Bank Reserve Ratio at China

According the news reports by China Daily, the Chinese central bank - the People's Bank of China announced on Friday 11/3/2006 that it was to raise the deposit reserve ratio of banks by 0.5% to 9% starting from 11/15/2006. This was the bank's third time this year to raise the deposit reserve ratio or 1.5% in total. The central bank raised the bank deposit reserve ratio by the same margin of 0.5 percentage points in August and July 2006. The previous two hikes helped to take around 300 billion yuan out of the banking system.

If 1% represents 300 billion yuan, the total 100% is 30 trillion yuan. That means there is approximately 30 trillion yuan (or approximately 4 trillion US dollars) in the Chinese Banking system. It is likely the Chinese central bank will bring the reserve ratio in parity with the US.

I checked the Federal Reserve of the United States. The current bank reserve requirement is set at 10%, which has not been changed for many years. The US Fed uses mainly the discount rate to realize its policies.

It is expected that the Chinese central bank will raise its reserve ratio two more time to bring it to 10%, the same ratio adopted by the US Federal Reserve. So the Chinese yuan can appreciate another 11% in the next one to two years.

1/15/2007 Update. Central Bank of China announded on Friday 1/5/2006 that starting from 1/15/2007 it would raise the bank reserve ratio by 0.5% to 9.5%。This is the fourth time it raised this key rate since April 2006. Its total deposits reached 33 trillion yuan.

Effective on 12/25/2007, China raised the reserve ration again (the 10th time) to 14.5%, or approximately 1/7, compared with 1/10 for the US banks.

Water Resources vs. Capital Asset Management

Over the last few years, I have met Mr. Liu (刘景胜) of the World Journal for several times. He indicated several times that he would like to write a report about my investment stories. I met him last time during a party at Serena’s home. He said about his intention again. I said ok to a short story. He just did a story about Steve Chen and his company, which appeared on the www.worldjournal.com on Tuesday, December 26, 2006.

For my own investment stories, I just have two stages. In the first stage, I recognized that the Internet infrastructure was just as the water infrastructure. So I mapped everything I could find about the Internet and related them to what I had already known about the water infrastructure: storage, pipeline, turbine/pumps (routers/switches), and so on. I did that for approximately eight years from around 1992 to 2000. That worked out very well. It turns out that the Internet infrastructure and the water infrastructure are indeed very similar.

The second stage is about the deeper understanding about the basic philosophy of the water system. The entire purposes of water systems are two-folded. One is flood-control. Another is drought-protection. The economic activities should be continued without worries about floods or droughts. If flood-controls and drought-protections are well managed, the economic expansions can continue without adverse impacts.

It is based on this understanding of waterworks’ contribution to the economy I have come up with my pursuit of the second stage of investment theme. The Internet infrastructure and the water infrastructure are completed. There operations and continual improvements will make the economy run smoothly.

Investment or capital market operation is another aspect of the economic activities. Just like water is needed where economic activities require. Capital is needed where economic expansions requires. So the lack of capital support or over supply of capital can cause similar impacts to the economy just as floods (oversupply of water) and droughts (lack of water supply) can cause economic slowdowns.

So all the soft tools used for water resources management can be applied to the capital market operations. With about a little over one-year out of the market, a new investment theme based on the basic philosophy of water resources management is applied to my new investment approach since 2001. The basic methodology is derived from flood-controls and drought-protections.

How to Land Golf Balls at the Fairway?

I have been advised to grab the golf club loosely and do not use force during my swings. My golf teacher Heath has taught me to sweep through the ball as there is no ball in the ground. He has said that I should not hit the ball and I should swing through the ball. All the teachings are great. But using them in my practice correctly is a very different story.

For a long time I could not figure out how loosely I should grab the club. In the past few days I believe that I have realized the concept. When I played about five holes that afternoon, the golf ball coming out of the driving shot landed in the middle of the fairways each time.

After a few weeks of practice I could using the driver to hit the ball as far as 250 yards. That was a big achievement for me. But the ball is going to the right all the time. Technically it is caused by slicing the ball. When I think about the slicing, the slicing can be cause by the tight holding of the club. When the club is hold tightly the direction of the ball is fully determined by the club face. Since there is a circular movement of the club, the ball can spin to the right.

In the last few days, I grab the club more loosely and at the same time I do not force the club too much. In a way my hand is guiding the club, at the same time; the club is guiding my hand movement. The club and my hand move in the same pace. Now the slicing balls are becoming straight balls. When I use driver to hit the ball, the golf ball can land more or less on the fairway.

Another skill learned about reducing the slicing balls is to have the follow-through movement after the impact of the club to the ball. The follow-through is useful to straight the direction of the club during the impact. When the club is withdrawn too soon, a slicing ball is caused.

Basically, in order to drive the golf ball straight along the fairway, I have to master the three skills at the same time.

(1) I have to grab the club loosely;
(2) I shall not force the club too much during the swing;
(3) I shall have the follow-through after the club-ball impact.

In the coming weeks, I am going to continue to strengthen this newly acquired skill until I could do it correctly subconsciously (without thinking about the three skills).

道德经 第五章

天地不仁 以万物为刍狗
圣人不仁 以百姓为刍狗

天地之间
其犹橐籥乎
虚而不屈
动而愈出

多言数穷
不如守中

[译]

The world is without charity; all things are as scarecrows. The Ancient Masters are without charity; all people are as scarecrows.

The world itself is like a bellows. Emptying it will not make it collapse. Moving it will make it produce more.

Too much talking, which can leave the topics numbered, is not as good as keeping centered.

道德经 第四章

道

冲而用之
或不盈
渊兮

似万物之宗
挫其锐
解其纷
和其光
同其尘
湛兮

似或存
吾不知谁之子
象帝之先

[译]

It has many states.

Using it at the containing state, everything can be poured into it, but it never fills up. This is the state of deepness.

It may be the father of the world. It blunts all points; it untangles all tangles; it forms all lights; it contains all particles. This is the state of greatness.

It almost exists. But I do not know whose son it is. It may be the father of all our forefathers.

