Happy Friday! I hope you have an outstanding weekend (and don’t forget to call your Mama on Mother’s Day!).   🙂

I’m going to jump right into this week’s questions…

First, Kelly asks:
Hi Susan, I’m a newbie that discovered you by way of Craig Ballantyne’s Internet Independence daily e-mails, and am really glad I did. Let me just cut to the chase now. The level of integrity, honesty and trust that comes through in your posts is some of the best out there and it is greatly appreciated (and I’m reading a lot of related stuff lately!!). When I read and re-read Kungfu Finance articles I always get the image that you are the one pulling aside the curtain on the ‘great OZ’ and exposing the man behind the curtain. Thanks for that.

Anyway, I realize you are limited by how much you can comment, but I’ll give it a go to see what comes of it.

  • Interested in options trading education to start . Can you suggest any trusted advisors/mentors or subscription based info?
  • I see from the posts you value the input from the likes of Craig and Matt, Simon Black, Doug Casey and the guys @ Capitalist Exploits. Are there others you would recommend? (I have no problem at all paying for valuable services and information but want to make sure it is $$ well spent) Looking to separate the grain from the chaff so to speak. Thoughts?

Thanks in advance, from one who is striving to be one of the ‘1000’ @ KFF

Hi Kelly!  Welcome to Kung Fu Finance, and thank you for your nice message!

For options trading, my favorite is Doc Eifrig’s publication that he does for Stansberry Research. Actually I believe he has two—Retirement Trader and Retirement Millionaire. I’m an “Alliance” member of their site so I get both, but I really like the Retirement Trader.

It’s expensive, but his track record is unbelievable—he’s closed something like 96% of his trades successfully (that is simply unheard of, anywhere) and I like his methodology. He has published a series of videos that walk you through exactly how to do it—from what options are, to how to sell them (what he focuses on— selling put options primarily, but other techniques too), does screencasts of how to execute the trades from within your brokerage account, has special reports on which brokerage accounts are the best for options and how to use them, and what level you need to get approved for to make the trades, etc…. Then you just get started! He is great.   🙂  However, his service is quite expensive (something like $2500 per year, and I heard he was raising the price to $4000 but that might just be Stansberry’s marketing).  Also I wouldn’t necessarily recommend selling puts as your best strategy if you expect the market to go down dramatically…like if we have another dramatic crisis such as we had in 2008!

I also met Steve Belmont from the Rutsen Meier Belmont (RMB) Group at the Casey Conference recently, and he seemed very knowledgeable, too, although I haven’t personally used his services. But he has been trading options since 1984 (so has seen a lot of markets!) and his firm focuses on a slightly different market segment—futures and futures options specializing in commodities, currencies, and interest rates. (I’m not sure exactly what you are interested in.)

TD Ameritrade (the brokerage) also has some good learning tools (and they are free!), and I have heard good things about Options Express (although again I have never used them myself). TD Ameritrade has free online video classes that you can watch anytime, which are good—they go into detail and you can learn a lot for free!

And yes, I love Craig, Matt, Simon, Doug Casey and the Capitalist Exploits guys…and many more. I just wrote a post on Confessions of a Newsletter Junkie and listed some more there so you can read that and get an idea of who I like, and if you still have questions, please ask away…Thanks!

Next, Joachim asks,

Hi! First of all thanks for your work, I learn a lot from your emails.

I’m a student from Sweden and when I’m not studying I’m trying to learn as much as possible about the world, both macro perspective and investing.  My portfolio is not so big, I have a few gold and silver companies, one agriculture company and some physical metal. I read a lot of free stuff and I’m also a subscriber to Casey’s “The Casey Report” and International Man’s “World Money Analyst”.

I like them both and I’m thinking of subscribing to a new letter from your list (really loved that email).

My question is; Which one should I pick? My budget isn’t so big. Most of all I would like one that does due diligence and really explains why they invest in just that company. Does Weber do this?

I probably need to pay a lot more to get a letter that teaches how to choose the right companies and why. But if someone knows it must be a newsletter junkie… 😉

Hi Joachim!  That’s great that you are learning about the world from a macro perspective—that’s exactly what I did and I think it helps you become a much better investor!

Regarding newsletters, I can try to help you choose. I love Chris Weber, but he doesn’t have a lot of “picks” each month…that’s not his style.

