Phil Town's Rule #1

I was reading my issue of AAII's Computerized Investing and it had a stock screening article explaining Phil Town's Rule #1 approach to investing.

As I was reading through, the article started off with alot of basic spiel about buying great companies with strong management and a sustainable competitive advantage at discounted prices. I tend to roll my eyes at some of this because it's a strawman - who wouldn't want to buy fine companies at discounted prices? The devil is always in the details in these types of things, but as I read further into the mechanics of the the approach I find out that this Rule #1 approach is almost exactly what I've been doing in my screening and valuation approach - with the exception that once he identifies his companies Town then seems to actively trade those those stocks based on technical indicators.

I've requested his book from the library and look forward to reading, but outside of the book "Buffettology" it's one of the few mainstream books that I've seen that espouses this screening and investing approach.

The "Buffettology" book is the foundation of much of the valuation approach that I currently use and underlies my screens and valuation methods, and it sounds like the Town book will go into considerably more mechanical detail than the Buffettology book. I'm particularly interested in the trading approach that he's using.

Expenses

I hadn't really thought about it this way, but this Motley Fool article got me to thinking about annual mutual fund expenses.

If somebody has $100,000 of investments sitting out there in a mutual fund with a 1% expense load, then they're paying $1000 per year in expenses to the fund. At current discount broker rates thats easily over 50 round-trip trades per year...

Humor for the day

This is funny. The world in 7 pictures.

Andy Mckee - Drifting

My brother sent me this link a while back and I came across it on the web again today. Pretty cool if you haven't seen it yet. Artist is Andy McKee, song is "Drifting". Here's his website.


http://view.break.com/237467 - Watch more free videos

Healthier Tobacco?

I was reading about the recovery of tobacco farming in the U.S. Apparently tobacco acreage in the U.S. has increased 20% since 2005 due to increased tobacco exports.

This got me to wondering - why don't we have a healthier cigarette? Current tobacco smoke is loaded with carcinogens, many of which are "formed from natural components of the plant." Why haven't less carcinogenic tobacco plants been developed?

After looking on the web it seems efforts have been made but progress has been difficult. It actually seems like some progress was made (see XA project) using a catalyst to make the cigarette burn cleaner, but it was difficult to bring to market because the new healthier cigarette might open up the industry to more legal and regulatory scrutiny, and competitors might retaliate.

At the end of the PBS Nova article from above it's also mentioned that "Brown & Williamson and RJR are developing cigarettes that use a special tobacco with lower nitrosamine content. The tobacco is cured with a special process that inhibits the formation of nitrosamines." ... So I guess things are moving that direction after all.

Maybe one day we'll be able to eat a meal of fat free french fries and pizza, drink a sugar free coke, and when we're done light up a cancer free cigarette.

Home Runs

I'm pretty bored with the entire steriods and sports discussion and all the apologists, but here's an interesting study on what a 5% increase in bat speed can do for home run production in baseball.

The study estimates a 5% increase in bat speed (estimated bat speed generated from additional muscle mass of steroid use) can increase the speed of the ball off the bat by about 4mph, and is projected to result in 50% or more increase in home run production. Here's the story.

I got curious to see how far from historical norms we are now, and while there was a clear surge in the 1990s, we're actually seeing home run leader totals moving back to more historical norms in recent years. Probably a better measure is the average or median level of home run total in the league, but I don't have the data to get there, but this gives an idea. Thanks to infoplease as the data source.

Heavy Duty Batteries and Stompers

Does anyone know why batteries with a name like "heavy duty" are the least powerful you can buy today compared to the common alkalines and rechargables? If you need a battery for a remote control or a clock it sounds like a heavy duty will do, but unless you want your camara to puke out after 20 pics use higher powered stuff.

At one point long ago were "heavy duty" batteries the good batteries? How did they earn that name and why don't they have a new name now? Even back in 1980 when I was 10 years old the heavy duty batteries weren't any good.

This was all very confusing as a kid, because when you're 10 years old and wanting to win your stomper pull wouldn't you naturally reach for the "heavy duty" battery? It's like you'd think you're putting 93 octane in your machine, but in fact it's the opposite.

(Don't know why I just thought of stompers, but do you remember everybody wiring them up to 6V batteries anyhow with stripped out lamp wire, hooking lead tire weights to the front to hold the wheels down, and adding on extra cool tires for better traction?)

