New year: time to think and plan BIG

2008 is few days from us. At the beginning of the year, I like to think and plan on the goals I want to accomplish in the new year. Chances are that you're just like me, surrounded by people who has small dream, small goal, and little to no desire to get ahead their financial life. People who are "used to" living day by day , year by year, with no exciting dream to talk about. It's good idea to be alone and think clearly what are some BIG things you want to accomplish in the new year. Or else, next year will be same as this year. Think and plan on it. Write it down and be specific on your goals. The more specific it is, the bigger chance it will get done. These are some of the major goal I set to reach in year 2008:
*Buy Apartment building with over 40 units with over 5 thousands dollar cash flow.
*Develop a winning stock trading system allow me over 50% of profit with loss no more than 10%
*Find equity partner to invest with me for my properties.
What about yours?

When Cap Rate > Interest Rate...

Cap Rate is defined as : Net operating income / property price. Net operating income measures how much rent is left after all the related expense, such as insurance, taxes, maintainance and operating cost. For example, if the property values is $100,000, annual gross rental income is $10,000, total operating expense is 3000. Then your cap rate will be 7%. Cap rate is very useful because you can tell if the property going to cashflow postive or not immediately. Say, you're doing 100% financing with 7% interest rate. Then you're breaking even in the above example. If the interest rate is 6%, then you will have net 1% cashflow as your profit every year. This mean you can net 100,000 X 1% = 1000 dollar every year.

Moving Average

Using moving average is an helpful way to determine the trend of the market. The popular technique is to using a fast moving average , say 10 days, and a slow moving average, say 30 days, and plot these curves on top of the price chart. Whenever the fast moving average cross the slow moving average, it indicates a trend is developing. If 10 days MA cross 30 days MA, this means prices is on the rise. I found that using 2 moving average is helpful to determine the trend of the market. But there could be a lot of WHIPSAW, (MA cross above and below frequently), it could be quite confusing. Therefore, I will use one more slower moving average to helps eliminate whipsaw. A 50 days MA is useful in combination 10 and 30 days. Thus, I'll wait MA 10 cross MA 30 AND MA50 as a true confirmation of the trend. It still not perfect, but at least it can eliminate some whipsaw compare using only just two moving average.

HOPE now!? Worry later....

On Friday, President Bush push out a government assisted program to freeze mortgage rate for the sub prime borrowers such that their initial teaser rate maintain for up to 5 years without worrying resetting to a higher interest rate. The purpose is to help these sub prime borrowers continue able to afford the mortgage payment. This should help reduce the number foreclosed proprieties due to miss-payment and bank take over ownerships. Overall, it should help stabilize the tanking real estate market all across the U.S. However, these are some of the concerns I have:
1)Governement interference is not supposed to happen in a total capitialist market. Price should be determined by supply and demand. Thus, this program destory the basic element of a free market
2)It encourage people with poor credit / income get into the market in future because they expect governement will bail them out again if they face problem with their payment
3)Hope now, worry later? It's true that sub prime borrowers can temporaily get a break without worry their payment increase now. How about in 3 or 5 years, when this program finish their freezing period, these very same people will have to face the mortgage payment problem in that time? Of course, we all hope prices of real estate will rise in next few years, so these people could refinance it again in few years. What if the market is still weak? What happen to them? Is governemnt going to bail them out one more time ?
It's still too early to see the effect of this HOPE program, we'll have to continue to keep track of real estate market in next few months to years to conclude its effectivness . What's your view?

Foreclosure.com

As you should probably know, the number of foreclosure in many area of the country has experienced a significant increase in the past 6 months. There are more people behind or can't afford the payment and walk away from the mortgage obligation. House prices continue to fall as a result. This is quite an exciting time for buyer. I've been looking for foreclosure listing last several months. I rely the resources from Internet. While there are many website program out there charge you a monthly fees for seeing the listing, I found a site that is pretty informative in providing the foreclosure listing info without a charge. Foreclosure.com. It covers all the 50 states in U.S. While the address is not complete , (it only show the street name, city, and state), it is useful enough as a first step. After I review the listing, I 'll call my agent in the area I'm interested invested in. I give them the street name and ask him/her to do more research for me. Check it out and let me know how you like the site?

TDAmeritrade Backtest strategy feature

Few weeks ago, I have a friend told me the online broker TDAmeritrade. It is discount broker like scottrade, etrade, that charge discount transaction fees compare to traditional broker. The interesting feature that attract me is the back test strategy they provide to the user. Basically, one can enter a set of trading rule (entry and exit condition) based on certain technical indicator and test it with the real historic data of the stock you're interested. It let you see how much money you make or lose based on your input trading rule. I open an account with them few days ago and now is busy testing the trade idea I've had in the past. It is quite an impressive tool so far. I'll update with you when I find a formula that I like and have consistent winning result.