Dan Aloni's blog

Attention: Spoilers ahead. If you haven’t watched the Tron movies then perhaps you shouldn’t read this post.

I believe the first time I watched the Tron movie was sometime in the 80′s when I was a young kid before I even knew how to write a single line of code. It didn’t make much sense to me then, and it certainly doesn’t makes sense to me now. The visual effects however were very enticing for a movie at that time. Yesterday I watched the second Tron film – Tron: Legacy, and although they have modernized the visuals to a spectacular degree, the plot is horrid and from a scientific point of view, makes even less sense than the first film.

For a very young kid, who cares about the doggy plot? If these kind of movies inspire young individuals to become programmers and engineers, then it filled its purpose as a form of art. I remember watching the old Tron movie back then only a few years after it came up, not caring about the plot but caring about the idea that computers can be programmed and the wonders we can make of it. I wanted to write computer programs at age 6 even before I’ve had a computer.

However, when you grow up and understand how the world works and how and engineering really comes into play, along with the differences between science and science fiction, then watching this film requires a huge suspension of disbelief. To a degree that makes you laugh.

Here I’ve gather the lists of issues that came to mind while watching Tron: Legacy:

• So, we have this Sam Flynn kid who is the largest shareholder of a big software company, living in a garage somewhere next to a bridge in an industrial zone. He also likes to pull pranks on the company he owns. I don’t think this idea holds water – really, even Paris Hilton is not that dumb (oh, Paris, if you are reading this, I didn’t mean to offend you, please send me a private E-Mail, thanks).
• The kid gets a message from his father who disappeared about 20 years ago, shortly after the first film’s plot, so he goes to check the abandoned Flynn arcade shop, that someone seems to be paying its electricity bills all this time . Somehow we assume that he never cared enough to check the old arcade shop in the past. Let’s say that happened to be the case because the kid is stupid (despite being a computer hacker like his father), as I claimed earlier.
• So there, the kid finds a monitor of a running modern-day Linux system. This can be proved with a frame grab – you can see top running Linux kernel threads and udev. Here we assume that an unattended machine from the 80′s didn’t have any power failures, hardware failures, and it was running an Ubuntu system all that time. Also, it has a unique Xorg setup with a 80′s looking green-on-black interface. Also, it has a about a few GB of RAM. There’s also a contradiction with the printed output in the other window shell, because it seems that the system is not of a Linux type, but some odd Sun Solaris server. What?? Did someone port Ubuntu to Solaris on SPARC architecture? I’m confused. This thing called SolarOS doesn’t even exist.

Terminal of the Flynn UNIX flavor.

• Anyway, the kid looks at the bash shell history and sees that last commands that his father typed, which include ‘make’ and ‘make install’ of the program that controls the LASER device that disintegrated his body into the machine at the first film. Also, it appears that the father edited a file named last_testament_and_will.txt, contradicting what he said further into the film, that he didn’t know he wouldn’t came back from one of the sessions inside The Grid. We shall leave this plot bug aside.

Every IT guy paused at that frame.

• Anyway, the stupid kid knowing a LASER device pointing at his back, decides to re-run the LASER control program. Final Last Words? Well, then he is surprised to find himself inside The Grid moments later. Well done, kiddo.
• Forgetting the ‘fact’ that in movies ‘everything can be done with LASER’, and the kid didn’t burn up on the spot, we are introduced into a virtual reality world with its own odd rules of physics, and in order to please the non-technical viewer each program was ‘humanified’ into a living character. ‘Second Life’ anyone? Except that this virtual world seems to be completely realistic in its version of physics. Of course, the sheer amount of  computing power and data storage needed to provide a whole-world emulation including the AIs that are these program is way beyond our time and certainly beyond whatever was in the 80′s, let’s not forget about it. I mean that even if someone manages to write the code for that system, there’s no hardware in the world that can run it.

• After wining some games, the kid meets his father, or it seems, a fork() of his father, which seems to never aged. Kudos for the CGI making Jeff Bridges 20 years younger – very nice work. However, I am not pleased with how this went further in the plot.

The CGI makes Jeff Bridges look younger. Amazing!

