Sunday, September 24, 2006

How I Make Money With Google

The One-upmanship Factor:
Leveraging Google tools for speculative, short-term, news-event driven investing with Just-in-Time (JIT) company/industry research

The Application:
To be a successful investor, you don’t have to be the fastest on the block, just faster than Johnny to make money in the stock market

You can skip the next background section ("The G2") and dive into the "The Tactics" to get to the meat of the strategy.

The G2:
News Events
News drives a lot of investing, and the quicker you get and react to this news the bigger your potential gain. Company news such as the release of earnings reports, acquisitions, mergers, new contracts, new alliances, new products, new product or analyst reviews, court rulings, up for sale rumors, etc. all can have an impact on that company’s stock short-term price. And news events don’t have to be directly related to companies, industries or commodities to be useful for triggering investing activity. News events such as natural disasters, declarations of war, change in political regimes, flu outbreaks, Fed announcements, etc. all have significant impact on the global investment community. For example, home improvement store stock prices climbed after Katrina. Your ability to detect these news events and react to them as quickly as possible is the key.

The average investor will never be able to compete with automated systems that can “read” news events (see The Resource Pool), determine their investment potential, and automatically make buy or sell decisions within a few seconds. The key is not to try to beat these systems, but instead beat the general public. Your gain can still be significant. Review the following graphic for a better explanation (click to enlarge).

Google Alerts (Beta)
Google now offers a very nice e-mail alerting system that can inform you when specific terms appear in news, on the web, or in groups. The most important delivery option is “as it happens”. This will cause Google to send you the results as close to when the news event has occurred as possible (see the Google Alerts help page for more details on their event determination criteria). The news is delivered in an e-mail where the subject contains your search terms (i.e., “merger”). The body of the e-mail will contain the search results in the familiar Google search page results format. Many times there will be only one result per e-mail. You can get it delivered in HTML or plain text (which is useful for interacting with your own home grown tools – see The Tactics).

JIT Company and Industry Research
Unless you are tracking news for a specific company or industry, you will mostly likely know very little of the company(s) in your news alert. This is why JIT research is so important. You will need to be able to quickly research each company, its competitors, and its industry to make an informed decision on whether to buy this stock (or commodity) or not. Google Finance is a useful starting point for this research, and can followed by Yahoo Finance and others such as Hoovers.

The Tactics:
Google Alerts' Search Terms
Picking your search terms for Google Alerts is one of your most important tasks. Search terms that are too broad will give you too many useless results; to narrow and you miss too many. Use the advanced search options (the same available for regular searching) to refine your search terms. Search terms can be completely independent of specific company names and this can be an advantage over other techniques that just look for specific company or industry news.

Understanding the financial implications of specific news events is very important. Establishing the “cause and effect” is useful in planning your strategy and for picking your Google Alerts’ search terms. You should spend some time to see what happens when specific events occurs, and what industries and company profiles are impacted before you begin buying stock. I recommend setting up several Google Alerts and tracking what happens to the companies and industries that appear in you e-mail alerts.

Lesson: be clever and bold, but do your homework first!

Tracking the Stock for Signs of a Price Decline
Since this strategy is primarily designed for maximized short-term gains, tracking the stock price after you have purchased the stock is very important. You should aggressively track your stock and sell it when the price starts to slide.

Grow Your Own Tools
Google currently allows you to have an unlimited number of alerts (but this is subject to their verification policy). You can route different alerts to different e-mail accounts. Tracking many alerts (based on many different search terms) can be very time consuming. Creating your own software tools can reduce this effort. Since this service is e-mail based, almost any programming language can be used to retrieve, parse and process your Google Alerts. These programs can run in the background on your PC while you work, and could do one or more of the following:

• Filter / categorize your alerts
• Issue a sound or pop-up when certain alerts are received
• Put the alert contents into a database
• Launch “screen scraping” processes to retrieve additional information
• Forward your alerts to other e-mail recipients
• Send your cell phone a text or SMS message

The following is an example of some simple Perl code that can retrieve and print your e-mails (to the console) automatically. This compact code could easily be enhanced to send the e-mail contents to your cell phone and/or put the contents into a SQL database.

