by Charly Mann
These are the times that try our financial souls. The current recession is so severe that it must be considered a once-in-a-lifetime event, like the Great Depression of the 1930s. In most economic downturns one can confidently make predictions of an eventual recovery and buy stocks at bargain prices. However, unlike most downturns, the period we are now living through is seeing severe contractions of all the world's economies.
For last ten years the world has been living well beyond its means, and borrowing heavily to finance unsustainable economic growth. Think of a family that makes $100,000 a year, and ten years ago had good credit. Then the family borrowed on their house and racked up credit card debt to live a lifestyle that only someone making twice as much could afford. Today, that family is several hundred thousand dollars in debt, and their bills exceed their income. This family will not be buying new goods, and will instead probably have to sell their home for less than they paid for it. These people are in a real financial mess, and it will take years for them to dig themselves out of this hole. To pay off their debts, they will have to adjust to a lifestyle that is significantly inferior to that of a normal family making $100,000. This is same state the major world economies are in, and no amount of tax cuts and government spending will make much of a dent in the financial mess.
It will take many years to emerge from this crisis, during which time all the world's economies will continue to be sluggish. Countries that take painful steps to reduce their debt and implement controls to prevent the reckless spending we once had will eventually recover from this calamity. At this time, the country that has the best chance to emerge healthy is China because of their small national debt, highly educated and hard-working labor force, and relatively small social entitlement obligations (social security and health care). For this reason, I believe the stock symbol FXI is a great long-term investment. It is an index fund made up of the twenty-five largest companies in China. It is currently trading for around $25 a share, and I expect it to rise between 80-100% within three years.
by Charly Mann
In 2008 the world entered the worst economic downturn since the Great Depression. Many people have seen their investment portfolio decline by 40% or more over the last year. The purpose of this column is to take a portfolio of $50,000 and try to double it. We will keep publishing this column on a regular basis until our fund reaches $100,000 or dips to 0.
As a prudent investor we are going to follow two fundamental principals in this exercise. First we are not going to put our entire monetary egg in one basket. We know that investors who have all their money in one stock, sector, or fund (like Madoff’s) often lose much more than diversified investors in times like we are in now. Second we are only going to invest in things we understand. We begin this exercise with low expectations, but ready to take sensible risks to achieve our goal within five years. There is no sign of an economic recovery on the horizon, which means it is unlikely we’ll see a bull market in the next year. We also know that the safest place for our money, cash, is receiving less than 2% interest from banks, CDs, and treasury bills, which means it would take us more than 35 years (the year 2044) before our money double at current rates.
Today we’re going to list the five stocks we’ll start this exercise with, along with how much we are investing in each. We are also listing how high we think each of these stocks will rise within the next twelve months. Over the course of these columns we will tell you more about the positive fundamentals of each of these companies. The only significant metric we are offering today is the current price/earnings ratio for each company. The price/earnings ratio is one way to determine the value of a stock. The price to earnings ratio is considered one of the best ways for determining how good a value a stock is. It shows how expensive a stock is in relation to how much a company earned in the last year. If a company made $2 a share in income last year, and the stock today sells for $18, then the P/E for that company is 9. Generally speaking the lower the P/E the better the value the stock. Companies that are robust and growing usually have a higher P/E than ones that are not. Over the last five years the average P/E for the top 100 NASDAQ stocks fluctuated between 16 and 25.
The economy is not good and we do not expect any of the companies we invest in to be as profitable next year as last, but we do expect all to still be around and that macroeconomic conditions and the advantages these companies have will make them stronger than most other companies. All of the following five stocks we are investing in we have followed closely for more than a year. This means we have listened to all of their quarterly conference calls, read analysts reports, and on a daily basis kept up with news relating to these companies and sectors they are in.
Price per Share 12/26/08: $85.71
Purchased: 110 shares
Stock Symbol: AAPL
Our Estimated High Price for 2009: $142.00
Current P/E 15.99
High of this stock in last 12 months: $202.96
Price per Share 12/23/08: $17.54
Purchased: 500 shares
Stock Symbol: Boom
Our estimated high for 2009: $27.50
High of this stock in last 12 months: $64.66
Current P/E: 8.78
UNITED STATES OIL FUND ETF
Price per Share 12/26/08: $ 28.52
Purchased: 330 shares
Stock Symbol: USO
Our estimated high for 2009: $55.00
High of this stock in last 12 months: $119.17
Current P/E: Not applicable
Price per Share 12/23/08: $ 15.74
Purchased: 625 shares
Stock Symbol: TEX
Our estimated high for 2009: $19.25
High of this stock in last 12 months: $76.25
Current P/E: 2.41
Price per Share 12/26/08: $ 8.52
Purchased: 1000 shares
Stock Symbol: M
Our estimated high for 2009: $12.50
High of this stock in last 12 months: $28.47
Current P/E: 5.15
There are two ways to live your life. One is as though nothing is a miracle. The other is as though everything is a miracle.