• The kid manages to escape thanks to Olivia Wilde‘s character who’s name is not important – let’s call her Olivia. Then, the kid meets his father, who did age organically. Guys, the man was inside a machine for 20 years but he aged organically? Does it mean that the system can emulate organic material over all its biological and chemical complexity? Do you know how much data you need to store for that? Millions above millions above millions above millions … of terabytes? Okay, I understand that you need some way of differencing between the two characters that look like Jeff Bridges. But come on, perhaps it’s possible to emulate the real world that way when the entire planet is just computer hardware (like in the Matrix), but with a old server stoved away inside an old arcade shop? Yikes.
• Anyway, the old Flynn after the first Tron movie involving the MCP (Master Control Program, or for IBM folks, the Linux port of SUSE – Mini Control Program – hey guys!), forgot to code in the support for User programs reintegrate themselves into the real world, so he cannot simply unplug from The Grid. Instead, they need to reach a physical location in the virtual world named ‘The Portal’ in order to escape.
• The rest of the film involves stopping CLU from getting out of the Grid, and the heroes trying to get out of the Grid in the process, during which we learn that CLU wanted to create ‘the prefect system’ and that Flynn remarks that the world has some merit in being imperfect, and along with a load of other philosophical mumbles. One could not have not noticed the similarities between CLU’s regime inside the grid and totalitarian 20th Century regimes that tried to create ‘the perfect country’. i.e. pre-1945 Germany.
• End of the film baffles me, as the Flynn kid manages to get out of the Grid (while his father and CLU die in the process), back-ups the entire grid into a SD card (what??), announces that he decides to be a responsible company shareholder (what???) and the oddest thing – he manage to materialize Olivia Wilde out of the computer with the laser. Yes, that program turned into flesh and blood. Or maybe an Android, Anyway, the kid tells her “I want to show you something”. Here as a guy you start to wonder. He picks her on his bike and then he takes the newly flesh and blood (and probably virgin) Olivia Wilde and shows her… the sunrise. Yes, the sunrise.

In overall I enjoyed this film, despite the many faults. I’d be looking for the next film, mainly because the the director said that they are going to dwell into the relationship of the Flynn kid and the materialized Olivia Wilde program. I guess they will have to change the rating, though.

Atheism is about acknowledging that the nature of the universe is immensely complicated unguided randomness and that our perception of reality is incomplete, imperfect and needs to be continually re-evaluated by using pure and unprejudiced tools such as Mathematics and other exact sciences that derive from it. I like this point of view and I support Atheism, seeing how it benefited the world in the last 400 years. For the further benefit of mankind, I hope that the lengthy process of abandoning religions will continue, and I hope you take an active part in it.

During the last decade we have seen the rise of server and desktop virtualization infrastructure as the official and standard means of creating services and resources isolation at both the client and server side. System virtualization provided rigid management of computing resources over standardized PC and server hardware for the first time.

However when one thinks about it from an engineering perspective – why does a full PC system virtualization needed in order to achieve ‘rigid management of computing resources’? Why couldn’t OS designers create those abilities in the first place? Why do we need hyper-visors such as Xen and software such as one provided by VMware in order to attain these abilities?

Short answer is that all major OS writers did not provide the proper infrastructure for running sub-instances of the OS efficiently and managing those instances with Quality of Service and fail-over on a network of hardware. A standard OS only provides the means of running unmigratable processes. A standard OS is there just to provide isolation between processes, scheduling, memory management, hardware abstraction, implementation of file systems and networking protocols.

In the past there were attempts to extend the OS concept in order to accommodate clustering capabilities. Linux serves as a good ground for these kind of experiments. Take for example – MOSIX, which is a project that extends Linux in a sense that one Linux system encompasses more than one PC, allowing for process migration. However process migration on its own is inadequate since a process is just one part that composes ‘service’, and you would actually want to migrate whole services efficiently in a fully isolated manner. Another project is ‘User Mode Linux‘ (often confused with UML which is something else), which allows running the Linux kernel as a Linux process. At some point in time there was a resource project that added suspend/resume support to ‘User Mode Linux’, but except that ability, ‘User Model Linux’ did not gain ground in the virtualization field.
Take another example – Cooperative Linux, written by yours truly. Except for helping lots of Windows users fiddling with Linux on their desktop machines, it did not gain ground in the virtualization industry on servers (even though it also runs on Linux, with the best opportunity for performance). All those projects are just partial hacks in the direction of VM infrastructure and none seem to provide it in a productive sense. All major OS designs are crippled in a sense that you need to virtualized them (i.e. put them in “a box”) in order to attain VM infrastructure capabilities.

