Gift of perception.

There is no right or wrong in the world. There is only truth and acceptance.

How you perceive that truth is what will determine whether or not you will accept it.

Most of us are brought up under a set rules and guidelines of how the world or society should be. Anything outside those rules is perceived as wrong. These are the truths that we have come to accept.

Go to school. Study hard. Get a job. Get a wife/husband. Have a bunch kids. Die. Capice.

Anyone else see the trivial sequence? Of course.

Hence the opium of the masses ( religion ) and metaphysics theories and the never ending cults.

They give a flavourful perception of how life should be rather than the bland routine we have been acustomed to.

One must learn to perceive life as it is. Not as you wish it to be.

If you live life in the sequence ingrained into you by other people you will not learn to perceive life on your own terms.

It will be like painting a replica of the Mona Lisa. Just as good. But not quite the same.

Einstein quoted “ A problem can never be solved at the same level it was created.”

Why do think this is so? Perception.

In any organization, if there exist problems that cannot be solved by operational staff, it is bumped up to management. If management cannot solve it, it’s taken to the directors. And if the directors cannot solve it, Consultants are hired.

This is because the problem may require a different angle of perception.

It works the same way in investment. When securities rise in value, some investors think the stock in valuable, so they buy into it, while other are afraid that the stock in not at the right price so they sell and vice versa.

In Life. Everything is about how you perceive it.

Is consumption of alcohol bad or good?

Are women better people than men?

Are Kenyan politicians good or bad?

Well, if you live in Kenya I think our perception on the last one may the same.


You can only accept what you can perceive.
The gift or perception is one that can be natured.

You will learn a lesson everyday. Pay Attention.

Dont let them get you!

Lately Kenya has been in a frenzy and no, it’s not about the politics, it’s about finding the hottest way to make the quick buck!

Greed has set its claws upon us. God help us all.

From Multi Level Marketing Schemes to Ponzi Schemes to outright Robbery.

Unfortunately, it is very easy to fall prey to these predators as they promise very high returns that could change you life.

One thing that we should all remember is that no else can change your life other than yourself.

Here are a few ways to avoid getting scammed:

Avoid schemes with "Referral Fees" - schemes that offers commissions just for recruiting additional distributors. If the plan is good, it will attract new investors on it own merit.

Avoid schemes that are "Free to Join" - Hakuna cha bure, Utaripa huko mbere!

Avoid schemes that claim that you "don't have to work hard" – There is no such thing as easy money.

Avoid "Miracle product" plans - plans that promise enormous earnings or claim to sell miracle products. Remember the virginity soap?

Avoid Guaranteed or risk free profits- The basic rule of investing is risk = return. So if you are promised + 300% return what is your risk? -300%

Classified Ads – Anything advertised in the classified is likely to be a scam. If they are making as much money as they claim cant they even afford a ¼ page ad?

Ask questions about their business – What product or service do they sell? Where do they invest the money? What value are they creating? If the answer is something in the lines of “we group members in a bus of money and it goes round…..” Your money will go round the corner into their pocket and vamoose!
If their business is making millions in a matter of weeks money why do they need you to give them your 1,000 bob?

Where is the business located - A busineess that has a turnover of millions in a week will certainly not be located in a sublet office. Unless ofcourse, its a flyby night venture. Today you see them, tomorrow you dont.

Fraudsters come in all forms and sizes. If you do not fully understand what the business does just stick by the sidelines and sip you soda in peace.

Price- Volume Analysis

All the daily data you get from the stock exchange in financial technical analysis charts are nothing more than:

1. Price

2. Volume

Only the price and the volume of shares traded are known daily and captured as charts for financial technical analysis. Volume is an important element and can be used to help you identify trade entries and exit.

There are six basic “rules” or guidelines to follow in price-volume analysis. They are:

1. Rising Price + Rising Volume = price will continue to rise

2. Rising Price + falling volume = Bullish trend is dying

3. Falling Price + Rising Volume = price will continue to fall

4. Falling Price + Falling Volume = Bear trend is dying.

5. Falling Price + Sudden Volume surge = bear trend end. Watch for reversal

6. Price at Peak + Sudden volume surge = Bull Run end. Watch for reversal


Below are graphs that show you how the above analysis can be done.

