Recommended Books every Investor should own & read:

The Intelligent Investor by Benjamin Graham

The Essays of Warren Buffett: Lessons for Corporate America, Second Edition - Warren E. Buffett


The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments (Little Books. Big Profits) - Pat Dorsey

CNBC's Becky Quick talks to Warren Buffett

CNBC's Becky Quick talks to Warren Buffett about the the American consumer, and economic and tax policies.

http://www.cnbc.com/id/15840232?video=1598062931&play=1

Elite Investment Club Sides With Berkshire, Fairholme

Nice article: Check it out:


http://www.tickerspy.com/newswire/?p=2819

Contest Starting Soon:

Check out the $1000 investment challenge.



Contest Link

Coming Soon!

The Idoit's Guide Investment Challenge


This Contest has no rules, except for everyone to pursue the coveted first place finish. All are welcome to join, so spread the word to your friends, family, fellow investors & traders, group members, schoolmates, and communities abound.

To the winner goes the spoils; in this case, the winner will receive a $25 Wal-Mart Gift Card. (Contestants living outside the United States may be excluded due to potential delivery problems or the lack of a Wal-Mart store location nearby)

So, let’s Rock and Roll! Good luck to all.

Critical Stock Criteria:

This is a quick & dirty list of the most important things to look for when researching companies or stocks to invest. Keep in mind that this is not a complete list nor does the company or stock have to pass every single point. Although, we would recommend that the majority of points be reached; however, each case, must be weighed individually.

• Possess an Economic Mote

• Consistent EPS for past ten years (if applicable)

• Free Cash Flow

• Low Debt Ratio

• Brand Power

• Compare stock & company to the competition

• A Discounted share price/Margin of Safety

• Revenues

• Return on Equity

• Consistent Dividends (Recommended for a long term play, not necessary for short plays)

 General Practices:

• Always use a Stop-loss for short plays

• Minimize all expenses, fees, commissions, and taxes

• Read stock reports & news daily

• Do not use margin or acquire debt

• Be wary of trends

Remember K.I.S.S. Keep It Simple Stupid. All of these hair-brained ideas, systems or theories of technical analysis/charting are a total waste of time. Simply, pick great companies at a discounted share price. Presto; you win.

Recommended Summer Reading

"The Law of Success," by Napoleon Hill.

A good price on Amazon.com

Tip of the Month:

Keep your expenses to a minimum. Taxes, transaction fees, and commissions will quickly eat away at your profits.

Idiot's Guide to Sharing with the Investment Community

Last updated, February 4, 2010 - - The newest material will be noted as **

This post is dedicated to all the dumbasses out there that constantly post their nonsense on message boards to illustrate exactly how stupid they really are and to do their part in promoting abstinence. ~"Thanks; this Bud is for you!"

Let's begin:

• No person that has actually graduated from elementary school cares about your Penny Stocks or low dollar stocks that went up 20%, 50%, or even 100%. Get a clue and take a math class you idiot.

• Trading like a fool in Penny Stocks is just that, “Foolish.” If you do make a few dollars or cents, the brokerage commissions or the taxman is going to take them. Yes, you do have to pay taxes, you dolt.

** Do not brag about those 5 cent stocks that gave you a 1000% return. Were you born stupid or do you practice at it?

** Do not toot your horn about those 5 cent or bankrupt stocks that helped you fill suitcases with dollars. Pennies do not count.

There is a reason you are trading Penny Stocks, you either have little money, you're a numbskull, or both.

We have no problems with dreaming. But, stop trying to convince everyone else to buy into your long shots, scams, or schemes. You are not the first idiot nor will you be the last to lose money by looking to get rich by tomorrow. Penney stocks are notoriously losers and the odds are highly stacked against you.

• Only a dimwit would trade ETF’s, 3X or similar products. These were specifically created for boneheads. If you are hell bent on losing your money, we will send you our PayPal info so you can just dispose of your cash there.