[注]

这一篇讲什么是道 我认为很多专家也没有很好理解这一篇 这一篇的关键在于分段 如果段落句点弄清楚了 理解上就没有什么问题了 有些专家把冲理解为虚 其实冲就是冲茶冲水中的冲 按照我的分段 道有三个意思 即 渊 湛 帝之先 渊乃渊博 湛就是精湛 帝并非指西方的上帝 而是指中国的三皇五帝中的帝

Copycats and Masters are Different

The best book, for stocks, and for everything else, is "Dao De Jing" or the "Book of Power". I also like "Random Walk down the Wall Street" for stock investing.

Here I would like to air some of my thinking about Masters or Average people.

Every great master of the stock market, like any Master in every field, can only exist once. No earlier ones or later ones can be the same as the current Master, e.g. G. Soros. There is only one Confucius, only one Plato, only one Chairman Mao, and so on.

Learning from others can ultimately make someone a professional, but never a Master. Besides learning from others, a true master has to look inside into himself or herself to accumulate inner strength and finally becomes a master. Copycats are forever copycats.

Chairman Mao discovered "the political power comes from the barrel of a gun." G. Soros used the reflex theory in his financial dealings. Bill Gates envisioned that a computer would be on everyone's desk in his early days. All these were not a result of learning alone. That their discoveries will be forever associated with their Masters is because these discoveries are truly from their inner most things.

I encourage people in this group genuinely learn from those who spend his or her precious time in writing down his experience for all of us. At the same time all of us should put up our own efforts about our own experience. Hopefully one day, one true master will emerge among us. The rest of us can be proud that we produce an environment for that Master.

So let's create the nurturing environment first. A master will be born among us, naturally.

Various Investment Stories

2nd Stock Poll Investment Conference Notes
2-5 p.m. March 27, 2004 at Plano Library
By Chris Rao

This is based on personal notes. There must be many discrepancies between what I noted and the researchers' original meaning. So please forgive me for make mistakes in names or opinions.

Twelve investors attended this 2nd Stock Poll Investment Conference. I am very happy with this number of 12 because I like the 12% annual returns.

PENG Xiaohong and his three years old son Max Zhao delivered a wonderful projector to the conference. Since the young Max Zhao has not developed a full appreciation of stock investment, they had to leave early.

TANG Rujing presented three technical research reports. One was about the NASDAQ Composite index. He pointed out the divergence between NASDQ and QQQ in the recent trading period. Max SONG explained that the difference might be due to the influence of Microsoft. Tang also made a prediction of a strong market for NADAQ in the coming weeks. ZHANG Shi agreed with this prediction. Tang also presented technical reports about AMZN and INTC. His analysis was very encouraging. However, Max had some reservation about the validity of the analysis.

DING Cheng works at TI for many years. He has very good insights about the technology stocks.

Peter Deng discussed option straddle. He also suggested two stocks for the conference. One of them is CEF. Central Fund of Canada Limited operates as a specialized investment holding company, investing most of its assets in gold and silver bullion. The stated investment policy of the Company is to maintain a minimum of 90% of its net assets in gold and silver bullion, of which at least 85% must be in physical form. Another one is PTF. Its annual dividend above 11% is very attractive in the current market. Petrofund Energy Trust is a Canadian royalty trust that acquires and manages a balanced portfolio of oil and gas producing properties in Western Canada. Founded in 1988, the Company was created to provide investors with monthly cash distributions through investments in oil and gas-producing assets.

Max Song explained more about the technical and philosophical approach to the stock markets. The stock market has its own physics, or financial physics. There are three forces working at different frequencies in the market. One is the long-term force. One is the monthly or daily force. Another is the force working at minutes or seconds. When the three forces come at the same time, that's when he make a decision call. Seventy or eighty percent of the time, they work out beautifully. His dream is to connect his financial physics machine to the stock market. Then money comes in while he is dreaming bigger things. If you want to catch the essence of the Max financial physics machine, you have to listen to him physically, maybe in our next conference. Besides philosophy and physics, Max also thinks trading large volume stocks is better than trading stocks with low volumes. He mentioned QQQ, GE, and PFE for his model tests andpotentially for future trading.

ZHANG Shi and his wife FU Wei joined our group the first time. Zhang Shi's strength is in option trading. He uses advanced financial models to help making financial decisions. His insights about options trading and stocks in general were very much appreciated by all participants of the conference.

WANG Jihong is a professor in biotechnology. He has some wonderful insights about the market trends. He explained the gaps between vision and execution and ways to minimize the gaps.

Chris Rao presented an overall balanced approach. His work is to find a way to generate an annual 12% over the long-term with a minimum volatility in asset value. While most participants look for annual return of 20% to 40% in the conference, his 12% target seemed conservative.

LIU Song reported his work on sector rotation. In one time he invested in one or two sectors. When he makes enough money, he rotates his investment to other sectors. Max Song agrees with his approach. Max believes this approach can produce good results.

JIANG Yong is a software engineer. He is looking for a way to generate an annual return of 9% to 11%. He has made several good bets in the past several months.

Various Investment Methods

This is a personal note of the Monthly Stock Talk (I did not make any written notes during the meeting) prepared on August 29, 2004. The following summary can be a heavily filtered result. So if you want to get the real essence of one's experience, you might have to talk to that person directly.

Five of us attended our monthly stock talk (last Saturday every month) yesterday in a quiet Plano library conference room. We all shared our trading experience. Some of the points are leaving marks in my memory cells.

Brian Zeng encourages us to take more risks in order to win bigger rewards. He summarized his trading experience by comparing trading methods with military strategies. He said something more or less like this. A war ship should either move forward or backward in a battlefield, but it can never stop in one place. Otherwise, its opponents will destroy this war ship soon. Trading stocks or futures is just like operating a war ship.

Jianhua SU this time shared with us his constant trading strategies. His trading goal is to make 1% gain per week. His computerized trading strategy is producing steady performance, which is almost half way towards his goal. He is constantly updating his model to improve its operating efficiency. He also compared two major trading results. One is to make many small losses but with small number of gains exceedingly large. Another one is to make many small gains but with limited number of big losses. He has found out that either strategy can work eventually in practice. But personally he prefers the third strategy, which controls gains or losses more or less symmetrically.

