Saturday, July 23, 2011

On the Propagation of Constraints

It is often amazing how propagation of constraints from one situation to another results in non obvious connections between various aspects of the human condition. A few minutes ago, and still now, my granddaughter Willow has been joyfully carrying around a little shopping bag in it with various items. She comes to me about once a minute to add or subtract something from her bag. She has discovered the utility of bags, and probably learned the concept from some older female in her family.

So, what has this to do with the propagation of constraints ? A woman depends, in part, upon her physical attractiveness to others for survival or simply to have a good life. That simple and controvertible fact leads to constraints on the clothes she wears. The clothes must be attractive and favorably display her figure. This leads to the subsequent constraint that women's clothes seldom have as many pockets as men's clothes. A notable example is that men's shirts usually have a breast pocket on the left side, usually absent on women's clothes.

Similarly pockets on women's skirts are usually inconveniently on the front instead of on the side where they would interfere with display of her womanly hips. The net result of this is that women carry purses for their item carrying needs. In men's clothes, the pockets are their "purses." A follow on example of the utility of carrying capacity is the ancient tradition of basket making especially used in hunter-gatherer societies.

And so it comes to pass that my female grandchild is having fun today having joyfully discovered the utility of carrying capacity of some sort, all constrained by her future need to be attractive with that need conveyed to her by the habits of some older woman.

Wednesday, July 13, 2011

Eat our peas ...

Sometimes a President will coin a phrase that sticks in the memory. The notably verbal President Obama will be quoted for 10,000 years on "eat our peas".

Teddy Roosevelt did the same with "Speak softly and carry a big stick."

Then there is JFK "Ask not what your country can do for you, ask what can you do for your country."

It is pleasant to recognize history in the making.

Friday, July 8, 2011

Long Time No blog

It’s never too early to think about retirement. I am a responsiblish citizen and so I had been diligently contributing to my 401k until last year. Granted 2008 was a terrible year, but my portfolio in various investment bank managed mutual funds had lost about -17% since I joined the workforce in 2006 which really felt like a waste.

I felt like I could do much better. Anticipating my own unemployment, I finally consolidated all my mutual funds from my various 401Ks and rolled it into an IRA under my control. I only kept two small mutual fund holdings and put the rest in stocks I picked myself with the help of google’s stock screener because I favor stocks with high dividends, low price/earnings ratios, and general uptrend. Since October, this portfolio has returned over 22%. I’ve got another $6,000 towards my retirement even though I have not contributed a dime in a year. In the past, my out of paycheck contributions were about $4000 a year (before the -17% return) so I have no plans to contribute more anytime soon now that I’m doing so much better on my own accord.

Of the 9 stocks I selected, only one is a loser which was an impulse buy. It is obvious the average joe is a better investor than Lehman brothers or BlackRock…all you have to do is buy companies that actually make money instead of risking your shirt speculating on the next big thing! This is easy, just start by thinking of products you enjoy and take a minute to think about their business models noting those that stand out as “best in breed”. I start by following them for a little while to see where the price is going, and then I decide what I’m willing to pay and put in a limit order. The goal is to buy on the lower end of the stock’s usually range when the stock market is just having a bad day.

Two of my pastimes are hobby farming and collecting gems, so I bought stock in Tractor Supply and Tiffany & Co business I think they have the best business models in their sectors. In a few months these have returned 92% and 41% respectively in money I didn’t have to work for. These are my high performers and I believe they will split and I’ll have twice as many shares. Of the stocks I’ve made more modest returns on, I usually sell to collect my gains once they’ve hit about 14% return. I often will buy and sell a stock several times taking advantages of price fluctuations once I’ve made it my business to understand a company’s business.

Today I decided I need some new blood in my portfolio so I put in limits to sell my CMRG and PALL if they get a bit higher. These are the stocks I’m watching as new contenders: AXP, HWD, BAX, SCL, UL, SHW, JWN, HNZ, CAT. Some were selected based on my recent experiences in Tanzania that made me appreciate the global superiority of overlooked but iconic American brands such as Heinz ketchup and Catepillar generators.

To sum up:
· You do know better than investment bankers
· Stick to stocks where you truly understand how they make their money
· Always buy and sell using limit orders