Mabuhay from the Philippines!

… actually I’m back!  Hehe.  I made a post from an airport in Cebu but I think the bandwidth was so small there that it didn’t finish loading.  Glad to have technology back.

 My trip to the Philippines is threefold-  business, pleasure, and charity which is all the same to me (if you haven’t noticed, there has been a few typhoons and a series of floods in Manila and in the Ilocos region (North).  Most of the city is cleaned up and functioning, but the north needs some work.  It was actually a coincidence since I go up there a lot to volunteer).

It’s great travelling overseas, I especially like the Philippines because of their hospitable culture, friendly service, and they are industrious and intuitive in their work.  I really see the potential that this country has, so much so that I’m putting my money on it.  What, you only think I sit at a desk clicking buttons?  I have a business partner in Cebu and Manila, two cities that are exploding with growth… kind of like Shanghai but with more western influence, and thus more transparency.  Although I must admit, the politics can get tricky there.  If you don’t know people, you can’t get anything done from a business perspective.  One of the biggest ways that these two cities have an influence on the global economy is that they have very cheap labor.  Therefore, the outsourcing industry of the country is booming.  Unfortunately, I haven’t found a direct source to invest in that trend, but maybe we’ll get an ETF or fund to let us tap in there indirectly.  If you haven’t already noticed, the global economic downturn has adjusted everyone’s thinking on spending money, not just from a personal consumer level, but also at a corporate level.  Why do you think stocks like Ross Stores, Inc. [[ROST]] and Dollar Tree, Inc. [[DLTR]] or Green Mountain Coffee Roasters Inc. [[GMCR]] are doing so well?  They offer alternatives to consumers at cheaper prices.  It’s a little more difficult for Corporate America though… they can’t easily go to another American company that is struggling themselves, thus the easiest way is to outsource from other countries.  This trend has benefited countries like India and China, and quietly the Philippines (but you heard it here first!).  The Philippines has responded to this demand, and thus have made learning English a requirement in high school and classes at the University are taught in English.  They really are lining up everything for growth.

Another way that the Philippines has made a major jump in is their tourism industry.  It still has a lot of potential, however there are still some fears that need to be alleviated, but they are working hard in their transportation system to attract foreign investors.  Nevertheless, speaking from first hand experience, there are beautiful places on the Philippines that make for an incredible vacation to relax, explore and enjoy.  There are beach areas that the country is really pushing for- Palawan and Boracay.  Absolutely stunning, and at 1/4 the price of what you would pay for here in Hawaii.  Only those who are adventerous enough to fly there are rewarded with its natural beauty.  So anyway, that’s one major reason why I was stuck in the Philippines, for investment purposes.  To me, I see the Philippine’s tourism hotel industry as an IPO.  It’s new, has potential, has its risks, but can be very rewarding to those who venture to give it a try.  Right now I have reserved a hotel condo in Boracay.  The hotel hasn’t been built yet, but is scheduled to be completed in winter of 2010.  Therefore, I don’t have to rush to pay it all off.  I got a great deal, 0% 2 years, 25% down within that period… something ridiculous like that.  Here’s a picture of the Shangri-La hotel on Boracay…

 

The only thing though is that they want you to pay the principle off much sooner than buying one here in the States.  Now I have to wait for another year to sign more papers at inspection, and decide if I want to push forward with the next down.  I just made sure I got one foot in the door before it shuts.  You should try in-house or bank financing in the Philippines… a lot of paperwork, but they seem eager for your business.  Plus, when you have a bank account overseas it makes you feel real.  Haha.  Anyway, once the hotel is complete, the revenues of the entire hotel are shared to the owners of each room.  I just let them manage everything, and use the revenue to pay off the monthly dues then interest.  That’s the plan.  Gotta put our money to work, no?  I’m not here to solicit foreign investment in real property, it’s not like I can put a Stop Loss on it and kick back, but it’s not a trade for me, it’s an investment, plus when I get older, I would like a place to visit just like our good friend on his Italian Villa.   Hey, maybe in a few years if you’re brave enough I’ll let you stay there a few days?  😉

Anyway, I leave you with pictures of a resort I stayed at while doing business in Cebu, and some pictures I took on the island of Bohol.  