Chen DING shared with us his experience with his self-developed computer models. In some time periods (by back-testing the numerical models with historical data) his computer models work wonderfully. Tested performance can exceed several hundred percent annually. But in other time periods, his models may refuse to work properly. He is looking ways to improve his models.

Rujing TANG prefers an academic approach to market analysis. He recently passed the CFA tests. Now our stock group has one real professional among us.

Chris reiterated his balanced approach to achieve a moderate growth of capital (approximately 1% per month over a long period of time).

We have also discussed topics such as energy and oil price. No consensus is reached as far as the future movements of oil price.

How to Trade TXN?

Let's first talk about specifics. TXN (Texas Instruments) is a great company. In a way, one can make a lot of money from this company as long as the company survives longer than you have made enough from it. The question is whether you have the right strategy or not.

Secondly, any company traded in the stock exchanges can make money for someone (hopefully that someone is one of us). Otherwise, there is no chance for the company to be listed in the exchange in the first place. We are living the capitalistic world. Thing exists for a reason.

Now Let's go back to TXN. One has to have the entire strategy figure out about what to do when TXN is 3, or 30, or 300. One has to know what to do before it reaches any of these prices. Actually, it can reach any of these numbers. Murphy's Law --- things can happen, they will. In order to cover such a wide spectrum of numbers, one has to have a lot of money.

If the money is not enough, one can back up a step by trading SMH instead of TXN since SMH has much less volatility than TXN.

If the money is still not enough, one can be back to trading QQQQ instead of SMH since QQQQ contains more similar components.

In sequence, one can have a long list of back steps, e.g. SPY instead of QQQQ, TIP instead of SPY, or CD instead of TIP, and so on.

Knowing when to stop and when to charge ahead may make a difference, in investing, too.

My View of Warren Buffet

My view about Warren Buffet is presented here.

It's so interesting that there are such huge differences about Buffett in this tiny group of Stock poll. I just could not resist the temptations about saying a few words about this debate.

(1) It is easy to figure out the winning strategy when the rabbit is over at other side of the mountain. This can be applied to the financial giants like Buffett or Soros. The practical question is if their investment principles can be applied to the current investment environment.

(2) There are always intellectuals trained specifically for the kings (御用文人). These people can always figure out ways to make whatever the king has said about anything the righteous statements. Since the giants like Buffett or Soros have achieved such a high level in the stock market, people can always figure out some logical principles to summarize their investment practice.

(3) It is statistically possible that the achievement made by Buffett is just a probability since there are so many investors have been doing similar things like him. Buffett has also alluded to similar statement just to make sure people would not think him as God.

(4) As long as there are enough people trying independent methodologies deliberately and consistently, one among them will become the next generation Buffett. It's highly unlikely that the next Buffet would have investment principles similar to that of the current Buffett.

(5) It is more rewarding for each of us trying a different set of investment principles if the investment goal is to out-perform the market. One of the sure ways not to out-perform the market is trying to achieve the market return. It should be easy to do this if one can resist the temptation of doing better than the market.

Stock Poll Meeting Minutes (1 Year Old)

This was prepared by me after attending the stock poll meeting on January 2, 2006. I put here to see how things can change over a year.

Rujing organized today's Stock poll Group meeting. I thought it was a great meeting. I just want to share this with those who missed today's meeting.

Nine members were in the meeting: Ben, Rujing, Alan, William, David, Max, Olina, Helen, and I. the discussions covered many topics ranging from individual stocks to the general US economy, and to the global business trends. I did not take any notes during the meeting. So some points I am going to write down may not reflect the speaker’s original intentions.

Ben presented his reasoning about selecting AMD (Advanced Micro Devices) and SUNW (Sun Microsystems). He believes that AMD will continue to perform well. He mentioned that DELL might be using AMD's chips in its future products, especially in computer servers. Max raised concerns about the potential impacts to SUNW due to of Dell’s future use of AMD chips. (Currently Sun’s server products using AMD chips are selling well, according to Ben).

Rujing talked about his views about economics, especially about Fed Chairman Greenspan and upcoming Chairman Bernanke, among many topics. He believed that Greenspan was not a good Fed Chairman. He is even more worried about Bernanke's ability to be a Fed Chairman. His views on this topic were very unique among the members who were in the meeting. Many believed that Greenspan was a great Fed Chairman. Views about the upcoming Bernanke were not that uniform. Rujing is very bullish about Gold in this year (2006).

Alan presented his prediction about the 2006 market. His prediction is based on his personal research combined with that of Goldman Sachs chief economist Abby Joseph Cohen. He believes that in 2006 S&P 500 will have about 15% return, in which 10% is the long-term trend (based on Goldman Sachs predictions), 2% is due to the current market discount of Bernanke (his view is that Bernanke will do well actually), another 3% is due to his personal research results (he explained his logic well during the meeting, I could not replicate here at all).

William is the only person in today meeting who manage money for institutions (he works for a local asset management firm). He is not as bullish as Alan. He thinks Financials and Healthcare sectors will outperform in 2006. He has some concerns about the continued strength of the Energy sector. But he believes that the energy sectors should be overweighed. Specific stocks he mentioned were GOOG and AMD. He likes AMD, but did not like its high P/E ratio.

David talked about his views about the market in general. His assessment of the market is that it will be neutral in 2006.

Max gave his visions about right approaches to markets. He mentioned his favorite book "the Wisdoms of the Crowds". Max states that the market wisdom is much more insightful than any top-notch economists. He thinks the bottom up approach (I believe that means individual stock selection) is much more fruitful than top-down approach to investments, especially for individual investors. Ben has similar views about selecting best stocks independent of the overall market directions.

Olina was a star in today's meeting. Her success in individual stock selections were recognized in today's meeting. Some members think that her approach to stock selection resembles that of Peter Lynch and Warren Buffett. Some stocks she mentioned were TIE, AMD, BOT, KCS, and UARM. She also presented her reasoning in selecting some of the stocks.

Helen talked about her own stock selection experience. She presented her thinking process in selecting PKZ (an oil company acquired by PetroChina). She believes the energy infrastructure and services sectors will continue to be excellent investments. Her recent favorite stock FRO (an oil shipping company).

My favorite sectors for 2006 are Healthcare, Natural Resources, and Financials.