# view all outstanding e-mail messages
$Name = 'xxxxxxxx'; # account
$Pass = 'xxxxx'; # password
$Serv = '';
use Mail::POP3Client;
$Client = new Mail::POP3Client($Name, $Pass, $Serv); # new mail object
$TheState = $Client->State;
if($TheState eq 'AUTHORIZATION')
{ die "Bad user name or password.\n" }
elsif($TheState eq 'DEAD')
{ die "Mail server unreachable or unavailable.\n" }
$NumMsg = $Client->Count;
print "Number of outstanding messages = ($NumMsg)\n";
#Loop through the messages (starting at 1)
for($i = 1; $i<=$NumMsg; $i +=1) {
print "--------Heading for msg $i ---------\n";
$Headers = $Client->Head($i);
@HeadList = split(/\n/, $Headers);
foreach $Line (@HeadList) {
print "$Line\n";
}; #
print "--------Body for $i to Follow-------------\n";
$Body = $Client->Body($i);
@BodyList = split(/\n/, $Body);
# print "$Body\n";
foreach $BLine (@BodyList) {
print "$BLine\n";
print "-------End of Body $i -------------------\n";
}; # for i
# Close the connection

There are also inexpensive off-the-shelf software tools (see The Resource pool) that can retrieve, parse and store the contents of any e-mail message.

The Resource Pool:

Google Alerts

Google Finance

Inxight – Automated reading and comprehension software

Cypress Technologies - Message Parse Email Processing software

Thursday, September 21, 2006

Flaming Hot(!) Speakers

The One-upmanship Factor:
Get one up on Johnny. Singe Johnny’s mullet with this super hot omni directional speaker.

The Application:
Its Johnny’s birthday beach party with a group of friends. You pull up with your girlfriend just as Johnny was scratching his head, staring at his new “Paris” CD his mom bought him for his birthday. You can read the indecisiveness on his face. His hand is bobbling the CD. Its just moments away from being popped into his Boombox. Sweat starts to trickle from your brow. Your girlfriend glances at Johnny and then back at you with a look of horror. “Do something!” she whispers. You have act before its too late. You quickly unload your portable campfire rig and propane tank that everyone has grown to love. Little does the group know, you’ve made an important modification. A modification that will save this beach party…

The G2:
Ion or “Flame” Speakers
Back in 1968, Popular Electronics published an article titled “MUSIC FROM THE FIREPLACE MAY BE AROUND THE CORNER” (see The Resource Pool). This article describes how to turn a flame into a high fidelity speaker that broadcasts sound in all directions . . . spherically through a full 360 degrees. The principle is that though an ionization process, two electrodes connected to an amp and a sound source will produce sound from a flame. As a result of this article, several new flame speaker products popped onto the market in the early seventies. Since then, various artists have incorporated this technology into performance art pieces. It is/was also on display in San Francisco’s Exploratorium.

An explanation of this effect can be found in the following excerpt from the article:

“Although the molecules in a gas do not normally "hang together" as in a liquid, highly ionized gas molecules do. And thus, in such special cases of high ionization, the ions in gas exhibit cohesion much as in a liquid. Being cohesive, the ions have substance enough to exhibit "surface tension"-again, just as do ions and molecules in a liquid. As such, gaseous ions form a kind of invisible diaphragm which might logically be expected to couple with and to exert force upon adjacent air molecules. If such were, in fact, the case, a modulated highly ionized electrical current in a combustion zone might "beat" against adjacent air molecules, converting its electrical energy to audio energy, much like the physical behavior of a loudspeaker's solid diaphragm on the air around it.”

The ion “plasma” is created by introducing ionizable elements into the flame such KNO3 and salts (see The Resource Pool). The hotter the flame, the more ionization takes place, the greater the conductivity, and the better the output.

The Tactics:
Create a flame speaker using a very reasonably-priced portable campfire rig (see The Resource Pool) as the flame source. Fabricate an adjustable electrode stand and ion source that can be inserted into the campfire flame. Use extended leads from your kick’n car amplifier to attach to the electrodes and let the party begin! Cool as beans.

The Resource Pool:
Reprint of Popular Electronics article

Yukon Legend propane campfire

Definition: kno3

Making KNO3 - be very carefule!!!!!

Wednesday, September 20, 2006

Johnny Rents - You Don’t

The One-upmanship Factor:
Get one up on Johnny. Cleverly buy a multifamily home instead of a single-family home and take Johnny’s money.

The Application:
You catch a quick glimpse of the fog burning-off outside the second floor windows of your company’s office in the SoMa area of San Francisco. You’re putting the finishing touches on your code and are about crank up your unit tests when Johnny walks into your cube with a Mocha Frappuccino in hand. You see, Johnny just got promoted in the QA department and has stopped by to shove his pay stub in your face. Johnny now makes more than you. But you don’t despair, because you have cleverly figured out a way to buy a home in this insane real estate market, and best of all, you’ll get Johnny to help pay for it. This makes you very happy.

You can skip the next background section ("The G2") and dive into the "The Tactics" to get to the meat of the strategy.

The G2:
Real Estate Agents
Real Estate agents look at an inexperienced buyer and thinks “let’s hurry up and flip this sucker so I can collect my commissions”. Their motives are not always in line with your own, especially if they are listing many houses and are looking to quickly dump a few. Make your real estate agent bend to your will, not the other way around. Demand that he/she only show you the places the meet your strict criteria and timeframe, and don’t settle for anything less.