http://www.screencast.com/t/KKbLpuF4

 http://www.screencast.com/t/mFXci2aH52W

 http://www.screencast.com/t/vrHcoOdAa

http://www.screencast.com/t/Tt9nm6fbvT

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Here’s me thinking out loud again.  I thought I’d share you my version of what people on iBC refer to as the “pair trade.”  The idea is to make a trade on both sides of a sector, or buy one stock and short another stock that is related.  We’ve kind of abused this and just went ahead and used “technicals” to figure out our pair trade, which basically means you buy and sell two stocks with two similar technical setups.   Remember now, you don’t always have to go 50/50 on a trade.  I use the term “bias” many times to show if you are going to invest more on one side than the other- kind of like betting on the roulette, though I’ve never done that.  I figure, I’d rather trust my money to a Company rather than a rolling random ball.  Why does this method work?  Well, let’s use some simple probability.  Ignore everything you know about a Company (which is absurd, I know, but probability requires you to make some allowances).  Now all we have is a stock that can go either up or down.  “Hey, that’s 50/50!”  … um, well, yes and no.  Yes, there are only two directions, but choosing a side is not that simple.  The law of large numbers shows that the more bets or guesses you make, you’ll get closer to 50% which basically means, you break even, well actually you lost because you wasted your time.  So yeah, viewing a stock as 50/50 pretty much gets you no where.  BUT if you bet on both sides, well then you win every time, but wait, that sucks too because that also leaves you at break even.  So, let’s add some variables in there since we are talking stocks…  let’s take Stock A bet for that, and now let’s take another stock, Stock B and bet against that.  Now you have 4 directions: up down up down.  However, this is where human intuition is our advantage, and where human thought kicks probabilities butt.  Instead of choosing Stock A and B blindly,  make sure you learn a little about A and B, and you bet for the “better” one, and you bet against the uglier one.  This will only work though if you give both time, to let the fruits of their labor manifest itself.  And this will only work if you pick wisely and not try to let “technicals” mess with your research.  You see, for every 1 super good awesome spectacular brilliant company, you will have 20 horrible companies, and 100 wannabe companies that are only there for the thrill (to hitch a ride).  It’s very important to remember though that while that 1 company is doing amazing stuff at it’s peak, ALL the other crap does good too.  Some do good for a few months, some a few years, but you know they are whack because they don’t earn anything, people in the community/sector hate the product, or its too hard to find out about the Company because they hide everything.  Well there you go, this is where due diligence, human intuition, and common sense gives you an unfair edge against the others… we bet for the Company that leads, while shorting the companies that you know are doing everything wrong.  Maybe the bad Company won’t crumble as soon as you want, or maybe the great company looks flat.  But patience will reward you (and this is why I’m a fan of Fundamental research).  I strongly believe we are at a point in time in the market where both awesome and dodo companies have risen up to amazing levels!  So now would be a good time to think about some long-term “pair-investments” in your IRA, or in your kids college fund.

Here’s a list to get you started.  Again, these have quite long holding periods:

Hot coffee, hot coco …
Buy-       GMCR
Short-    CBOU

Sun shines here, not here…
Buy-  FSLR
Short-  YGE

Dress for class, not for trend…
Buy- GES
Short- TRLG

Everyone loves, versus everyone hates…
Buy-  AMZN
Short-  OSTK

Be a little creative in your pair trade!  It doesn’t always have to be sector related, in can be a play on trends…
No matter what, Americans will be fat and gravitate toward fat (more mass?)…
Buy-  Buffalo Wild Wings [[BWLD]] Short-  [[LULU]]

Go with those who do, not those who dream…
Buy – Apple Inc. [[AAPL]] Short –  iRobot Corporation [[IRBT]]

Robin Hood wins…
Short- [[M]] Buy- Ross Stores, Inc. [[ROST]]

Try it out and find some Company pair-investments for yourself.  It’s a good exercise.  Even if you don’t make both trades, then at least you can see how simple it is for a winning company to keep winning, and a losing company to keep losing, and when you place your chips on both sides, you’re betting on the two highest chances while at the same time spreading out risk.  The sooner you realize this, the better your investing will be.

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Well, I guess the story of the day is the Dow and its pretty number.  Uh oh, here comes all the prognosticators!  Anyway, I don’t have time to analyze the big number.  I have tax deadlines due tomorrow for all my procrastinator clients (that’s two big “p” words already!). 

Anyway, the only thing we should keep in mind is that 10k is a psychological number.  It will bring about a ton of headlines, a ton of blog entries, a ton of “I told you so” claims and posts.  It’s just a technical number.  Volume was a yawner, so this is all still part of the bigger picture- a market that got way oversold, and now is way over-corrected.  Here’s some more Dow headlines.  So far I got…

Dow Passes 10,000 for 1st Time in a Year– AP   from Yahoo.com

Dow Breaks 10,000: Don’t Get Caught Up in “Euphoria”, Mish Warns– Tech Ticker

Dow 10,000: What’s Coming Next?   – from Fool.com

The Last Dow 10,000: How the World Has Changed  – CNBC

Other:
– PPT Screener (for buys): General Maritime Corporation [[GMR]] Bank of America Corporation [[BAC]] Duke Realty Corporation [[DRE]] Aqua America, Inc. [[WTR]] Potash Corp./Saskatchewan (USA) [[POT]] IntercontinentalExchange, Inc. [[ICE]] Maguire Properties, Inc. [[MPG]] Jackson Hewitt Tax Service Inc. [[JTX]] Pacer International, Inc. [[PACR]]

PPT Hybrid Score for all stocks: 2.94 which means we have still room for rally to continue.