Many discussions were centered on the international equity markets. Many believe that the international markets may be great investments for 2006. Some regions mentioned were, China, India, South America, especially Japan. Many thinks Japan is a great place to invest now. Views about the Europe are more mixed.

Economic Questions for Investors

Alan, Ben and Max were discussed about trading rules on the Stock Poll Group. I thought it was very interesting. I have been thinking about this all the time. Here were some of my recent thoughts as first appeared on the stock poll group on February 3, 2006.

This year the Nobel Economics prices went to two strategists: Schelling & Aumann. Their findings are very relevant to stock trading, at least in my mind.

Schelling showed that a party can strengthen its position by overtly worsening its own options, that the capability to retaliate can be more useful than the ability to resist an attack, and that uncertain retaliation is more credible and more efficient than certain retaliation.

These insights have proven to be of great relevance for conflict resolution and efforts to avoid war. His theory guided the Cold War strategies for the United States. Actually his theory was a top military secret for almost 20 years before the Cold War ended.

His idea is about strategic commitments. That is if one side is committed to retaliate at all costs, then the other side may give up attacks. Wars can be avoided.

One can apply Schelling's theory in stock trading. The result is that we should not buy a stock in the first place if we can not commit to buy it when its price is falling. Buying at averaging down has a theoretical basis.

Now the danger is that we do not know if we are right about this commitment in the first place. So trading stocks is a confidence game.

Aumann showed the difference between games played only once and games played for infinite times. Nash (those who have seen the Beautiful Minds may know who is, too) have shown that the game (play only once) can an equilibrium solution. Now Aumann have proven that the Nash’s equilibrium may not work for the infinite games. In infinite games, a set of feasible solutions may be enough for winning an infinite game (the same game played again and again).

Aumann Theory is even better related to the stock trading. Trading stocks is a game. In order to win the game for a long time (many trades), the optimal trading strategy for winning one trade is not enough. The best strategy to win this kind of infinite game is to have a feasible solution at each trade. Only this set of feasible solution can win the trading game for years to come.

I try to derive some insights from the Nobel laureates, especially the economics laureates. If you have read my writing till here, thanks for your interests.

Critical Qustions for Stock Investors

Youhang in one of the stock poll group email discussions proposed some questions for every investor to consider before making major decisions. I believed that his questions had given us some great insights. This is a great list of questions to consider before each trade. Here are my opinions about each question. I sent out this email to the Stock Poll group on August 1, 2006. Some changes are made before posting on this blog.

1. How much do you bet on this view (in percentage of your investment capital)?

I believe one should invest consistently with his or her view. It is too hard for me to do it in any other ways. Like the volatility of the market, our thinking has a lot of noises, too. One should not confuse the thinking noises with the true and consistent thoughts. In other words, the thinking noises are highly correlated with the market volatility. The true and consistent thinking should have a low correlation with the market volatility. Recognizing our thinning has Mew and Sigma is one of the most critical steps in trading/investing.

2. What is the probability of your view being right? (Rough estimate, of course one can never be sure).

In the United States, one common statistical number is the percentage of divorce rate (approximately 50%). Marriage is a serious thing, at least as serious as investing. Our thinking has a high probability of being wrong or reversed over a period of time. Some times the period of time can be very short. I view my betting probability of being right is roughly 50%. So not loosing much when the right bets turn out being wrong is also critical in investing/trading.

3. What is your stop-loss point? At what point, you have to cut loss and cover? (Even though you may still believe your view is right but you must cut loss to ensure survival).

I do not have a stock-loss per se. However, I believe in another principle of allocating capital among risk-free assets and risky assets. There are two basic principles to me. One is related to sell and another one is related to buy. No matter how high the market is going, you should have enough shares to sell if you want to sell. No matter how low the market is going, you should have enough cash to buy if you want to buy. If one can do both for a long time, I believe one would have a totally different view about the market and investing.

4. At what point, you think you may be totally wrong and should consider going the opposite way?

At all cost, one should avoid the situation of this condition. One should anticipate these at all times. The goal should be not loosing money. Making money should be just a consequence of not loosing money. Going the opposite way should not happen at all.

5. What is profit-taking point? Do you increase your position at some point?

Profit-taking or increasing positions should be determined long before these actions are taken. Profit-taking or increasing positions should be default actions of some pre-determined trading/investment strategy, not an ad hoc or impromptu action at the point. The entire art of investing/trading rests on the mastering of this balance.

Asset Mark Funds

I was looking for an alternative real estate fund for the Excelsior Real Estate Fund. I checked several real estate funds and found out that the Asset Mark Real Estate Securities Fund is an interesting fund. I have confidence in both managers of the fund. So I read further and realized that Asset Mark is an excellent company doing interesting things. It was recently acquired by Genworth Financial, an insurance company listed at NYSE.

Asset Mark Funds in a lot of ways are similar to the Vanguard non-index funds use multi-managers to manage the same funds. Its co-managers are carefully selected in my personal opinions. Each co-manager works independently to select their portfolio securities. Its offerings are very limited but cover almost all the traditional asset classes. There are only eight no-load mutual funds offered by Asset Mark.

1. Large Cap Growth Fund is co-managed by Atlanta Capital Management, Wellington Management Company, and TCW Investment Management.

2. Large Cap Value Fund is co-managed by Brandes Investment Partners, Davis Selected Advisors, and NFJ Investment Group.

3. Small/Mid Cap Growth Fund is co-managed by Copper Rock Capital Partners and Nicholas-Applegate Capital Management.

4. Small/Mid Cap Value Fund is co-managed by Advisory Research and First Quadrant.

5. International Equity Fund is co-managed by Clay Finlay and Oppenheimer Capital.

6. Real Estate Securities Fund is co-managed by Adelante Capital Management andAEW Capital Management.

7. Tax-Exempt Income Fund is co-managed by Delaware Investments and Nuveen Investments.

8. Core-plus Fixed Income Fund is co-managed by Goldman Sachs Asset Management and Western Asset Management.

The only disadvantage is that the management fees are relative high compared with the Vanguard index funds or the exchange-traded funds. The performance of the Asset Mark Real Estate Securities Fund is comparable with that of the Vanguard REIT index fund and the Fidelity Real Estate Fund.