No Down Payment Home Loans
Who has $120K (20% of $600K) laying around to apply as a down payment for their first home? Not everyone realizes you can get 100% financing for home loans now. You can then use some of that spare cash saved to pay the closing costs which can be as high as 6% of the loan (yikes!). This type of financing can be tricky. With most 100% financing programs there are actually two loans (one on 20% and one on 80%). The loan covering the 20% is at a higher rate and can (and probably should) be refinanced after two years. Nationwide programs vary, and most have short windows of availability. This is where a good mortgage broker with nationwide coverage can help.

Credit Score
Your credit score is obviously very important when attempting to buy a house. What most people don’t realize is that you can still buy a home with “bad” (fair) credit. It will just cost you more. The better your score the better your interest rate. A good strategy, especially when going after 100% financing, is to get on a two year credit improvement plan (see The Resource Pool) once you’ve closed your home - even if you have good credit. Improving your score will get you a better rate when it comes to refinancing your 20% loan component after two years.

Mortgage Brokers
A Mortgage broker is like a shade-tree mechanic in the middle of Bum*uck, Georgia you reluctantly have repairing car that just broke down on the highway. Bubba, the “mechanic”, gives you a quick sh*t-eating grin with his chewing tobacco stained teeth as he welds a 1986 Ford alternator bracket to your 2005 Nissan alternator bracket. You sense that something is not quite right. Bubba assures you that you’ll “be back on the four-lane in no time” as his pit-bull, Kudzu, takes a leak on one of your back tires. A sure sign you are not dealing with the “A-Team” is Bubba’s grease-stained t-shirt which reads “Britney Spears - Dream Within A Dream, 2002 Tour”. Shade-tree mechanics, as with mortgage brokers, vary in knowledge, experience and resources. There are no professional certifications required. Good ones bring a tremendous value to the table, bad ones cause you to end up worse than you were before (see The Resource Pool). When dealing with a mortgage broker, demand a discount. After all, you are coming to him and not the other way around.

The Tactics:
The good news is there are financing programs available to reduce or eliminate your down payment. The bad news is you have to qualify for the loan and ultimately cough-up the monthly payments. This is where the “clever” part comes in. What most people don’t know is you can qualify for a owner-occupied multifamily home just as easily as a single family home (as long as that multifamily home contains four units or less). Most multifamily homes are not much more expensive than single family homes. I’ve found a good search tool to help you find multifamily homes in your area so you can see for yourself (see The Resource Pool).

As the new landlord of a owner-occupied multifamily property, you get to apply your tenants' rent towards your monthly mortgage payment – making your remaining piece within your financial reach, especially if you also have a roommate in your unit. This is were Johnny comes in. You offer him a “sweet deal” to move into one of your units in your building. Every rent check you get from Johnny will then smell like ambrosia.

To qualify for a residential owner-occupied multifamily home you may be able to underwrite the loan using rental income as your source of repayment. Of course when considering buying a multi-family property you should work with a mortgage professional that is experienced in this arena. Also you should find a good conveyancing attorney with multi-family experience.

In addition to the traditional mortgage interest payment tax breaks (prorated on the unit you occupy), you will be able to take advantage of rental property tax write-offs such as depreciation. I’ve found a good spreadsheet template to help you do what-if (sensitivity) analysis on your rental property (see The Resource Pool). You should also consult a good tax account experienced with this type of property before committing.

The Resource Pool:
Improving Your Credit -- Beef up your credit score in 5 steps

Mr. Multifamily -- He mixes and matches the best nationwide multifamily loan programs with your specific profile

Multifamily Search Site -- Use the "More Search Options" feature and select the "multifamily" option

Downloadable Sensitivity Spreadsheet -- Analyze before you buy

Saturday, September 16, 2006

Got Meat?

The One-upmanship Factor:
Get one up on Johnny.  Buy prime cuts of meat at half price and
use them strategically at social events.

The Application:
Its the pre-game cookout and Johnny proudly throws his burgers and brats on the grill. You coolly toss on a half-dozen New York Strips.

The G2:
Supermarkets have to get rid of a lot of their perishable goods. They play games with some of their goods such as shuffling older eggs into cartons of fresher eggs, or un-packaging and mixing older (and grey) hamburger meat with fresh red hamburger meat then repackaging it.

Prime cuts of meat that are about to reach their expiration date can be purchased at a huge discount – often at half price. Many supermarket chains designate one or more days a week to offer this meat at a discount. One 24 hr. supermarket chain in Atlanta used to slash their soon-to-expire meats just before midnight every Tuesday.

The Tactics:
Approach any young supermarket stock clerk and ask him/her if and when the soon-to-expire meats are offered at a reduced price. Chances are they will be happy to divulge this information. The more people that buy this meat the less work it will be for store employees.

The Resource Pool: