I have been reading "Damn Right!" by Janet Lowe. Some interesting tidbits from the book :

Charlie did not share the special admiration ?Buffett felt for Graham. Munger said "Graham had blind spots.He had too low an appreciation of the fact that some businesses were worth paying big premiums for".

Yet Charlie agreed with his most fundamental teachings and they have been part of the Buffett-Munger success formula from the start. "The basic concept of value to a private owner and beig motivated when you're buying and selling securities by reference to intrinsic value instead of price momentum-I don't think that will ever be outdated", said Munger.

I never want to overpay for an asset i.e pay more than its intrinsic value. Howeverthere are very rare exceptions for whom it is worth paying up a bit to get in with for the long term advantage.

Buffett : Charlie shoved me in the direction of not just buying bargains, as Graham had taught me. It took a powerful force to move me on from Graham's limiting view. It was the power of Charlie's mind. He expanded my horizons. Boy, if I had listened only to Ben, would I have been a lot poorer. Now I became interested in buying a wonderful business at a moderate price".

Charlie to his daughter when she was rebellious "I see you've decided to raise yourself, I hope you'll do a good job".

It was a relief to Munger to quit the law. I preferred making my own decisions and gambling my own money. I usually thought I knew better than the client anyway, so why should I have to do it his way? So partly, it was having an opinionated personality and partly it was a desire to get resources permitting independence". Munger came to understand that to be truly wealthy, a person needed to build up an ownership in a business.


By the time he quit law in 1965, " I had more confidence that Wheeler, Munger would work out, and I had much greater wealth" - Munger. I was not very surprised when he gave up the law said Munger's sister Carol, "That'swhat happens when someone finds something that is his real love".

What Charlie finds interesting is how few big decisions were involved in creating billions of dollars, fewer than one every three years. "I think the record shows the advantage of a particular mind-set-not seeking action for its ow sake, but instead combining extreme patience with extreme decisiveness".

The lesson of his business life is that you don't want to do business with people you can't trust. The economis are irrelevant if yoo don't have trust.

When See's turned out to be an excellent ongoing business, M & B realized how much easier and pleasanter it was t obuy a good business and just let it roll along, than to buy a deeply discounted but struggling business and spend time, energy and more money to set it straight.

Munger says he and Buffett should have seen the advantages of paying for quality much earlier.
"IF we hadn't bought See's, we wouldn't have bought Coke", says Buffett, "I've had windmills and second rate department stores, pumps and textile mills and all these were as problematic as windmills".

Munger told Berkshire that there are a lot of companies in America that throw off a lot of cash but which can't be expanded very much. To try and expand would be to throw money down a rat hole. Such businesses don't stir acquisition desires but they are welcome at Berkshire because he and Buffett can take the capital and invest it elsewhere.

The rally from yesterday continued today. Trying hard not to become very exuberant. Checked on scottrade balances more than I would have liked to.

BBI also went up to $4.80. The options are now worth $2000, doubled since purchase. But, I doubt the price will go to $5 + by Friday. It helped that Jim Cramer praised BBI today.

What is the contract size of an equity option? The contract size of an option refers to the amount of the underlying asset covered by the options contract. For each unadjusted equity call or put option, 100 shares of stock will change hands when one contract is exercised by its owner. These 100 shares of underlying stock are also referred to as the contract's "unit of trade."

So 200 options == 200 X 100 == 20,000 shares

to exercise, you have to purchase 20000 * strike price.

IF the stock goes up by $1, then you have just made 20000 * 1 = $20,000

Discovered the Value Line Investment Survey newsletter in the library the other day. Turned out that UPL and GWR have current timeliness ratings of 2. Also was pleased to find BTU and EXP with timeliness rating of 1. Seemed a bit of a confirmation for picking these.

Am going to check these out in the future for new issues to investigate and buy.

In a little bit of a dilemma about UPL, wondering if should sell, P/E is 44 which seems a bit high.

Also got an email from Logan, was encouraging regarding investing so far but also advised against margin and options. Advised to stay put on longer term strategies and not quick money.
Also was encouraging about the fact that have started on this part-time and not full-time.

Tried to read "Random Walk on Wall Street". Didn't enjoy it at all and think it'll be a waste of time. Better to re-read my blog and accounting instead I think. Also re-reading Phil Fisher in more detail.

Had gone to downtown MV last evening and happened to come across John Rothchild's "The Bear Book- Survive and Profit in Ferocious Markets" in the used bookstore. Seems interesting, picked it up and started reading it on the way back in the light rail. From it :

* Lynch sell signal:
When the yield on the thirty-year government bond exceeds the yield on the stocks in the
S&P 500 by more than six percentage points, sell stocks and buy bonds.

* Dow Theory
Not really a theory. Based on some editorials written by this WilliamHamilton- a disciple of Charles Dow. He tried to separate the momentary advance or retreat from a long march that carried stock prices in one direction for a meaningful stretch. A long march, he believed could only occur if the averages were heading in the same direction together and therefore confirmed each other's ups and downs. If the Industrials reached a new high while the Trasports faltered, it put the future progress of both indexes in doubt.
Soon after writing the obituary for the bull market on Oct 25, 1929, he died.
Robert Rhea, George Schaefer, Richard Russell are followers of this. Richard Russell's Dow Theory newsletter has a huge following. These three folks had correctly predicted oncoming bear and bull markets.


* Sell small cap if :

T Rowe New Horizons P/E
----------------------------
s&p 500 P/E

much greater than 1. Varies between 0.4-2+. Lower numbers are better times for small caps.
Called New Horizons small-cap gauge.