Do not post about the magical pink sheet/penny stocks that will or have made you millions. We do not believe you.

Do post about the secret stock you own that will deliver you from rags to riches. Of course, you will not share the ticker symbol, because it is a figment of your imagination.

If we could get paid dividends on the idiotic gibberish posted on the investment community message boards we could easily make billions.

• Do not post gibberish about how you are a stock trader who has made a 100K by trading. No one believes your drivel. If this were true, why are you posting on the Internet? Oh yeah, out of the kindness of your heart you thought you would share your infinite wisdom with the other peasants.

• Do not post bullshit about how your brother, sister, father, or mother works the trading desk at Oppenheimer or on Wall Street. We have no doubt your mother and sister works the street, but it is not Wall Street.

• Do not post that you live on the Upper Westside or a penthouse in the sky. Please do us all a favor; take the DVD of the Jefferson’s out the player and get a job.

• No intelligent person cares about your idiotic off-the-wall theories. "Oh my, the moon is tilting to the left this Monday, so double down on your solar stocks."

• Do not try to predict the market. It cannot be done. We all know it will go up or down. Gheez, wake up already.

• Do not post your idiotic charts. Please take your crayons and sign up for an art class. We are sure you would have better luck in that field.

• Yeah right, the government is out to get us all and destroy the middle-class. My god, what country are you from?

• Oh yeah, before I forget, I saw Bigfoot driving a Hummer down Main Street just yesterday. Better sell your Ford and Boeing Stocks.


• Constantly stating that you are a Trader is not sexy or cool. Well, maybe it is to your classmates during study hall or the middle school recess.

• Using LOL in your posts does not make you look or sound intelligent; quite the contrary.

• If you need attention so bad that you must post constant ignorant info on the message boards you may want to check your personality, hygiene, or go grab your mother off the streets for a hug.


• Lastly and most importantly, stop posting your pointless drivel.

Buffett's New Investment Cartoon

The Age of the 2x & 3x Idiot's Club

Here are the essential clues to illuminate current traders as the idiots they have become. They trade 3x products and they trade often. A monkey can trade these products daily to achieve skewed/amplified/ magnified percentages, but in reality it is highly unlikely they will make any real money using this method. It is just a game they are playing to achieve amplified percentages, not actual cash or performance. In essence, they are too stupid to actually trade stocks.

Common examples are: FAS, FAZ, TNA, TZA.

Upon opening up a portfolio and seeing any of these products within, immediately discard the individual as a colossal dumbass.

OTHER Closely related ETF's that have gained membership into the Club for Air Brains would be SDS, QID, SKF, QLD MWN, SCC, UYG, TBT, UWM, and on & on . . .

Actually, there are so many of these products that have been created to make even idiots look good that it is Freaking Hilarious. There is a sucker born every minute and the companies that produce this type of trash know this.


The bottom line is this: If you notice a portfolio or an individual that uses these products which track 3X or 2X the performance, or the inverse of what ever they happen to be tracking; do yourself a favor by not looking to this person for any type of intelligent thought.

Example from Citi's 2009 Proxy

Hypothetical reverse stock split ratio

Approximate number of shares of common
stock outstanding plus shares of common
stock reserved for issuance (as of January 31,
2010) following the Reverse Stock Split

(millions of shares)

1 for 2 15,660

1 for 5 6,246

1 for 10 3,132

1 for 15 2,088

1 for 20 1,566

1 for 25 1,253

1 for 30 1,044

The actual number of shares outstanding after
giving effect to the REVERSE STOCK SPLIT, if
implemented, will depend on the reverse stock
split ratio that is ultimately determined by the board


As of this date: We would guess the 1 for 5 ratio to be inline with BAC.

A look @ Citi

Edit: May 13, 2010: On April 27, We sold our shares of Citigroup (C) at a stop-loss of $4.50. We place this stock on WATCH until next earnings.