Key for VM infrastructure is that you must provide the ability to manage your VMs on a cluster in an enterprise level manner and capabilities. Of course, I don’t blame OS writers for not detecting these needs in the corporate world. Actually, there were a few engineers that did detect it, and even awhile back. IBM already came up with the idea of virtualization awhile back on their mainframes. However, that was the beginning – and later on when traditional OS designs for single, desktop users emerged those features were not needed. Unfortunately those OSes also propagated to the server side, and only few saw the potential to bring the virtualization feature back under the cloth of the ‘full system virtualization’ method, adding a VM infrastructure.

Rethinking the Operating System concept, one would come up with a ‘Super Operating System‘ concept (i.e. SOS, also a funny overlap with the acronym for – “Save Our Souls”), that would define a new Operating System from the ground up that would also conform to all the attributes that are currently provided by standard ‘VM infrastructure’. SOS should be able to run instances of itself, connecting those instances with their dependencies. For example, I would be able to run two instances and connect them with a virtual Ethernet link (of course, I’d need a separate network stack for each instance). It should also make it possible to migrate its sub-instances, and other aspects of current-day’s VM management.

I know that designing a new OS as a standalone mission is somewhat unessential, but I have other ideas to pursue in that venue that would might improve the software world a little, but that’s a topic for another post.

Here’s an example for a company that most investors would very much appreciate. Agree Realty Corporation (ADC, SEC filings) owns and operates over 3.5 million square foot of commercial real-estate in the United States of America. There are several reasons why its stock should appear attractive for investors.

• The consistent 15 years history of paying dividends – about $2 every year. If an investor bought the stock in 1994 and reinvested the dividend up until now, he or she would have made about 10 times of the original investment. The payout ratio is normal – about 1.05, meaning that the dividend matches the companies earnings. Assuring that as long as these earnings are sustained and the dividend distribution policy remains, this hefty dividend payout will continue.
• The company’s revenue from its operations (mainly renting) in 2009 amounted to 15% of its asset value meaning its a very efficient REIT. Of that revenue, 7% remains as distributable net income.
• Leverage is currently only 36% of the balance.
• Ownership by management and their relatives (Agree family) is large – over 5%.

However before we go and buy this company, one needs to look at the prospects of commercial real estate in the United States. The ICSC website tells us there were 105,000 shopping centers in the United States at the end of 2009. There are numerous blogs on the Internet that are suggesting commercial real estate in the US will be entering a rough period due to de-leveraging and downsizing, much like the state in which the housing market is currently in. However, they are saying that over some time (since 2007) and so far businesses are booming.

So far I’ve mentioned nothing about the stock. At the current price of $28.49 (November 26, 2010), the data is as follows:

• Book value at 62% of share price.
• Leverage is at 36% of the balance.
• Annual dividend distribution of 7.2%.
• Balance at 99% of market cap.

Historically the company trades above its book value. Only during recessions such as the one in 2001 and the other in 2008 the company stock went close or below its book value. I’ve gathered the relevant information from 1996 and until 2009, as can be seen in the table below:

Personally I prefer to buy REITs close to their book value, which means I would have only bought this stock during recessions. An interesting story about ADC is that back in 2008 this stock price went down to $8 and the company refused a take-over at that price. Currently, 62% above book value is the historical average for this stock, which means that similarly to the rest of the stock market, it hasn’t decided between recession or a new bubble. I’d recommend to keep it, sell it if it reaches 100% above book value and buy it again if it goes back to book value.

Disclosure and Disclaimer: I am the writer of this article and I own shares of ADC since July 2009. Information on this website should not be considered to be investment advice. It represents the musings of one person and should only be used for entertainment. Moreover, any information found on this website should not be assumed to be correct. It is possible that there may be some errors. Above all, do your own research.

“All we are, as people, just minds trapped inside our own brain in different degrees of freedom”, he said. Sarah gazed up to him, moving her curly blonde hair to the other side.

“That’s true. It affects the decisions we make every day. So prune to subtle changes in brain chemistry, that we can hardly call it free will”.

“But what free will do I have now, Sarah? You brought me to this place, to learn what? How much time has passed?”

“To the world? Only one hour”

“It felt like a month!”

“It was a month, for your mind, as it is still accustomed to the linear speed of time”.