The great breakthrough in one's life comes when you realize that you can learn anything you need to learn to accomplish any goal you set for yourself. This means there are no limits on what you can be.
In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual.
We're not meant to fit in. We're meant to stand out.
If you love life, life will love you back.
Life isn't about finding yourself; it's about creating yourself.
Making a living is not the same as making a life.
Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think of you.
I don't need a friend who changes when I change and who nods when I nod, my shadow does that much better.
If you were all alone in the universe with no one to talk to, no one with which to share the beauty of the stars, to laugh with, to touch, what would be your purpose in life? It is other life, it is love, which gives your life meaning. This is harmony. We must discover the joy of each other, the joy of challenge, the joy of growth.
Judge yourself by your actions and not your intentions.
Discipline is the bridge between goals and accomplishments.
Call it Nature, Fate, or Fortune; all are names of God.
Remember to work hard. Look to the future with enthusiasm and hope. Accept responsibility, not only asking for your own rights, but also accepting responsibility for yourself, for other people, for nature and for future generations.
Goals are a means to an end, not the ultimate purpose of our lives. They are simply a tool to concentrate our focus and move us in a direction. The only reason we really pursue goals is to cause ourselves to expand and grow. Achieving goals by themselves will never make us happy in the long term; it�s who you become, as you overcome the obstacles necessary to achieve your goals, that can give you the deepest and most long-lasting sense of fulfillment.
Your imagination is your preview of life's coming attractions.
Ethical existence is the highest manifestation of spirituality.
My desire for knowledge is intermittent; but my desire to commune with the spirit of the universe, to be intoxicated with the fumes, call it, of that divine nectar, to bear my head through atmospheres and over heights unknown to my feet, is perennial and constant.
One-half of life is luck; the other half is discipline - and that's the important half, for without discipline you wouldn't know what to do with luck.
It is not the man who has too little, but the man who craves more, that is poor.
Security is mostly a superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure or nothing.
By three methods we may learn wisdom: First, by reflection, which is noblest; second, by imitation, which is easiest; and third by experience, which is the bitterest.
There are two ways to slide easily through life: to believe everything or to doubt everything; both ways save us from thinking.
Adults are obsolete children.
You will never be the person you can be if pressure, tension, and discipline are taken out of your life.
Love never dies a natural death. It dies because we don't know how to replenish its source. It dies of blindness and errors and betrayals. It dies of illness and wounds; it dies of weariness, of withering, of tarnishing.
True happiness is to enjoy the present, without anxious dependence upon the future.
Love doesn't make the world go 'round; love is what makes the ride worthwhile.
If you're never scared or embarrassed or hurt, it means you never take chances.
Great minds have purposes, others have wishes.
Time is the coin of your life. It is the only coin you have, and only you can determine how it will be spent. Be careful lest you let other people spend it for you.
Choose a job you love, and you will never have to work a day in your life.
The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one.
We can't measure out goodness by what we don't do, by what we deny ourselves, or by what we resist, and who we exclude; but we should measure our goodness by what we embrace, what we create, and who we include.
Evil (ignorance) is like a shadow. It has no real substance of its own. It is simply a lack of light. You cannot cause a shadow to disappear by trying to fight it, stamp on it, by railing against it, or any other form of emotional or physical resistance. In order to cause a shadow to disappear, you must shine light on it.
The difference between adults and children is that adults don't ask questions.
No life ever grows great until it is focused, dedicated, disciplined.
You must live for another if you wish to live for yourself.
Why is there something rather than nothing? We do not know. We will never know. Why? To what purpose? We do not know whether there is a purpose. But if it is true that nothing is born of nothing, the very existence of something - the world, the universe - would seem to imply that there has always been something: that being is eternal, uncreated, perhaps creator, and this is what some people call God.
What lies behind us and what lies ahead of us are tiny matters compared to what lives within us.
The shortest way to do many things is to do one thing at a time.
Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things you only hoped for.
A life, if well lived, is long enough.
The world is a dangerous place, not because of those who do evil, but because of those who look on and do nothing.
Time is the coin of your life. It is the only coin you have, and only you can determine how it will be spent.
The first step in the acquisition of wisdom is silence, the second listening, the third memory, the fourth practice, the fifth teaching others.
The best and most beautiful things in the world cannot be seen or even touched. They must be felt within the heart.
If you have integrity, nothing else matters. If you don't have integrity, nothing else matters.
Happy are those who dream dreams and are ready to pay the price to make them come true.
It's not enough to have lived. We should be determined to live for something. May I suggest that it be creating joy for others, sharing what we have for the betterment of humankind, bringing hope to the lost and love to the lonely.
When it comes to eating right and exercising, there is no "I'll start tomorrow." Tomorrow is disease.