I hope this will give a good picture of how price- volume analysis can help you select entry and exit points in you stock picks.

Enjoy your week.

Investment Clubs.

Investment Clubs, better know as “Chama” are a good way to venture into the market.
Most investment clubs are formed by a group of friends, co-workers, neighbors etc. The basic idea is to get people who have similar goals and objective to avoid a lot of conflict later on.

What are the advantages of being in an investment club?

You don’t need a lot of money to start. The little money each member contributes quickly adds up to a lot. Every shilling counts!

You get to pool your funds and reduce the individual risk associated with investing.

The combined knowledge of group members can prove to be vital. Imagine having members from banking industry, advertising, manufacturing, transport, finance etc. The wealth of information can be priceless.

You get to set your own rules and are compelled to follow them. How many times have you promised yourself to do something and up to now haven’t done it? Many I guess. How many times have you promised a friend to do something and failed to do it? Few I bet.

Decisions about investments are deliberated and agreed upon by people with different investment perspectives and may result in profitable investments.


With the unlimited gain potential and limited losses (until you money gets to 0 bob) of the markets, you can easily grow this money into a substantial amount.

Set realistic long term goals. Investment clubs take time and effort before you can reap their benefits. But when you do, it will be worth it. Ever heard of the Tran-century Group?

Have regular meetings to discuss your investment objectives and the direction the club is taking. And don’t meet in pubs. Trust me.

As the age old adage goes: There is strength in numbers.

Go on, call your buddies, start a club.


ps. You can download this ebook. It will guide you in starting your own investment club.


Its the same book two different links. Just in case one doesnt work. Enjoy.

http://s21.quicksharing.com/v/3832056/InvestmentClubProfits.pdf.html

http://www.mediafire.com/?0wlzjklkngx

Fundamental vs Technical Analysis

Fundamental Analysis tries to determine the intrinsic value of a stock. It relies on historical financial performance of a company and its projected future performance.

The three most useful reports in financial statements are the balance sheet, the cash flow statement and the income statement.

And you thought you would never hear of this stuff again!

Tools that are used in fundamental analysis include:

Earnings

Earnings Per Share

P/E Ratio

PEG

Dividend Yield

Dividend Payout Ratio

Book Value

Price / Book

Price / Sales Ratio

Return on Equity (ROE)

We will cover each tool in the next few weeks and practically evaluate stock in the market.

Technical Analysis tends to use charts and calculation to identify prevailing price trends in order to cash in on the price action.

Technical analysis doesn’t bother to look at the fundamental data. It assumes that all the data available is already reflected in the price.

So there will be no P/E, PEG yadi yada yada. Nice eh?

Well it’s not so simple.

Tools in technical analysis include:

Moving Averages

Relative Strength

Momentum

Bollinger Bands

Volume

Support & Resistance levels


We shall also cover these tools and how you can use them in the next few weeks.
Note that these are not the only tools available in both technical and fundamental analysis.

Sentiment Analysis is used to analyse the next hot tip. The next hot stock.It seeks to determine the emotions of investors in the market.

Tools used in sentiment analysis include:

Ear

Mouth

Eyes

Sentiment analysis comes in the form of rumors and misunderstanding in the markets.
This is where speculators reside.

We shall also cover aspects of sentiment analysis.

In covering these three areas Uncle James and I hope that you will be better equipped to make your stock picks a refined process rather the a “shoot first ask later” decision.

As a close friend of mine would say, have a fantabulous week!

The Animal Farm

The Bulls
A bull market is when prices are moving up in the market. There is a lot of optimism in the market which drives the prices up.

The short term bulls are driven by good earnings of companies and announcements of positive future prospects of the company. Announcements such as mergers (CFC-Stanbic), Acquisitions ( Olympia, Scangroup, KPLC, EA Cables), Expansions ( KQ ) etc.