1 Bird at Hand or 10 birds at the Forest?

If two statistically similar rewards to available for people to choose: one is 1 million dollars with 100% probability to win and another one is 2 million dollars with 50% probability to won. Almost all people will take the 1 million with 100% probability to win. That was one of the discussions in the Beida Alumni meeting. Charlie Tian quoted a saying that one bird at hand is better than ten birds at the forest (一鸟在手胜于十鸟在林). Most people there agree with this wisdom.

In another situation as in casino games, almost all games from slot machine to Black Jack have similar winning probability of 50% for double pay. That is statistically equivalent to the million dollar case. But people are willing to spend the one dollar at hand for the 50% chance to win the two dollars.

In these two occasions, people’s ways of thinking are almost the opposite. Tao AN, who is another graduate of Beida theoretical physics department, explained that might be related to the immeasurable principle of quantum physics. Thought itself might be part of the logic.

In stock market the behaviors of greed and fear are another example of such two opposite ways of thinking among investors. The logic of thinking at the two extreme ends can be very different or sometime opposite.

My Golf reached 114

I had a very busy day yesterday. I played golf for several hours and attended the annual Beida Alumni meeting at the evening since Jie is a graduate of Beida. The game was very interesting, so was the alumni dinner pot-luck.

Around 10:30 in the morning, Guangyan called me to see if I could join a foursome golf game at the Ridgeview Ranch. Three people were already in the golf club. I did not have any meal by that time for the day. Jie warmed up some leftover food in three minutes. I finished the warmed food in less than 10 minutes. I did everything else by 10:55. I called Guangyan again to tell them I was on my way. Actually our tee-time was 11:15. I got to the club house and paid fees for the green and the cart. We were ready for the game. Guangyan was not part of the four. Lihong, Shang (nickname Li Xiaolong), Laozai and I were the team. We started at the 10th hole and played the entire 18 hole.

Lihong is the best player with 87 strokes. He was very careful in strategizing and executing each shot. He is good at long-shots, mid-irons, and putters. He is the master player among our group.

Laozai finished with 97 shots. He is very skillful in long shots and the approach shots. If he plays well, his tee-shot can go beyond 200 yards easily. He can become an excellent golf player if more stability is maintained in his play.

I do not know how many strokes Shang finished at. He is a very interesting player. His stance and style is very different from what I have seen at TV or from the few books I am reading now. His stance is very wide. If he plays well, he can drive the ball beyond 250 yard. But his chance to drive the ball to both sides of the fairway or to the woods is relatively high. His overall golf level is equivalent to that of Laozai but they have totally different strengths and weaknesses.

I am the beginner player in this group. I finished the game with 114 strokes. My main goal for now is to stabilize my swings and to control damages in the game. I played a few good shots. I did not have any pars yesterday. But I had quite a few bogeys. I played from the white tee with them. This was the first time I played the white tee. Laozai gave me a lot of advices in executing many shots. Lihong and Shang also game me some advices in how to play in general.

We finished around 3:30 in the afternoon. We felt the time was still early and still had some strength left to play more. Laozai suggested we could play as two teams. He suggested Lihong and me as a pair and he and Shang as another pair. I was sharing a cart with Laozai while Lihong and Shang were sharing another cart. I suggested we play as two teams without changing seat. Everyone agreed. We played from 10th through 18th holes and we passed up 14th and 15th holes. In most holes, both teams were even. Lihong’s team won the 10th hole. Our team won two holes including the 18th hole. Our team won. We finished the team play around 4:45 p.m.

What I felt was that our team was a weaker team with lower total skill level. But in golf, the standard variation is still very big. In my level three to five shots variation is very possible. So the winning yesterday might be a pure chance.

FOF

FOF is the symbol of the newly created fund of funds by Cohen & Steers as the first fund of funds concentrated on closed-end funds. Its full name is Cohen & Steers Closed-End Opportunity Fund. It is also a closed-end fund.

According to its registration materials, its investment objective is total return, consisting of high current income and potential capital appreciation. The fund seeks to achieve its objective by investing in the common stock of closed-end management investment companies (the portfolio funds) that invest significantly in equity or income-producing securities. The portfolio funds generally focus on equity or income-producing securities, sectors or strategies, such as dividend strategies, covered call option strategies, total return strategies, balanced strategies, general equities (including both dividend and non-dividend paying equities), limited duration strategies, convertible securities, preferred securities, high yield securities and real estate, energy, utility and other equity or income-oriented strategies.

The combination of the quantitative approach and research-driven process for selecting closed-end funds is intended to produce a portfolio focused on total return that is allocated across multiple sectors, strategies and managers. They seek to identify closed-end funds that meet one or more of the following characteristics:

• Strong fundamentals,
• Relatively high current income,
• Share prices at a discount to net asset value,
• Undervalued funds,
• Well-regarded asset managers with strong track records,
• Diversification of sectors and asset classes,
• Market capitalization greater than $200 million, and
• Average daily trading volumes greater than $750,000 per day.

This fund can be a great fund if they can accomplish what they have stated. FOF is the pioneer in this category of funds. There are funds of funds in mutual funds, such as the Vanguard target retirement funds. Since I am interested in risk-adjusted return investments, I should pay close attention to this fund. I am watching this one very closely. I may purchase some shares as soon as the market price falls near or below the NAV.

道德经 第三章

不尚贤 使民不争
不贵难得之货 使民不为盗
不见可欲 使民心不乱

是以圣人之治
虚其心 实其腹
弱其志 强其骨

常使民无知无欲
使夫志者不敢为也

为无为 则无不治

[译]

Not to overrate experts will make people not indulge. Not to overvalue hard-to-get goods will make people not steal. Not to stimulate desires will make people not frustrate. The Ancient Masters' way to control are: to empty their wants and to fulfill their needs; to weaken their minds and to strengthen their body. Always let people be without sophistications or desires. Always let intellectuals be fearful to maneuver. Act without intention, then nothing can not be controlled.