At the Annual meeting the idea of a possible Reverse Stock Split was said to be one option on the table. Let’s take a quick look at Citi’s outstanding shares vs. other banks.

The Market Caps are in the same ballpark:

Shares Outstanding for the Large Banks are:

C: 28.5 Billion with approx. 7.7 Billion owned by the US Treasury. Current Stock Price: $4.97

BAC: 10 Billion - $18.57

WFC: 5.19 Billion - $33.69

JPM: 3.98 Billion - $45.88

One can see by looking at these numbers there is quite a difference; however, Citi is only at 35% institutional ownership, versus between 60% - 75% for the other 3.

Actually, this is a good lesson/example of Dilution. Most notably, compare the shares outstanding with the price of the stock.

Unless there is a lot of buying or a share buyback there is a good chance of a reverse split happening. It will be interesting to see how this plays out.

Personally, we like Citi shares at this point ($5.00-Range) and may start building a larger position.

Anyway, this is all conjecture at the moment and may not happen.

Dilution definition

A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities.


Investopedia Commentary
Adding to the number of shares outstanding reduces the value of holdings of existing shareholders.

Great Video

http://www.forbes.com/2010/04/09/pabrai-buffett-munger-intelligent-investing-video.html

Buffett Reports $100K Salary; Peanuts For Board Members

Source


Berkshire Hathaway Chairman and CEO Warren Buffett paid himself total compensation of $175,000 for 2009, while the company's board received between $2,700 and $7,000 each.


Berkshire Hathaway Inc. Chairman and CEO Warren Buffett paid himself total compensation of $175,000 for 2009, according to a Schedule 14A filed March 11.

Of that, $100,000 was Buffett's base salary, the same he and Vice Chairman Charles Munger have received for more than 25 years.

Trader Chatter:

Looks like a break in the resistance point or maybe not; if not it's possible to go lower. In this case look for a possible decline to the downside or we may see a reversal causing a swing to the upside.

Then look for a head & shoulders pattern forming or perhaps a candle. This could indicate a move to the downside, but if the wind is blowing north to east we may see an upside move. In the latter case, watch for the flag because this may lean toward the direction we are going or perchance this may cause some kind of uncertainty.


Key Trader Vocabulary to Know: Maybe, perhaps, if, possibly, may see, uncertainty, it might, could, might be, looks like, perchance, it’s possible.

Tips for Following Traders Online:

Do not follow individuals that trade like fools. What we see a lot on several of the online portfolio investment community websites is the following:

Let’s take two examples of traders we have observed;

Average trades 148/Month:

An average commission would be $10.00. So: 148 * 10 = $1,480.00. 12 months in a year: 12 * $1,480 = $17,760.00.

Oh sweet god! No, your eyes are not buggy, that is close to Eighteen thousand dollars. Tell me these fools are making a profit?

Here is another trader we have observed:

380 trades/month: (380 * $10) * 12 = $45,600.00. Approx. Forty-six thousand dollars in commissions.

Plus we have not even touched upon the short-term capital gains taxes on these so-called trades.

In a nutshell, this type of BS is totally unrealistic (unless of course you work for an investment bank, which I would assume you do not).

Just for giggles let’s half the commission: (380 * $5) * 12 = $22,800.00

= Ridiculous!

Stock Picks

Disclaimer: We do not endorse, recommend, swear by, stand-behind, nor do we have our lips glued to the CEO’s derriere. So, please reframe from writing us emails asking if we have some kind of secret information. Merely, these are picks that we found interesting, wanted to share with the masses, and may be worth further research. The decision is yours. Seize the day!

Tips to Live By:

 A successful investor must deal in values not price movements; must be immune to pessimism and optimism and ignore stock market forecasting.

Berkshire's 2009 Annual Letter:

A good read:

http://www.berkshirehathaway.com/letters/2009ltr.pdf

Updated; Feb, 27, 2010

Yay!