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I have so much to say, so little time.  I haven’t had a chance to even get on the internet these past few two days.  Crazy crazy times.   Most of my time has been occupied by a lot of important meetings.  Meetings that help me to forecast our longterm economic future.  With my ties to the economy in my local area, I’m thinking (at least for Hawaii) we will be served up a second wave of economic turbulence.  We have to look beyond the data.  I mean, it looks good to see “recovery”, but looking closer, it looks more like we are being kept afloat by the savings of the responsble class.  It will be interesting to see how this plays out.  Never get sidetrack by temporary euphoria.  We rise on hope, fall on reality.   Dow wants to run the 10k?  Don’t forget, this is a marathon… with hurdles, a hot sun, and wild bears.  Make enough noise, you might wake one up.

Meanwhile, I have to take a break this weekend.  It’s been so hectic.  Then I get back on the track and hustle for October 15, which is deadlines for tax extensions.  Again, with my background, last year has sent a record number of people filing for extensions because they got so screwed up financially.  These businesses that are struggling will not turn things around in one year and give us record profits like nothing happened.  It’s a process, there’s a timing to this market, and people fail to see the big picture, that things happen in events… we can’t say we have “fully recovered” until we get more pieces to the puzzle.  So yeah, once again I’m getting frustrated working with so many messed up businesses, and it’s bringing me back to reality.  But I must say, I admire their heart, and their survivor mentality (did I just see Dominoes selling sub-sandwhiches, Pizza Hut selling Asian Chicken, and StockTwits selling wristbands?!  Nah, wristbands rock!).

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Almost every screen I’m running is returning a ridiculous amount of stocks.  This makes me a little uncomfortable here.  The imbalance on the bull side is staggering.  For all you technical traders, we are watching 9789 on the Dow.   That’s where I’d expect the next bullish run.  More importantly, I’m watching 9487.  If the dumb-people index is true, that’s where the market gets hit.  Interesting range, interesting game.  Traditional swing traders would take profits on a tape like this.

I changed the “emerging strength” screen, and now it’s looking like a “buy on the dip” screen.  So maybe something more like a, “recovering strength” screen.   0_O 

According the the results, these are all “buys” today:
Tenneco Inc. [[TEN]] The McGraw-Hill Companies, Inc. [[MHP]] Manulife Financial Corporation (USA) [[MFC]] Navistar International Corporation [[NAV]] The New York Times Company [[NYT]] Nokia Corporation (ADR) [[NOK]] The Phoenix Companies, Inc. [[PNX]] [[AGCO]] RSC Holdings Inc. [[RRR]] The Talbots, Inc. [[TLB]]

… let’s see how they do if we use a -10% or -15% change in hybrid PPT score as our sell trigger.  I still feel like the past two days will skew our data a little, so give me some time to figure this out.

And finally, Fantasy Football hates me.  I lost by one point this week.  ONE POINT!  That makes me 0-4.  Haha.  A player’s stats on one game does not have any effect on their next game (unless he is Drew Brees).  It’s all about match ups.  I’m slowly getting this.

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A whole bunch of buy triggers signalled today.  Wow, lot of work to do.  I’ve been testing this PPT trading system, a little similar to the conservative 10/15 entry/exit system.  I’m using more aggressive parameters here.  It returned a huge list, so I went and hand picked my favorites.  I noticed the list is returning a lot of oil stocks.  Shoot, I’m getting too excited.

Modine Manufacturing Co. [[MOD]]   … handsome stock.

Petroleum Development Corporation [[PETD]]

Clear Channel Outdoor Holdings, Inc. [[CCO]]

BreitBurn Energy Partners L.P. [[BBEP]]

Metalico, Inc. [[MEA]]   … this again?  Lol.

Goodrich Petroleum Corporation [[gdp]]

[[vasc]]   quiet medical stock.  Should hear more about it.

Tesco Corporation (USA) [[teso]] … buy on dip trigger hit.

If you’re interested in the study, I saved the Screen as “Emerging Strength” on The PPT tools page.  It’s simple, but will build on it.  63 stocks were returned on this screen, so I hope to get it to a smaller range, like 20-40 stocks.  But then again, today was a good overall day in the market, which could skew the data giving it a bullish bias.

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