[注]

为无为 则无不治 初看起来是不可思议的 但是只要一仔细琢磨 就会体会到其深刻含意 为无为 第一的为字是动词 与作或做类似 后两个字无为 与无愿望或无目的相似 全句为无为就是无目的地做事 这是一种做事方式的最高境界

拿炒股票来说 开始时总想找一个能翻番的股票 目的性非常强 股票一涨高兴 股票一跌就难过 常常是一旦买进股票 它不但不翻番 而且还会下跌 股票能否翻番不是我们决定的 想让它翻番就可以翻番是不可能发生的 股票的变化有它自身的内在规律 懂得这一点之后 我们才开始意识到不论股票是涨是跌我们都应该认为这是好事 跌了就多买一点 涨了就多卖一点 所以涨也高兴 跌也高兴 买卖股票不是自己决定的 是股票市场为我们决定的 这时候的买股卖股才达到了为无为则无不治的境界

道德经 第二章

天下
皆知美之为美 斯〇恶已
皆知善之为善 斯不善已

故
有无相生
难易相成
长短相形
高下相倾
音声相和
前后相随

〇是以圣人
处无为之事
行不言之教

万物作焉而不辞

生而不有
为而不恃

功成而弗居

夫唯弗居
是以不去

[译]

We all know beauty as beauty because there is ugliness. We all know kindness as kindness because there is unkindness. Therefore, being and nonbeing create each other. Complex and simple complete each other. Long and short arrange each other. High and low slope towards each other. Sound and voice blend each other. Beginning and end follow each other. Therefore, the Ancient Masters deal with things without efforts. They practice teaching without words. All natural things develop but do not interfere. They make but do not retain. They work but do not possess. They succeed but do not boast. Therefore, they do not boast; their honors do not deplete.

[注]

有无相生，难易相成，长短相形，高下相倾，音声相和，前后相随。这六个排比句不是简单的重复，而是很有讲究的。如果有人还觉得它们是简单的重复，那是因为这些人太急躁了，还没有平下心来，还没有安静下来仔细地想。这六个排比句考虑到了时间，空间，频率，机遇，因果，经验等等。 这不是简单的大道理，而是实实在在的有用的东西。我觉得每一条都是处事做人所必须考虑的。

例如，在投资问题上，这里讲的每一条都很重要。

第一，有无相生。这里有两方面意义。首先要考虑投资的经济条件，即有没有投资的必要条件。如果把吃饭的钱拿出来投资，万一钱亏了，连饭钱都没有了，这就是没有考虑到有无投资的经济条件了，这就将有生成无了，把有钱吃饭变成了无钱买菜了。 如果知道暂时没有投资的经济条件，这并不是说永远都是如此。只要量入为出，勤俭持家，那么，投资的经济条件就会逐渐具备的，这就把无生成有了，把无钱投资变成了有钱买股了。这是有无相生的第一个意义，或者这说是战略方面的意义。有无相生的第二个意义就是上次提到的常有和常无两种状态。常无就是现金在手，常有就是股票在身，这两种状态也是暂时的，可以相互转化的。这是战术方面的意义。

第二，难易相成，就是要考虑投资的难易程度。是直接投资单个股票，还是投资共同基金？是投资熟悉的行业，还是投资未知的行业？ 是自立更生，还是请人理财？这些都是难易相成方面的问题。这些问题的解决都离不开投资人本身的社会经验和阅历。化难为易还是从易到难，如要投资，投资者是不得不考虑这些相辅相成的难易问题的。

第三，长短相形，就是要考虑投资的时间的长短。你是想放长线钓大鱼？还是想快进快出？或者两者兼而有之。这些问题的回答可能与投资者的性情修养直接有关。叫一个急性的人炒长线可能就不合适。取长补短以至于不要相形见绌。

第四，高下相倾，就是要考虑买卖股价的抬高和下跌的趋势。股价升高了，可能会跌下来；股价下跌了，又可能升上去，这就是高下相倾了。有的投资者喜欢股价上扬的，乘胜追击；有的投资者喜欢股价已经下跌的，物美价廉。这些问题如不深思熟虑，往往会乘胜追击落空，价廉物美泡汤。

第五，音声相和。音声就是振动波。大家都知道人之所以能说话，是因为空气。喉咙里的声带振动，迫使空气振动并产生声波，声波传到耳朵里，就成了声音了。音声相和就是要研究股票价格频繁变化的原因。 由此可以产生两个想法，第一投资者要认识和把握经济大环境这支美妙的旋律，并与其同舞。第二要培养自身的对经济旋律的领悟，要能够在于无声处听道此处无声胜有声。做到了这两点，无论这支美妙的经济音乐是否在演奏，你都能听出其本身的旋律，那个时候，就真的做到音声相和了。

第六，前后相随。大部分投资者，几乎永远是处在资金短缺的状态之中，这是因为投资者没有安排好资金的前后相随问题。其实这个道理很简单，很容易理解。天不是每天下雨，为何市民能够每天喝上水呢？水库使雨水前后相随是也。整个长江流域，也不是天天降雨，而长江之水却永不间断，滚滚而流，奔向大海。长江各支流小溪前后相随是也。如果投资者能把点滴之资金化成川流不息的资金流，那就永远地摆脱资金短缺的状况，使必须资金前后相随，奔流不息。

投资者做到老子的如此六条，而且每一条都非常必要，是缺一不可的。

老子的最后四句：生而不有；为而不恃；功成而弗居；夫唯弗居，是以不去。 就更加直接与股票交易有关。比如买卖股票，这里有现金和股票两极。

第一，生而不有。现金和股票之间要做到生而不有。现金生股票，股票生现金。但是生钱后不要持钱，生股后不要持股。

第二，为而不恃。投资者要做到为而不恃。股票价格每天有涨有落，因此带来现金持量的高低。买进卖出时不能够抱有对未来价格的正确判断的期望，否则就会被每天的股价变化弄得稀里糊涂。

第三，功成而弗居。在短时间内会出现现金量的增减。持有的股票价值也可能出现升降。投资者如果能做到资金多时花钱买股，股值高时时卖股生钱，就一定能够成功。

第四，夫唯弗居是以不去。老子的使我相信，只有做到钱多时卖股，股多时卖股，投资者才能成功。一定不要只居其一，而不居其二。

总而言之，现金和股票是一对矛盾，一定要平衡这一对矛盾。

道德经 第一章 常有常无

道可道非常道
名可名非常名

无名天地之始
有名万物之母

故
常无欲以观其妙
常有欲以观其徼

此两者同
出而异名
同谓之玄
玄之又玄
众妙之门

[译]

The state can be stated is not the normal state. The name can be named is not the normal name. Nameless is the origin of the universe. Named is the mother of the world. Therefore, always without expectation one can see the wonder. Always with expectation one can see the boundary. These two come out together but with different names. Togetherness is the mystery. Togetherness and further togetherness is the door to all wonders.

[注]

道可道非常道。可道是讲空间的道，暂时的道。常道是讲在时空中永恒的道。即道是随时空的变化而变化的。

同谓之玄，玄之又玄，众妙之门。这句讲的是事物层出不穷的道理。从一方面看，事物是多层次的组合；从另一方面看，事物又是可分的。这与我们常讲的一分为二的意义有些相当。这里讲的是合二为一。

无是相对于有之前的状态，而有是相对于无之后的状态。有与无是整体的两个阶段。常有和常无是存在的两种状态。有与无同时生存，同时消亡。

在常有出现之前，必须先做到常无，这样才能做到欲以观其妙。这就是说，只有在常无的状态之下，才能看清楚世界的奥妙之处。这样，当你进入常有的状态之时，因为你已经知道常有的极限，世界不再那么奥妙了，所以才能做到欲以观其徼。

例如，在投资中，就必须决定常有和常无这两种状态。常无，就是处在现金这个状态，即投资之前这个状态，手里拿的都是现金。在这个时候，你可以投资的可能性就多了，就有各种美妙的花样摆在你的面前。如果在这个时候，你看出了一种投资不再那么美妙了，即看出了她的局限性了，看到她的边界了，欲以观其徼了，即知道其价格变化的全部范围了，或者说你已经知道其变化的所有可能性，你就可以立即进入常有的状态了，也就是说你可以投资了，把现金换成资产了。如果你暂时还看不出来一种投资的变化之边界，你最好还是拿着现金比较稳妥。所以，常无和常有是个整体的两个部分，或者说常有和常无是一个整体策略的两种状态和两种方式。

为何同时要掌握常无和常有这两种形式呢？在乎道有可道和常道之分，道可道，非常道之故是也。同出而异名。同出就是同时产生，即常有和常无同时产生。同谓之玄。玄就是创造性，就是智慧。就是说，看出了常有和常无之同，这就是智慧。简单的说，就是看出了事物的两面性，就是智慧，就了解了玄。玄之又玄，即智慧中的智慧，即智慧之精华。众妙之门，就是说，只有智慧中的智慧，即智慧之精华，才能看到众妙之门，即重新回到常有和常无相统一的智慧境界之中，即出而异名之前的玄同之中。

Golf Companies

I am starting playing golf. Now it’s time to understand the industry. Since my main focus is to allocate capital most effectively, I now have a chance to understand the golf industry with direct experience.

The first golf company I knew was Nevada Bobs since Jie worked at a deal related to this company. The next golf company I knew was Callaway Golf when I was taking an economics class. A student in the class discussed about Callaway Golf as his favorite company to invest. Now I become a golf player. It is time to study this industry formally. The following companies are listed here according to their founding year.

USGA
Founded in 1894
http://www.usga.org/

The United States Golf Association (USGA) has served as the national governing body of golf for the U.S., its territories and Mexico since its formation in 1894. It's a non-profit organization run by golfers for the benefit of golfers. The Association sponsors a variety of programs that benefit everyone who plays the game, from conducting 13 national championships each year, to writing and interpreting the Rules of Golf, to funding turf grass and course maintenance practices, to supporting grassroots programs.

Acushnet Company
Founded in 1910
http://www.acushnetcompany.com/

Acushnet Company is a leading maker of golf balls, clubs, shoes, gloves, and other golfing equipment and accessories. Its Titleist brand of golf balls is the #1 seller in the US. Its FootJoy golf shoes are also #1 nationwide. The company makes value-priced Pinnacle golf balls, Cobra golf clubs, and Scotty Cameron putters, as well. Acushnet's products are sold to golf pro shops, sporting goods stores, and to mass merchants throughout the US, Canada, and South Africa, and in parts of Europe and Asia. Almost 30% of sales are from outside the US. Players who use Titleist equipment include Bart Bryant, Ernie Els, Zach Johnson, and Tommy Armour.

PGA
Founded in 1916
http://www.pga.com/

Founded in 1916, The PGA of America is the largest working sports organization in the world, comprised of more than 28,000 dedicated men and women promoting the game of golf to everyone, everywhere.

NGF
Founded in 1936
http://www.ngf.org/

The National Golf Foundation is the industry leader in providing relevant information and insights on the business of golf. We offer golf-business research, information and consulting services to companies and organizations world-wide, including our 6,000 member companies that enjoy added benefits and savings.

Club Corporation
Founded in 1957
http://www.clubcorp.com/

Founded in 1957, Dallas-based ClubCorp is the world leader in delivering premier golf, private club, and resort experiences. Internationally, ClubCorp's affiliates own or operate nearly 170 golf courses, country clubs, private business and sports clubs, and resorts. ClubCorp has approximately $1.5 billion in assets.

Among the company's nationally recognized golf properties are Pinehurst in the Village of Pinehurst, North Carolina (the largest golf resort in North America and site of the 1999 and 2005 U.S. Opens); Firestone Country Club in Akron, Ohio (site of the 2003-2005 World Golf Championships - Bridgestone Invitational); The Homestead in Hot Springs, Virginia (America's first resort founded in 1766); and Mission Hills Country Club in Rancho Mirage, California (home of the Kraft Nabisco Championship).

The more than 60 business clubs and business and sports clubs include the Boston College Club; City Club on Bunker Hill in Los Angeles; Citrus Club in Orlando, Florida; Columbia Tower Club in Seattle; Metropolitan Club in Chicago; Tower Club in Dallas; and the City Club of Washington, D.C.

The company's 18,000 employees serve the nearly 200,000 member households and 200,000 guests who visit ClubCorp properties each year.