Buffett's Take on BNI Deal

The Bernie

Biannually we will present our most coveted award, The Bernie. This award seeks to share with the rest of the investment community the stupidest material we have had the honor to read. Also, The Idiot’s Guide to Investing would like to take this time to send our gratitude to all those dolts out there for their continued dedication to the art of idiocy.

If you would like to submit a posting that you have read for consideration, please send it to: idiotsguidetoinvesting@gmail.com

Calculating Actual Performance:

We are asked Frequently how to determine actual performance. Here is an example for a one year investment of $1800 in Altria Group (MO)

Current Price (current value) ……………$2120
Purchase Price (Amount Invested) …. $1800

Gain or (loss) ……………………….. $320
Add Dividends ……………………… $144
Total ………………………………… $464

$464/1800 = 0.257777
Multiply by 100 = 25.7%

26% Return

Divide by the term for longer periods. Pretty simple, ay!

Often, the dividend(s) is overlooked, but they are a big part of the return which keeps on giving.

Importantly, if you reinvest the dividend, which in this case would buy approx. 7.2 shares @ $20 per share which will increase the div. amt. every quarter; thus, the magic of compounding begins.

Online Stock Market Community Warning:

This is an Urgent Public Service Announcement: Due to the increased amount of bullshit we have been reading lately the following warning has been issued:

The online stock market community is largely full of muttonheads and fools pretending to be successful traders or self-appointed experts on everything from commodities, stocks, currencies, all the way to grasshopper futures and beyond. Sadly, these communities are a virtual cesspool of the most misguided morons you will likely ever stumble across. So, this is a forward warning; be weary of everything you read on an investment community message board or forum. If you are too lazy, naïve, or unwilling to learn for yourself and/or conduct the research yourself to confirm the information, please do your money a favor by leaving it in the bank or by hiring a professional manager.

This is not a test; this is an actual emergency.

Beware the Novice

Formula for the Misguided:

Sadly, there is a common practice among amateurs who wish to gain high percentages within their portfolios and then brag about it. This is accomplished by using Penny Stocks which can be very misleading.

Stock formula for calculating percentage change:

(Price Sold - Purchase Price)/ (Purchase Price) * 100 = %

Let’s take an example:

Let’s buy 100 shares @ 0.80 cents per share. The Cost = $80 dollars

Let's say we sell at $1.29 per share = $129 (which will actually show a high percentage)

Here is the math: (Price Sold - Purchase Price)/ (Purchase Price) * 100 = 61%

(1.29 – 0.80)/ (0.80) * 100 = 61.25%

But in reality this 61% gain is not impressive.

First subtract the buy price from the sell price, then subtract the commission of $10 for the buy and $10 for the sale = 129 – 80 – 20 = $29.00

($10 is an average commission price, but this does vary slightly)

This is assuming that you can actually find a buyer for all of your low volume shares at the ask price and if you bought all of the shares at one time.

Additionally, we have not even mentioned the Short-term Capital Gains Tax which can be as much as 35% for 2009. The average is 28%.

Let's do one more example with a 1000 Shares:

Buy 1000 shares @ $0.80 = $800

Sell 1000 Shares @ $1.29 = $1290

Sell price difference would be $490 – 20 commission = $470

470 – 28% tax = 470 – 131 = $339

I guess $339 is okay for people living in their parent's basement.

An important question would be can the so-called trader sell the order and consistently eke out a profit with each trade? The simple answer is, "No." But, you will never hear the idiot(s) mention his or her losses. Keep in mind, for every winner there is a loser.


One can clearly see how misleading and unimpressive this is actually. Sadly, this is common among amateurs who wish to gain high percentages within their portfolios and then brag to their idiot friends or the naïve; but in reality they are making very little money or none at all.

Thankfully, percentages start to make more sense once you get away from penny or low priced stocks.

Do yourself a favor, find five to twelve reliable companies and start building a winning portfolio.