Science may have found a cure for most evils; but it has found no remedy for the worst of them all -- the apathy of human beings.
Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you're generally better off sticking with what you know. And the third is that sometimes your best investments are the ones you don't make.
The greatest weakness of most humans is their hesitancy to tell others how much they love them while they're still alive.
Happiness is as a butterfly which, when pursued, is always beyond our grasp, but which if you will sit down quietly, may alight upon you.
Overcome your fears and you can reach your potential.
Science is organized knowledge. Wisdom is organized life.
Six essential qualities that are the key to success: Sincerity, personal integrity, humility, courtesy, wisdom, charity.
Only Ideas have long and lasting consequences, and ideas come mainly from books not television, movies, or video games.
Live as if you were to die tomorrow. Learn as if you were to live forever.
True love is eternal, infinite, and always like itself. It is equal and pure, without violent demonstrations: it is seen with white hairs and is always young in the heart.
Life is a marathon, not a sprint.
You have succeeded in life when all you really want is only what you really need.
It's not how much money you make that's important - it's how much money you keep and how long you keep it.
Peace cannot be kept by force. It can only be achieved by understanding.
Where all think alike, no one thinks very much.
The only way to change your life is to change your mind.
No pessimist ever discovered the secret of the stars or sailed to an uncharted land, or opened a new doorway to the human spirit.
To say that a man is your Friend, means commonly no more than this, that he is not your enemy. Most contemplate only what would be the accidental and trifling advantages of Friendship, as that the Friend can assist in time of need by his substance, or his influence, or his counsel. Even the utmost goodwill and harmony and practical kindness are not sufficient for Friendship, for Friends do not live in harmony merely, as some say, but in melody.
If you are going through hell, keep going.
I have six great friends that taught me all I knew; their names are What and Why and When and How and Where and Who.
Very few people really care about freedom, about liberty, about the truth, very few. Very few people have guts, the kind of guts on which a real democracy has to depend. Without people with that sort of guts a free society dies or cannot be born.
If you cannot accept fear of failure, you will never be successful.
The good life is inspired by love and guided by knowledge.
Reduce the complexity of life by eliminating the needless wants of life, and the labors of life reduce themselves.
Most people are about as happy as they make up their minds to be.
A certain degree of physical harmony and comfort is necessary, but above a certain level it becomes a hindrance instead of a help.
Nothing is as weak as a relationship that has not been tested under fire.
Too many people spend money they haven't earned, to buy things they don't want, to impress people they don't like.
Wise men speak because they have something to say; Fools because they have to say something.
There are two things to aim at in life: first, to get what you want, and after that to enjoy it. Only the wisest of mankind achieve the second.
Money can contribute significantly to happiness if spent wisely.
Money often costs too much.
Passion is the genesis of genius.
Even a fool, when he holdeth his peace, is counted wise: and he that shutteth his lips is esteemed a man of understanding.
Love your enemies; do good to those who hate you; bless those who curse you; pray for those who treat you spitefully. When a man hits you on the cheek, offer him the other cheek too; when a man takes your coat, let him have your shirt as well. Give to everyone who asks you; when a man takes what is yours, do not demand it back. Treat others as you would like them to treat you. If you love only those who love you, what credit is that to you? Even sinners love those who love them. Again, if you do good only to those who do good to you, what credit is that to you? Even sinners do as much. And if you lend only where you expect to be repaid, what credit is that to you? Even sinners lend to each other to be repaid in full. But you must love your enemies and do good; and lend without expecting any return; and you will have a rich reward: you will be sons of the Most High, because he himself is kind to the ungrateful and wicked. Be compassionate as your Father is compassionate.
We learn wisdom from failure much more than from success. We often discover what will do, by finding out what will not do; and probably he who never made a mistake never made a discovery.
Our prayers should be for blessings in general, for God knows best what is good for us.
If a problem cannot be solved, then you need to find the best way to manage it.
The greatest wealth is health.
Modesty forbids what the law does not.
Wisdom is the supreme part of happiness.
You may think that you are the product of events that are largely beyond your control, but you do control the moment. The present is the time you take control of what your future will be.
Believe those who are seeking the truth; doubt those who find it.
An idealist believes the short run doesn't count. A cynic believes the long run doesn't matter. A realist believes that what is done or left undone in the short run determines the long run.
Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish.
Self-pity is our worst enemy.
It is preoccupation with possessions, more than anything else, that prevents us from living freely.
Any so-called material thing that you want is merely a symbol: you want it not for itself, but because it will content your spirit for the moment.
An object in possession seldom retains the same charm that it had in pursuit.
Three great forces rule the world: stupidity, fear and greed.
An intellectual is a person who is always seeking knowledge and has the ability to change his mind when he learns new information.
Materialism is the only form of distraction from true bliss.
To be able to fill leisure intelligently is the last product of civilization, and at present very few people have reached this level.