Greg stood up. As he gazed at the stars of a silent and surreal tropic night surrounding, directly above the gleaming yellow fire light reflected by the water from below the pier on which they soon started walking. It still felt quite real to Greg. Even the sound of the low ocean wave with its soapy bubbles quietly shattering on the wooden polls.

Sarah turned to Greg as they reached the end of the pier. “Terri might be in danger. We need your help, but you cannot go back to her. Greg, will you help us?”

That was an excerpt from a science fiction book that I’m writing. I won’t share the synopsis yet, as I’m still working around the plot. However, I can say that I plan to include various aspects of philosophy, science, life and death, religion, romance, struggle, deception, concealment, political debate, economy, and more. I’ll try to do what a good author does by pouring in his own world view into the world he creates in the books. Heinlein, you are truly a great inspiration.

Will you read it when I’m done?

(English preface: Hebrew titled “Next Phase Of The Information Age”, this post entry is targeting TED viewers in Israel. English Translation).

לפני שנחזור לנושא הקריוגני, אני רוצה לדבר קודם על עידן המידע. כיום אנחנו חיים בתחילת תקופה מאוד מעניינת וחדשה לאנושות. מידע זורם מכל כיוון לכל כיוון – הוא נשמר, מקוטלג, לא באמת נעלם, ואם מישהו בעוד 20 שנה ירצה לדעת מה האנושות “הרגישה” ברגע מסוים בזמן (למשל 30 באפריל 2010 ב 8 בבוקר שעון ישראל), כל מה שהוא יצטרך לעשות הוא לפתוח את מסד הנתונים של טוויטר עבור אותו רגע בזמן. כל שנה ושנה המחשבים נעשים חזקים יותר, יכולת האיכסון של מידע דיגיטלית גודלת, וכתוצאה ישירה גודלות יכולות המחקר המדעי באוניברסטאות ובמרכזי מחקר ברחבי העולם.

לאדם אשר מוקפא קריוגנית לא ידוע תחת איזה תנאים ובאיזה זמן יתעורר. יתכן שיהיה אפשר לרפא את גופו מכל מחלותיו (באמצעות נאנו טכנולוגיה והבנה מלאה של הגוף האנושי). או, שיהיה אפשר לגדל גוף צעיר וחדש לאדם זקן ולהשתילו לאדם מוקפא. או, יתכן שיהיה ניתן לסרוק את מוחו ולשמר את תודעתו בתוך מחשב. קיום של תודעה אנושית בתוך מחשב הוא נושא פילוסופי עמוק בפני עצמו. אין ספק שסריקת המוח והעברת כל עצם החוויה האנושית לתוך מחשב תהווה עידן מידע חדש, בתקופה שבה תהיה הטכנולוגיה לעשות זאת.

We are social beings – our thoughts and ensuing behavior draws quite considerably from the impressions we get from the people around us. Did you ever encounter a public demonstration while walking down the street and decided to join it? That is what I’m talking about. Did you ever think of doing something mainly because many other people decided to do it? The opinion of the crowd is often serves as a positive reinforcement. The opinions of your family members are also important to you as well in the same manner.

Over the years I have noticed that most people take their own thought process for granted. I did too throughout my childhood. However, there were many times that people did not understand how I draw conclusions and how I think, mainly because my thoughts were not in line with their own. Naturally, I assumed that they think like myself (so I’ve tried to explain things on my own terms), and they assumed that I think like them. Slowly I began to discover that I think quite differently, and that my thinking comes from independent thinking.

I would often find myself requiring the maximum amount of facts and sometimes even avoiding reliance on other people’s own ideas or assumptions when trying to understand a problem, finding a solution or to formulate an idea. I find it convenient to rely on my own assumptions (even if later I discover they were wrong) than on others’ assumptions. I learn, I seek knowledge everywhere I go. I strive to learn from my mistakes. I try my best not to add emotion or ‘gut feeling’ to the decisions I make. This trait helped me to embrace creativity, original thought, and eventually landed me a career in software engineering. I see myself belonging to the STEM group of people – Scientists, Technologists, Engineers, Mathematicians. My way of life is basically to apply the scientific approach to life itself. Personally, I prefer to add the Artists to that group as well and call it ‘STEAM’.