Stansberry does a great job of explaining what they are investing in and why, but it can be confusing when you are just starting (they have a LOT of different newsletters, and they market them all whenever you sign up for one). But their information is good.

The Casey letters are all very good and do a great job of explaining why they choose each company, and sometimes they offer a special which is great. Depending on what you are interested in, they have a letter for “major” gold/silver companies, one for energy, one for tech, and one for “junior” mining companies (in addition to the Casey Report that you already subscribe to).

Also, most newsletters have 30 or 60 day money back guarantees (they all should have this, but some are easier than others!) so you can also sign up for some and then read the first issue or two and cancel if it’s not what you’re looking for.

Let me know what you think and I will try to help you narrow it down some more…

Joachim: Thanks KFG! I want to learn more about how to valuate companies and so I can compare investments. I think I’m going to try Casey’s International Speculator. It is a little expensive but I can use my 3 months trial.

Also thanks for the latest update about the Casey Conference!

Hi Joachim,

No problem! Yes, I like the International Speculator and Louis and the team do a great job of detailing out all about the companies they are choosing to buy (the “8 P’s”) and why, and entry and exit points…it’s great (just remember though that the Int’l Speculator focuses on Junior mining stocks, which are the highly-highly-HIGHLY speculative stocks so should only be used in a small portion of your portolio…money you can afford to lose). And spread your risk out among several of them!   🙂

I actually interviewed Louis a few months ago and he gave some wonderful tips for speculating in the Junior Resource market, so you can check that out too:

http://www.kungfufinance.com/kung-fu-girl-interviews-louis-james-of-casey-research/

Good luck, and please keep me posted!

Next, Ina from Jamaica asks,

Hi Susan: Thank you again for sharing so much from the conference, I almost feel like I was there. I am a rookie so much of the information is new to me but I understand some of what you shared. I live in Jamaica and know that it will take some more time for the current situation in the USA to hit us, so I am being put in a position to plan and take timely action.

I bought some shares in 2 companies recently so I now have an account with a Broker. The market is in a wait and see mode as we await the country’s annual budget and negotiations with the IMF. Stock prices are low so it is a good time to buy.
I need to calculate when to sell.
I read that a good time to sell is when the stock has reached its Intrinsic Value. How is this determined?

Looking forward to your next article and your response.

Hi Ina! Thank you for your nice message, and congratulations on planning ahead and taking action—good for you!

I have to insert my standard disclaimer here “I am not a registered investment advisor and cannot give personal advice”; however, I can certainly give you some information about intrinsic value (and other equity valuation methods).

First of all, you are very wise to determine your exit strategy (when you plan to sell your stock) now (when you are buying) instead of just “waiting to see what happens”, which is what most people do!

(Just one quick disclaimer—just because “stock prices are low” doesn’t mean they can’t go lower, but I’m assuming you mean their valuations…I am unfamiliar with the Jamaican stock market specifically and whether it is overvalued or undervalued right now!).

Many “value investors” (e.g. Warren Buffett, David Einhorn) use intrinsic value as a method of determining when to sell a stock.

One great article on intrinsic value that I have read is this one:
http://www.gurufocus.com/news/162794/how-do-you-estimate-a-stocks-intrinsic-value

The author uses a very balanced and common sense view of intrinsic value and talks about the importance of your assumptions and how different types of companies are valued differently (e.g. some have a killer brand, some own amazing real estate, etc.).

He also discusses another method of valuation, “DCF” or discounted cash flow, which is another great tool to have at your disposal!

Typically when you google “intrinsic value of a stock” you get a wide variety of different responses, usually attributed to one famous investor (e.g. Benjamin Graham, etc.), but this article above does a great job of telling you exactly what you should look for when you buy and sell a stock.

Also, depending on the type of stocks you purchased, make sure to use a trailing stop loss, so that if your stock (gasp!) actually falls in price, you have the discipline to get out and limit your losses!

Trailing stops work pretty well across the board, unless you bought something highly speculative like a junior mining stock, in which case they are not recommended.

Good luck, and please keep us posted on how it goes!

Next, Gary asks,

Hey KFG, thanks again for the recaps from Florida. Another great and thought provoking article! I have to say I think this John Mauldin guy is on drugs. Seriously. I don’t know what they are putting in the water at these Casey Conferences, but it’s got to be pretty strong.

