD and another site, but which one would
be better and would the RS also be available within the TnT software?
*Q-08*
And IBD also offers an “EPS Rank”… what do you think of that one?
So, what is the best (single?) source for the market share, the book-to-market ratio
and actually every other data we need?
*Q-09*
At Step 4 of the 10-Minute Hot IPO Scan you use the “Horsehead”
company as an example for the calculation of insider selling and
your calculation using the given numbers are logical, but I am not
sure I follow your underlying logic about the insider selling itself.
According to the Hot IPO 50% rule on page 156 you want the CEO
(all insiders?) not to sell more than 50% of the company to the
public which would mean that 2,085,608 shares should be held by
them in the end. If you put this in relation to the 369,571 shares
they actually held you get a pretty clear picture.
On the other hand, you say there on page 169 that “the insider
should retain at least a 25% stake in the company.”
Which one is it?
Also, I wonder about the number of shares outstanding.
In the “Offering” the total shares outstanding are more than 34
million and today the shares outstanding sum up, according to
Google Finance, to more than 43 million.
Was that offer from “Horsehead” a secondary offer for more shares?
Shouldn’t we calculate the total insider ownership of shares in mind
of the 50% (or 25% ?) rule?

*Q-10*
Where and how can we identify a “Green Shoe”? Is the mentioned
somewhere on EDGAR or just visible through the volume? If so,
how is it possible to determine between “usual” high volume, 115%
and 135% high volume?
Also, how do we identify “high volume” with an IPO? In percentage
terms of shares outstanding?

ANSWER

On call or recording if you missed the call.

For attendees I am giving you my $399 Forex course for FREE:

http://www.thebestbusinessonearth.com

I haven’t read all through the manual/course yet but will we go over options at all?

Nope!  Just stock.  But you can ask option questions on this call.

In the past you have not been a fan of gold. People like Doug Casey believe that gold will hold value while the dollar continues to loss value. What is your current thoughts on Gold?

How about long bonds? In a WSJ article Jeremy Siegel and Jeremy Schwartz side with Alex Green that bonds are in a bubble.

http://online.wsj.com/article/SB10001424052748704407804575425384002846058.html </exchweb/bin/redir.asp?URL=http://online.wsj.com/article/SB10001424052748704407804575425384002846058.html>

David Rosenberg disagrees.
https://ems.gluskinsheff.net/Articles/Breakfast_with_Dave_081910_summary.pdf </exchweb/bin/redir.asp?URL=https://ems.gluskinsheff.net/Articles/Breakfast_with_Dave_081910_summary.pdf>

https://ems.gluskinsheff.net/Articles/Breakfast_with_Dave_081910.pdf </exchweb/bin/redir.asp?URL=https://ems.gluskinsheff.net/Articles/Breakfast_with_Dave_081910.pdf>

It has been suggested to buy long bonds but hedge with 5% of the value of the bonds with gold.
I know that I should have more exposer to bonds according to the Oxford Asset allocation model, but the fundamentals for bonds look dicey.

Do you see deflation or inflation coming next? Or both and in which order.

GOLD Futures

30 year bond futures

What investment vehicle would provide the highest monthly income for a fixed amount of money invested?

Direct Participation Program in Oil and Gas.  See Kathy Heshelow’s book: “ABCs of DPPs”:

http://www.amazon.com/Investing-Oil-Gas-Participation-Program/dp/059553192X/ref=sr_1_1?ie=UTF8&s=books&qid=1282851232&sr=8-1

Are there reliable statistics on the profitability
of currency spot trading versus currency options ?
In other words , which way of trading currencies
is generally the most profitable statistically ?

No statistics are available.  I consider trading on a long-term chart best (that’s my opinion):

See http://www.thebestbusinessonearth.com

For attendees I am giving you my $399 Forex course for FREE:

http://www.thebestbusinessonearth.com

Refer to these two graphics in my discussion of Forex…

EUR/USD Pair

USD/CHF Pair

Where do you see the EUR/USD going over the next few weeks and months?

What’s your take on the recent rise of the Euro? Is it a short term correction or could this mark a turnaround? (For the near future or even for the mid term?)

I hope you will find time to answer this question in your next call.

Listen to my answer on the recording and look at the graphics above.

Are master limited partnerships good investment vehicles for creating monthly income?  How can we calculate how much monthly income a lump sum investment will generate from an MLP?

INVESTOR’S BUSINESS DAILY

Drill for Year End Write Offs in Oil and Gas Drilling Programs

Exploring for a year-end tax deduction? Sinking some dollars into an oil and natural gas drilling deal can be risky. But such investments can offer robust returns as well as write-offs.