Karsten Manufacturing Corporation
Founded in 1959
http://www.pinggolf.com/

If there's a PING in your swing, it's got to be Karsten. Founded in 1959 after Karsten Solheim designed a revolutionary putter in his garage, Karsten Manufacturing designs and manufactures customized PING golf clubs; the clubs are named for the sound they make when striking the ball. Karsten's offerings also include the PING TiSI titanium driver (which the company claims can improve the distance of a player's drive), G2 and i3 clubs, PING PAL youth clubs, golf bags and other accessories, and apparel. Karsten also supplies parts for the Patriot missile and to the helicopter industry. John A. Solheim, the founder's youngest son, leads the family-owned company.

Nevada Bobs
Founded in 1974
http://www.nevadabobs.com/

Nevada Bobs open retail stores in California, Minnesota, and several other states. Its stores sell golf clubs, golf balls, and golf accessories. The first Nevada Bobs Discount Golf store opened in Las Vegas in 1974. Since then, it has expanded significantly. Nevada Bobs Discount Golf now has over 100 stores, in locations throughout the world.

TaylorMade Golf Company
Founded in 1979
http://www.taylormadegolf.com/

TaylorMade Golf is driving to be the best after acting as a catalyst in the golf equipment industry. The #2 golf club maker, after Callaway Golf, produces metal drivers and irons (300 Series, R500 Series), putters (Rossa), and balls (Distance Plus, Maxfli, TP Tour), which are sold worldwide. Other products include bags, apparel, and accessories, as well as products for women and kids. It sponsors players on the PGA (Mike Weir, Retief Goosen), Senior PGA (Gary McCord), European PGA, and LPGA (Se Ri Pak) tours. Gary Adams founded TaylorMade in 1979 after discovering that balls struck by metal drivers travel farther than those struck by traditional woods. TaylorMade became part of Adidas in the late 1990s.

Callaway Golf
Founded in 1982
http://www.callawaygolf.com/

Founded in 1982 by Ely Callaway, Callaway Golf creates products and services designed to make every golfer a better golfer. Callaway Golf Company manufactures and sells golf clubs and golf balls, and sells golf accessories, under the Callaway Golf, Odyssey, Ben Hogan and Top-Flite brands.

Adams Golf
Founded in 1987
http://www.adamsgolf.com/

Adams Golf designs, assembles, markets and distributes premium quality, technologically innovative golf clubs. Adams Golf operates in a single segment within the golf industry (golf clubs and accessories) and offers more than one category of product within each segment.

126 Strokes Golfer

Today, Guangyan, Hong, Zhen, and I played golf at the Pecan Hollow Golf Course http://www.pecanhollowgc.com. Lihong joined the play for the last two holes. This was my sixth 18-hole golf play. It was the best play for me ever. Our game started around 1:30 in the afternoon. Hong and I finished 15 holes. Guangyan, Zhen and Lihong stayed a little bit longer. I stopped early because I felt it was to dark to see the ball and it was a little bit too cold as well.

I counted the strokes for the 15 holes I played. I averaged 6 exactly. That is equivalent to 108 strokes for the entire course. Zhen told me that I had to add one stroke for each hole since we played at the red marks. So I would have 126 strokes. I feel that is wonderful for me. I have been told that 120 strokes are for beginners. I am close to be a beginner golfer.

Weizhen Tang

Olina has been talking about her new friend Weizhen Tang . She said that he was a financial genius. She told me that Tang could make profit one per cent per week, no down-week. He could make over 52% for a year. She said that she had a portion of her money managed by Tang. She said that she believed him. She also told me that Max believed that, too. She said that she was helping Jay to market Tang locally.

I am reluctant to believe such a rumor. However, that would be wonderful returns if Tang could really do that for a long time. After I have googled about Tang Weizhen on the Internet for a while, I am not yet willing to believe the story completely. It is likely that this person might be a marketer of his personal ego rather than a real financial genius.

On January 20, 2007 on a birthday party, Richard stated some similar stories about Tang. Richard personally knows him for over ten years. According to Richard, Tang was going to entering the Wall Street this year (2007). Olina mentioned similar goals about Tang a few months ago. The story is becoming more realistic. So his story will come out in the Wall Street Journal very soon if his great returns on investments can continue over time.

By now, the story was ended as of March 17, 2009 with the involvement of OSC of Canada. On March 26, Ontario Securities Commission alleged that Tang had run a Ponzi scheme that defrauded investors in Canada, the U.S. (mainly in Texas) and China of about $60 million.

道德经第十八章：智慧出，有大伪。

I Can Swing the Clubs

After practicing range ball swings almost every day for more than six weeks, and five rounds of 18-hole real golf (two at Chase Oaks http://www.chaseoaks.com, two at Ridgeview Ranch, and one at Pecan Hollow), today I felt for the first time I could swing both the irons and woods at ease. Actually, I felt that I could swing the woods already two weeks ago. With the help of Heath on the 3-wood today, the repeatability of the good swings increased significantly. Just about 10 minutes before finishing today’s driving range practice, I suddenly felt I could swing the irons as well. I started with the 5-iron, went down to 6-iron, 7-iron, and so on. I could do it right about 8 times in 10-tries.

That was a good feeling. I felt I could finally swing the clubs at ease and I could feel the weight of the iron in my hands during the swings. The golf balls went right along the intended line. The balls could reach as far as 200 yards for the woods and about 150 yards with the irons.

So far I have finished at-par at two holes among all the five games I had played: one at Black Jack Golf Course and one at the Pecan Hollow. I am confident I could do better than at in my next game.

For the last six weeks, I first went to Chase Oaks with Zhen several times to start practicing swings (about five times). Then I joined the Ridgeview Ranch Golf club together with Guangyan November 1, 2006. Since I joined the club, the weather has been very good. I practiced at least 25 times during the month of November. The golf professional Heath is a good teacher. He teaches about five students for one hour at noon every Saturday. I have learned a lot from him. Zhen is my first teacher. Pete told me a lot of his golf experience. Guangyan told me how to hold the club. The two-plane theory DVD was an excellent help for my understandings of different style of swings.

Today I saw Zhen, Guangyan, Binjin, Laozai and his daughter among the golfers at the driving range.