Space Walk

I saw this today on the Astronomy Pic of the Day



Here's a big version of the image. Photo is from NASA.

Free Trades?

I use Scottrade as my primary broker, but I came across this company named Zecco today featuring $0 stock trades. I haven't tried it yet but it sounds like checking out if you're thinking of opening an account.

I'm not sure how they make money, but it sounds like they don't pay interest on cash balances. With a broker offering free trades you'd have to worry about executions, but they post a study on their site claiming above industry average execution quality.

1234

Here's that catchy song "1234" from the Apple ipod commercial. By the artist Feist. Beautiful song.

Yep.
Acoustic guitar
electric bass
big thumping drum kit
hand claps, finger snaps
banjo
trumpets
brass section
honkeytonk piano
harmonica (or maybe light accordion?)

September holdings

I haven't posted stock holdings in a while, so here goes:

from largest to smallest

GRMN Garmin - GPS systems
CTSH Cognizant Tech - Information Tech outsourcing India
HANS Hansen Natural - Energy Drinks
VDSI VASCO Data Security - e-transactional security
TRAD Tradestation - online broker
CRDN Ceradyne - body armor, ceramics,
LIFC Lifecell - tissue generation
BLUD Immucor - blood test
INFY Infosys - IT outsourcing India
CKFR Checkfree - in process of buyout by Fiserv.

Weakening Dollar - Impact on Equity Indexes

Here's an interesting graph on Traderfeed adjusting the S&P500 index for the declining value of the dollar. Taking the declining dollar into account we're still considerably below values in 2000.

How low will the value of the dollar go? Value of dollar vs. major currencies is shown below. Link to Federal Reserve Source

Second Life

There was a good story in today's NYTimes about the online game Second Life offering insights into what makes us tick. (NYTimes i.d. required but registration is free)

Second Life is a virtual world, so there's no reason it should be similar to real life, but in many respects it is. Keep in mind that I've never visited the site, but have read quite a bit about it. The site seems to be a popular topic of social researchers also.

The NYTimes article discusses how status matters even in a virtual world. People use in-world currency to purchase nice clothes, hairstyles, nice homes, real estate, and even "buff" bodies (in-game avatars). The article notes that "trendy" fashions evolve in this virtual world just like in the real world.

Much of this to me indicates we're hardwired to pursue status and I think this might be behind our keeping-up-with-the-Jones' mindset. There's probably no real reason we need all the stuff we think we do (most of us passed what we "need" long ago), but our stuff serves as a proxy for status -> status is what we really want.

In the real world I think this helps us think about our motivations and understand what makes us tick. From a financial perspective maybe it'll help us control things a bit better when we realize how we're wired.

Forrest Gump in one of my favorite movies understood this:

Now, Momma said there's only so much fortune a man really needs and the rest is just for showing off.

Voyager's Golden Record

I was reading about the Golden Record that was put on the Voyager spacecrafts and found this very interesting. (The record cover is shown above - here's more about all the symbols on the front. They say an intelligent race could decipher what's on here, but I wonder.) Image from JPL/NASA

The record was designed to last for a billion years so that if somewhere out there the spacecraft was encountered by an alien race there'd be a message from earth to them. The cover above shows information intended to communicate how to play the record and retrieve the data, including audio and visual information.

It's interesting - how do you communicate without language? and what gets put on the disk? There's greeting from earth in many languages, music, and images from earth, including images of our solar system's location, images of the planets, mathematical notation, as well as everyday scenes of life on earth.

Anyhow, I thought this was pretty cool to read through - imagining I had encountered something like this - how would I interpret what I see? Also, it's interesting to see what was included on the disk (many scenes of biology and daily life)- and consider what was excluded (no scenes of war).

Alternative Air conditioning

I found this innovative. Guy cycles cool well water up into his home, runs it through a heat sink (radiator) with a fan blowing on it to cool his home.

It's ugly, but a neat idea.

Source of extinction level asteroid

Here's an interesting hypothesis on the origin of the asteroid that scientists think struck the Yucatan and killed the dinosaurs at the KT extinction 65 million years ago. A massive collision in the asteroid belt that exists between Mars and Jupiter is identified as the source in the study. The study is interesting as they've taken orbits of existing groups of a family of shattered asteroids and worked backwards to the point in time when a collision broke them apart from what used to be a much larger asteroid.