First off, he says as a result of things collapsing, or whatever they do, that all of sudden the US just turns around and gets its act together and starts a new era of prosperity? Bang, just like that? 2013 starts a new program to a balanced budget?… Does he say what happens to the $80 Trillion in unfunded liabilities? Like we just turn on a switch and the govt. all of a sudden does the right thing on the frugality front. Next year? Makes no sense.

Secondly, I see this article by Mauldin here today: http://www.financialsense.com/contributors/john-mauldin/a-leaderless-world talking about a world in which every nation is out for itself. The world has no leading bloc or country after the collapse of the west. A G-Zero world, if you will. He’s reviewing a book on this scenario which is of some profound importance (a “powerhouse book”). Apparently he doesn’t know about the push for greater country blocs, like North American Union, Asian Union, even if the EU breaks up. Or what about the push for a “One World Government” that all these guys are talking about. More global governance, etc.

What the heck does he see that’s going to drive us the other way towards “Every Nation for Itself”? It’s ludicrous. Plus I thought the US was returning to prosperity in 2013 now?

What do you think?

And Brian similarly asks,

Kung Fu Girl, I’ve really enjoyed your well-written, detailed and thoughtful posts the past few weeks.

I’m also wondering what John Mauldin is imbibing to give him the rose-colored glasses optimism about the US government.

I’ve seen absolutely NO evidence that Republicrats in Congress will ever make the tough decisions to cut federal spending… until an economic or financial crisis hits that endangers their political well-being.

Looking forward to more great commentary and analysis, have a great week.

Hi Gary and Brian!

Wow, where to begin.   🙂

I think John Mauldin is just anxious for all of this “limbo” to be over (I sure am!). I like his quote from the article you sent me (thank you!):

You can almost feel the changes coming. I feel like the kid in the back of the car on a long road trip: “Are we there yet?”

Exactly. It’s excruciating. The entire world is being crushed under this gigantic boulder of debt, and yet it just seems to drag on forever.

And yes, I totally agree with you, it is simply inconceivable to me that our U.S. government will suddenly “get it”, rise up, and miraculously tackle and solve our budget deficit and crushing debt problems in 2013. The idea is ludicrous to me. (Oh, may I please be proved wrong! I am trying to tempt fate here! PLEASE make me a liar and let them solve our problems in 2013!)

But the only way I can ever see them agreeing on a balanced budget is if it is somehow in their best interest…and then, only until reelection time! (I have turned quite cynical over the past several years, apparently! LOL)

But then again, unlike John Mauldin, who actually dines with the Speaker of the House and other government luminaries (and tries to talk sense into them!), I am just a lowly serf who longs for these government luminaries to actually “do the right thing”, but who grows increasingly frustrated the more they…(searching for the right word…), well, suck, frankly. I really hope John knows something that I don’t know!

And no, he didn’t mention them solving the $80 trillion in “unfunded liabilities” (read: Social Security and Medicare…) next year, although that would be absolutely astonishing if it truly happened.

One of the things that I took from the article you forwarded was Ian Bremmer’s point about the void of leadership.

In my mind, that is exactly it. It’s not often that I go on a political rant (this website is politics-agnostic, for the most part), but there is a huge crisis (void) of leadership in this country. No politician is willing to do what they all know they NEED to do, because they know they will never be reelected. So, instead they continue to tell people what they want to hear instead of telling them the truth, make promises they can’t keep, kick the can down the road onto our kids and grandkids…and nothing changes.

What do I think about G-Zero vs. One-World government…that’s a tough one. Considering the vast lack of leadership on a country-by-country basis I can kind of see Ian Bremmer’s point, although I have read about the Council on Foreign Relations many years ago and how there is this vast conspiracy afoot by the super-rich or elusive “powers-that-be” (whomever they might be!) to bring about the downfall of America and create “one united world government”. I’ve never been much of a conspiracy theorist, but this one might be worth exploring in a future “Conspiracy Theory Thursday” post!

Thank you both very much, and sorry for my mini-rant!  (I’m not usually much of a “ranter”).   🙂

That’s it for this week; I’ll be back next week with ideas on how best to “get to the other side” and more insights from the Casey conference (can you believe that was only Day 1?).

I hope you have a fantastic weekend, and don’t forget to call your mama on Sunday!

(And please let me know what you think about all of this in the comments!)

To your financial success,

—Kung Fu Girl