However, it’s not easy being an independent thinker in a dependent thinking world. You often need to explain yourself. Your social habits are sometimes different. You often find yourself going against the social norm because you conclude that some aspects of the social norm make no sense to you. You find Atheism quite appealing whereas most of the world is still composed of religious people. You skimmed through history and found that independent thinkers such as yourself brought positive changes to society and helped to bring the renaissance, industrial revolution and more. Ironically, even though ‘Independent Thinking’ is a trait that mothers in many families would like their children to have, as it is generally associated with success in life, young women would often find this trait strange and bizarre when observed in a potential partner.

Don’t get me wrong – independent thinkers can also fall victims to the illogical situation of romantic infatuation. It happened to me as well, and as a independent thinker I have drawn all the conclusions from those lengthy experiences. Not being able to logically explain yourself in a productive manner to someone you care about can be discomforting to both sides. There were fruitful experiences, because now I know which kind of a woman partner I should seek out, and that comes from a direct result of spending some time with a woman whose self is by far an anti-thesis of what I consider the right match for me. Thanks to her and others, I now have a clear image: My ideal partner should be intellectual, competent, eager to learn, creative, insightful, an expert in her own field, and preferably an independent thinker such as myself. Other traits such as having maturity, humility, being non-conceited, non-materialistic, speaking non-condescendingly – all are very much appreciated.

I often get annoyed at how people behave at supermarket lines where I live. For the incident I ’caused’ today, I will live to remember.

This evening I went to buy some groceries in the neighborhood supermarket. As usual, I pick a few items and went to the express cashier line (10 items or less). While standing in the line, strictly following the known “who’s last” principle (a principle used in crowded group lines, in which each person in the line remembers who is the person after himself), a guy roughly at my age asked me if I’m the last in line. I said yes, and he went away, assuming that as a stranger I’d follow the standard courtesy of reserving a place in the line for him.

Later, an older man came and asked who’s last in line and I said “a guy who went over there”. After 5 minutes, the line behind got really me accumulated. The guy for which I reserved the place in the line, came back with just two bottles and squeezed into the line just behind me. I was just about to put my groceries on the moving tray to be checked. At that point I thought – well, I helped a guy to do something I personally never do (because I think it’s not fair when considering the other customers). So, the conversation went as follows (translated, of course):
- “Excuse me. Did you just enter the supermarket, empty-handed, when you asked me to reserve the line for you?”
- “Yes, why not?”
- “Well, do you think it’s ethical?”
- “Do you think it’s alright that I’ll spend time in this long line for just two bottles of drink?”
- “Yes.”
- “So, you should have said that you don’t know me when I came back”. Well, the guy obviously didn’t know that I really don’t like to lie.
- “It doesn’t change the fact that it’s still not ethical”
- “Wouldn’t you have done the same?”
- “No, I never reserve a spot in the line at the point I enter the supermarket.”
- “Well, I do, and I don’t see a problem.”
At that point, the older person that stood behind the guy, started to get aggravated, saying to the guy, “So you are saying that you are impertinent and he is not?!”. Then the older guy pushed ahead and bypassed the impertinent guy at the line, putting his groceries on the tray to follow mine. Those guys continued their argument for a minute, and the guy gave up for the older man. I did not interfere – I simply went on, paid for my groceries and went home.

Imagine a routine visit to your doctor. You sit down and he says, “Listen, I looked at your recent tests, and I have something important to tell”. You are surprised. “What is it, doc?”. He says, “It seems that you have encountered a serious disease named Fumovelenositis”.

The doctor continues, “Fumovelenositis contributes to a life-long accumulation of tar and other poisonous substances in the lungs. As a result, over the years it can cause a cascading degradation of health and bodily balance, putting you in high risk of heart attack, strokes, cancer and many serious illnesses. It has a harmful effect on essentially almost every organ in your body. Depending on the amount of contamination, there’s a large chance it will short your life considerably, by say 5 to 30 years.”

Shocked, you wonder: “But doc, how did I contract this disease?”.  The doctor says, “You don’t understand? You haven’t contracted the disease – it’s not a pathogen. You practice the disease daily. You smoke.”

“But doctor, smoking is not a disease, it’s just a behavior!”, you say. The doctor replies, “Well, anorexia nervosa, compulsive overeating and alcohol addiction are also harmful behaviors. These are all treatable illnesses just like yours. ”

This conversation above might not apply to current times, but awareness of personal health is continuing to increasing within the developed world just as awareness of the environment continues to rise. Although many groups people have discovered it through history, it’s possible that awareness of self well-being is one of the revolutions of the 21st century. It’s very possible that in half a century a conversation such as the one above will be common and smokers will be strongly banished from society.