One benefit provided by the tax code is an upfront tax deduction. “Often, a large portion of your investments may be deducted in the first year,” said Ronald Rutherford, a certified financial planner in New York. In other types of business, more of the costs must be written off over long time periods.

The amount you can deduct would vary according to details of the transaction. But suppose you invest $25,000 in a drilling deal this year. Say you get to deduct $18,000 from your 2007 income. In a top 39.6% federal tax bracket, that deduction would save you more than $7,000 in tax payments. State tax deduction might increase your total savings.

Depletion Allowance

If your drilling investments find oil or gas, you may get revenue starting in late 2007 or 2009. Then your taxable income will be reduced by depletion allowance. That’s a second tax break to encourage energy exploration. It assumes the well in which you’ve invested loses value as the energy resource is pumped out. You can treat part of your revenue as a nontaxable refund of your original investments rather than as taxable income. Imagine you’re paid $4,000 in 2007 for your 2007 investments. Because of the depletion allowance, you might have to report only, say, $3,000 as taxable income. The exact amount will vary each year, depending on factors such as the amount of oil and gas produced and income reinvested. This shelter can go on as long as the oil and gas keeps flowing.

A third reason to consider making this type of investment is for the sake of diversifying your portfolio. When stocks or bonds are weak, oil and natural gas prices may rise. Despite these benefits, there are risks. Mainly, the driller might not discover enough oil and gas.

Check Background

One precaution is to check the background of the management running the drilling operation. Ask to see letters to investors in prior deals to see if the operators actually sold oil or gas and distributed cash. The type of drilling that’s planned can impact your return. “Wildcat” exploration looks for previously undiscovered petroleum. On the other hand, “developmental” drilling takes place near fields already producing oil and gas. Such drilling probably won’t produce a bonanza but very likely will find some petroleum to sell.

“Ask to see a map of the area to be drilled,” Rutherford said. “There will be less risk if the wells are in the middle of a producing oil or gas field rather than on the outskirts. And check with your tax pro. “These programs raise issues regarding the alternative minimum tax, the passive-activity rules and the at-risk rules,” says Robert Keebler, partner in the accounting firm Virchow, Krause and Co. of Green Bay, WI. “They should be addressed before you invest or you may not receive the upfront deductions you expect,” Keebler said. Keebler points to another potential tax advantage concerning Roth IRA conversions. Regular IRA’s may be converted to Roth IRA’s. Deferred income taxes are due upon conversions.

AIGI Matters

But you can eventually withdraw all of the money in a Roth IRA tax-free after the latter of five years of age 59 ½ , You are eligible to convert only in a year when your adjusted gross income is $100,000 or less. “The first-year deductions from a drilling income below $100,000 for the year,” Keebler said. “Nevertheless, the underlying economics are critical, so you should pay attention to the investments potential as well as the tax advantages.”

Brokers and Advisers

Oil and gas drilling deals may be available through some brokers, financial planners, accountants and other advisers or directly from the sponsoring oil company. These investments typically are structured as partnerships or joint ventures. Some may require you to have a specific level of income or net worth to participate. Don’t ignore risks. Oil prices have soared the past two years to record levels and so has the price of natural gas. Although it seems highly unlikely at this time, they can always plummet in the future and reduce your income.

Very few investments enjoy the pure tax shelter benefits by investing in drilling for reserves of oil and natural gas. In a successful drilling deal you may have your cake and eat it too, from the upfront tax deductions to ongoing tax sheltered cash flow.

Dear Dr. Brown ,

In your opinion , what is the best introductory book on Forex trading ? And which second book should one read to further his knowledge on the subject?

Many thanks .

There are very few books on Forex trading because so few people understand international monetary theory.  The best resource is my Forex course entitled “Your Right To Wealth!” I am offering your FREE tonight at http://www.thebestbusinessonearth.com

CAN YOU PLEASE TELL ME HOW TO INVEST IN REAL ESTATE WITHOUT ALL THE HARD WORK I AM DOING?CAN YOU GIVE ANY SPECIFIC RECOMMENDATIONS

First off understand that there is no such thing as real estate investing due to it’s low liquidity.  Real Estate is a business and it is VERY hard work.

I know because I am very good at it and I personally know all the big gurus from John Ulmer to Ron LeGrand.  John is currently in jail due to screwing up the financing he was using on his homes.

So, if you want to stay in Real Estate you simply have to accept that fact that it is hard work.

That’s the bad news.  The good news is that Real Estate investing seminars don’t sell but many of the strategies taught just a few years ago work or will work in the a few years.  So buy every real estate investing course you can get on Ebay and study like crazy.

Then THINK how each strategy would apply to your area.  Try the ones that make sense and over time your business will make more sense!