* Inverted yield curve
Problem may be present if short term interest rates higher than long term interest rates.
Colonel Ayres observed that stocks declined whenever the short-term interest rates rose higher than long-term rates-the "inverted yield curve" sell signal, which he issued in January 1929.

* Zweig's 3 key characteristics of a bear market : bear markets share atleast one of these three :

1. Extreme Deflation Things are getting cheaper, and the CPI is falling fast. Whenever consumer prices have dropped 10% over six months, bear market alert
2. Extravagant Multiples If Dow or S&P is selling for 20 times earnings, setback likely. Only applies in a perky economy when earnings are robust. In a recession when earnings are sub-par, high p/e's may not be a cause for concern.
3. Inverted yield curve Temporary is ok but if lingers, then stocks will disappoint. Only one bear market had all three strikes (1929-1932). Every bear since 1929 had atleast 1 strike.

I completed Siegel's book so no more tidbits from there. 

Some other interesting quotes I read in Warren Buffett Speaks. -

Everybody engaged in complicated work needs colleagues. Just the discipline of having to put your thoughts in order with somebody else is a very useful thing. -

Munger has mastered short answers. "Charlie is not paid by the word" explains Buffett. -

Retirement plans? About 5-10 years after I die. -I feel like tap-dancing all the time. We tap-dance to work. -Any string of impressive figures multiplied by a single zero is still a zero. -

With enough insider information and a million dollars you can go broke in a year. -

That which is not worth doing is not worth doing well. -

I went to Dale Carnegie not to prevent my knees from knocking when public speakig but to do public speaking while my knees were knocking. -

Rule No. 1: Never lose money. Rule No.2 : Never forget Rule No. 1 -

-I has been helpful to me to have tens of thousands (of students) turned out of business schools taught that it didn't do any good to think (EMT) -Its only when the tide goes out that you learn who's been swimming naked. -Forecasts usually tell us more of the forecaster than of the future. -

When you combine ignorance and borrowed money, the consequences can get interesting. -do a lot of reading. I read annual reports pf the company Iam looking at and of competitors, that is the main source of material. -

I'd rather have a $10 million business making 15 percent than a $100 million dollar business making 5 percent. -Don't take the performance of your stock personally, after all : A stock doesn't know you own it. -Never buy an airline stock.

Jeremy Siegel book takeaways

Some things I read in Jeremy Siegel's book yesterday :

10) If there is significant evidence that a sector has become overpriced relative to its fundamentals then alter. A warning sign is when a sector achieves a 30% or greater weight in S&P500 Index. Oil in 1980 and technology in 2000 are examples. Subsequent returns to both sectors were very poor.

13) Investor's Intelligence has published one of the long-standing indicators of investor sentiment. They have evaluated scores of newsletters determining if bullish, bearish or neutral.
When investor sentiment is lowest, the returns have ben highest. And when investor sentiment has been highest, worst returns in the market. Sentiment = bullish newsletters/bearish newsletters

Sentiment Return (70 thrugh 00)
0.2-0.3 Return = 20%
0.9-1.0 Return = -10%

14) It is of note that the volatility index (VIX) the measure of implied market volatility computed from option prices, spikes upward at virtually the same time that investor sentiment drops. Anxiety in the market which can be measured from the premiums on options prices, is strongly correlated with investor bearishness.

15) Another indicator of investor sentiment :
Whenever the recommended allocation to stocks falls below 50% by portfolio managers, returns in actuality have been high. (Richard Bernstein)

16) Out-of-favor stocks : Dogs of the Dow (Dow 10 strategy)

I finally found the AWESOMEST tool to calculate the return of my portfolio. I had been losing a lot of sleep over this and was trying to figure out whether I should even keep actively investing at all or just leave it all (the meagre all ;) in index funds... But all my doubts are resolved for now!!!

Anyway this absolutely sublime tool is called XIRR. A nice description of it is at :
http://www.fool.com/ddow/1998/ddow980227.htm

Over the past 3 years, my return was 18.2% . Its probably not the best and have been very lucky so far and it may go down from now on, but still is encouraging enough to continue to invest myself. :)

Am so incredibly happy. Love XIRR and finally see the point of Excel.

Jim Cramer apparently mentioned SVI last night, had exchanged emails with someone at NBC about the possibility of calling and speaking to him about it on air. On balance Iam glad they didn't call, not sure if I would have managed to sound loud and hearty convincingly.

Hmm, it seems to me that the fewer things I do, the more constructive Iam. Gives me time to think and act rather than just running around at full speed, getting tired and not being very productive. Also tend to lose perspective if am doing too many things at the same time.

Just started my blog today. Need to start my device driver code this evening. Going to fiddle around with the Linux PC which I setup last week. Got the company's website up and running on the other machine. Need Windows on webserver PC since it is T's computer and he has tons of stuff stored on it. Website looking elegant but need to work on portfolio and misc links. So now let's work on building an actual product. Looked at craigslist and am amazed how many Linux "experts for hire " there are out there. That model ain't gonna work.

Meeting A and daughter in the evening, long overdue on that too. Just bought CMG today, hopefully a good decision. Sold PLCE at about 31 percent gain, thought it was overpriced. PLCE stores don't look very crowded to me, and was looking at a good exit price which I thought was today. Hmm, let's see if sell a good idea or not, but anyway as Buffett says, stick to your guns after doing your own analysis. My analysis said overvalued. (unlike CRI sell which was a sub-optimal decision but was made before reading The Intelligent Investor and Common Stocks, Uncommon Gains) . Let's see if these books help my portfolio any or as dad says, maybe its all luck in which case I should just get my horoscope done ;)

Going to Kabul for lunch on Friday with K. Should be fun, should get some news about the higher-ups. Not that it matters, except for gaining an insight into the latest corporate silliness
in my company.