Although I’m generally in favor of capitalism, there are some aspects of it that does not contribute to our well-being. Our economic system promotes money rather than health – Tabbaco companies are so successful because the nicotine cigarette is a successful product. It’s possible that this will change in the future due to the rise in awareness of personal well-being. Taxes over alcohol and nicotine products might help with this, though I’m far from being an economics expert so don’t take my word for it.

As a non-smoker who feels disgusted while enduring smoke-infested environments, I felt quite appalled when one of my long-time friends has began smoking. It raised all sorts of questions, and in the back of my head I have worried that I’ll unwittingly start avoiding and keep myself at at distance. I did try to convince the individual to stop smoking. It didn’t work, and I think perhaps I was not persistent enough. Call me a insensitive, but I do prefer meeting my non-smoking friends than meeting my smoking friends. For me, smoking is disappointingly asymmetrical in a sense that my smoking friends don’t care really care that I despise smoking (although they care enough not to smoke in my apartment).

Besides being bothered by smoke, I’ve also find myself being bothered by the attitude often expressed by avid smokers who testify that quitting is not even under consideration. I hear funny remarks, “we all gonna die anyway”, or “my father is a doctor that smokes – therefore smoking is not unhealthy”, or “your car emits more deadly gasses than my cigarette”. At that point I advise the smoker to see a mental therapist or try to find the flaw in his/her logic or argument. Also, “smoking helps me relax”, or “smoking helps me concentrate”. Well, that might be true for the short term, but the fixation over substance abuse does not do you any good on the long term. Guys – there are much healthier ways to find relaxation and concentration.

Besides health, which is a topic the avid smokers clearly don’t care about, there’s also the odor issue. Heavy smokers – in case you didn’t know, your breath stinks like a rotten dead rat in the sewage during a hot summer day. And yes, I can sense it even you stand at the other end of the room.

So please, don’t smoke.

(if you are an experienced investor, you can skip down to ‘My Strategy’ otherwise you might find my layman’s explanation about investing a bit boring)

About Investing

I’ve first started investing in open-market securities 4 years back when I started working in XIV. Since then I have been learning about investment in stocks, bonds, options and more. It took time (mostly pain-staking) for me to fully embrace the strategy that I’m sure would provide the best result for me.

First, I’d like to say that investing requires a certain mind set. What I mean is – you need to settle on your expectations from investment. If you’re a native gambler, that is, you like to go to casinos, fill lottery tickets and the likes then you’d might think of stock market investing as something quite similar to that. However, investing has a greater purpose than just earning some bucks. It’s an important instrument for sustaining and enriching your wealth.

It’s true that the stock market can make gamblers feel at home, but the real purpose of the stock market is for you to get to be at the business owner side of the economy. Yes, you – the person under the payroll who sits behind a desk all day. You get a paycheck in the end of the month but you don’t get a share of the profits of the company that employs you. But wait – you can get a share of the profit – simply buy a share of the company! Marvelous!

Okay, it’s not that simple. So, what should be the price of that share you want to buy? Here’s the trick – it’s hard to tell what should be the price of the share. You can, however, see what people are currently paying for it. However, that’s confusing, because the current market price of the share could be far from the ‘should be’ price. Moreover, the current price can fluctuate, causing you to feel between euphoria (for earning money so quickly) and distress (for losing money so quickly).

Owning a share means being a part owner of a business, and it has several implications. First, did you buy that part of the business at a fair price? Let’s see: if the business is projected to earn $1 per share each year, and you bought the share at $50 (a 1/50 2% return on investment) then it’s not a good deal. A good return is at least above 7% a year of the original investment. So, you should have bought the stock at about (1/0.07)=14.2 dollars. If the market currently offers the share at a higher price then perhaps you shouldn’t buy it.

Share prices constantly fluctuate on market sentiment. The sentiment is affected by the media, rumors, analysts opinions, fund manager opinions, herd of investors, and more. The trick is not to let them get you by the balls. Try Warren Buffett‘s approach – figure out according to the factual information that is available what should be the fair value of the share. It’s not a simple task and it requires for you to research and understand business and financial reports quite a bit. But hey – that’s what you are required to do if you fully owned a business anyway – so give it a shot.

Another source of distraction is a weird creature called ‘Technical Analysis“. Technical Analysis is similar to coffee leaves reading in a sense that it tries to find order or ‘forecasts’ in random data, in this case – patterns on a random walk of a price/volume graph pertaining to any kind of asset. It’s a system of so-called mathematical set of rules that claims to provide tools that help an investor to make better decisions related to the buy or sell timing of a stock. ‘Timing’ in this context could be seconds, minutes or hours – a time-frame in which nothing changes in the factual information about a company. Don’t fall in that trap. It is a known fact that most ‘day traders’ that employ the “tools” of Technical Analysis lose their entire money (mostly due to broker trade commissions). There’s only one way to consistently profit from Technical Analysis – setting up a Technical Analysis course and charging money from the participants.

My Take On Investment Managers

At one point in time I learned about the necessity or the lack thereof regarding hiring of personal investment managers, i.e. the situation where you pay professionals to manage your investments. Essentially this is akin to putting your money in a mutual fund. So, these are the points I gathered:

• Pro: Saves time – someone else manages your investment – you don’t have to invest your own time in that.
• Pro: You can blame others are managing your investments if they make mistakes instead of dealing safe-blame
• Con: Instead of educating yourself how to learn from your mistakes over things that you could not have anticipated, you let someone else do those mistakes.
• Con: It costs money (sometimes 1% of your capital per year).
• Pro: Their long term goal is to increase your capital so that you pay more commission (which is a fixed percentage of your capital), so it should drive them to make good better returns for you.
• Pro: The professional investment manager has more knowledge about the market, and since they represent a large number of investors at a time they can have enough shares in order to sit in company board meetings.
• Con: You cannot be assured that they actually use their knowledge advantage.
• Con: There’s a risk that the professional investment managers will buy or sell assets in favor of their own portfolio, i.e. they will use your money as a market tool in order to help others or themselves.
• Con: There’s a possibility that they will do nothing (or close to noting) to manage the money and just take the commission.

I’ll quote another blog about this matter: Mutual fund managers keep failing to beat the market.

From personal experience, I tried one company who does investment management and decided that it’s not for me. I didn’t like how they work. So, I’ve decided to perform direct investments (i.e. no mutual fund). I don’t want any middle-mans between me and my assets. Plus, I think I’m smart enough to manage my own investments. Judging from the last 4 years with all the ups and downs I’ve made it quite well through the turmoil along with some extra gain over the market.

My Strategy

Overall I prefer Value Investing. To elaborate more, I invest in three types of securities:

• Stocks
• Corporate Bonds
• Government Bonds

On the long term, stocks will provide the most profit. However, stock picking is hard. I focus on companies that pay a generous dividend (between 6% and 11%), have a low price to earning ratio, and a strong and consistent business. These companies can usually sustain tough times like in the 2008-2009 period. Also, by paying most of their profits as dividends, I feel closer to the money I invested. I don’t expects the companies to grow much – I prefer for them to sustain their current business and profitability for the long term and stay relevant in the market. An added bonus for this is a capital gain, since stocks that persistently pay 8% don’t stay at that price for long – the market ‘appreciates’ (or ‘discovers’) them, and then they go up, and the dividend yield decreases (that is, only if the profitability remained the same). At that point if the dividend yield decreased only because the stock went up – I’ll might sell, collect the gained capital, and buy other stocks that have a higher yield.

Another form of securities I like are corporate bonds. In my country most of the bonds are protected from inflation. This form of investment is less risky, and you know what you are getting as long as the company doesn’t go bankrupt. Also, at the worst case you will only lose a part of the investment.

About government bonds – these are useful but only at times when the stock market is a popular investment. I currently hold no government bonds because I don’t see an upside. However, in a few years when the stock market goes up considerably, the difference between the yields of government bonds and the stock market will narrow, and then when it will be extremely difficult to find stocks at reasonable yields – then it would be safe to park the money on the government bonds.

Here’s a list of what I don’t do (or stopped doing at some point):

• I don’t invest in stock options, and I don’t short sell – too much of a gamble, needs too much of attention, calculation
• I don’t invest in mutual funds – don’t want no middle-man between me and my assets taking commission
• I don’t invest in companies with imaginary prospects and/or no solid business – you’d be surprised how much ‘Dream Concept’ companies are being traded out there.

In future posts I’ll might say a few words about past investments and might give a few recommendations of my own, through as a disclaimer I’ll say it would definitely not serve as any kind of consultancy – you are free to do what you want and I’m not trying to affect the market in any way.