Long term bulls are driven by good economic sentiments. Lower inflation rates ( from double digits in 2006 to 5.9% in March 2007), growing GDP( 6% 2006), Increased investments both local and foreign which we are seeing currently in this country-Kenya.

When the bulls come home, it’s nothing but a party!!

However, one should watch for extended bull runs that result in overpriced stocks and corrections are inevitable.

Remember the 1st quarter of the NSE 2007?


The Bears
A bear market is when stock prices are moving down. There is a lot of pessimism in the market. Short term bulls are caused by poor earnings from companies ( Sameer Africa), negative publicity such as scandals and internal fraud ( Portland Cement), poor future earnings projections ( Eveready) etc.

Long term bears are driven negative economic sentiments. The converse of the Long term bulls.

When the bears come home, its trouble. But the party continues.

One can change positions from a long position to a short position. Short selling is not yet possible on the NSE but we are getting there.

Short selling is a technique used to sell high and buy low. On more sophisticated markets this can be done. Such as the NYSE now NYSE-EURONEXT.

Bears also present an opportunity to buy stocks that were previously overpriced from the bull runs.

After the correction at the NSE in the first quarter, opportunities to buy were present in abundance.

Remember, You haven't lost until you've sold.

Chickens

Chickens are just that. Chicken. They are afraid to lose anything so they opt to make investments in the money market.
They invest in bonds and T-Bills.

Pigs

Pigs are high-risk investors looking for the one big score in a short period of time. The speculators.
They are characterized by greedy and emotional decisions about their investments.

They are very impatient.
Informed traders love the pigs, as it's often from their losses that the bulls and bears reap their profits.

The bear run in the 1st quarter was absolute massacre of the pigs.

"Bulls make money, bears make money, but pigs just get slaughtered!" –investopedia.

Where do you stand?

Choose your investment strategy wisely.

The Battle

Its 6.00 am Kenyan Time. Half the country is a wake; half is still sleeping. Mama Mboga and their industry counter parts in Marikiti have already pushed 3 hours of work. Guards, police, customer care reps, nurses, doctors, factory workers etc are changing shifts from night shift to day shift.


Corporate players are up, well groomed, and skipping breakfast because if they don’t leave the house now, they will be late. The traffic these days is just too crazy. Kila mtu ana gari!!!



Back to the factory scene; “ toooot…” the shift has started. The HHIC is outside the gate picking out the casual labourer for the day. It looks like a political rally. There are just too many people.


“ Basi, hawa tosha. Wengine Kesho.” Says the HHIC. Tough luck.


HHIC??


Head Honcho In Charge.


We go up a few rungs of the ladder. The office is a buzz. “Got to crack that brief.” You think to yourself.

Emails are coming in quick succession:


From: HR.
Subject: Memo.


“Dare I even read it.”


From: Client
Subject: New Changes.


“Dame it! Can’t they decide?? I’m already finished with the last changes!!”


From: The forward friend
Subject: FW; FW; FW


“Kubaf!”


Before you delete the forward, your big boss gets a tongue lashing from the bigger boss, and makes a through pass to you.


“x#x*%)('?#”



And who does the work?

Its 10.30 am and half of the lot that was asleep is now awake.

Hustler Mbaya!!

Wasee wa barabara.

Meets client. Discusses what they need. Gets L. P. O using his friends company.

Off to down town. Buys supplies with all the money in his pocket but still owes 25%.

“I will pay when the cheque comes through.”

Delivers to client. Capice!

Easy money?

Clients reject the supplies. This is not what they asked for.

“Kimeumana!”


12.30 pm and the other half is now awake.

No job.

Off to Base.


5.30 pm. Overtime, rush hour traffic, the million man walk back home.

Another day bites the dust.

Tomorrow is a new battle.

Moral of the story:

1.” The trouble with being in the rat race is that even if you win, you're still a rat."
Lily Tomlin

2. “Be nice. Remember everyone you meet is fighting a hard battle."
John Watson


Join us in this journey towards financial freedom and the quest for life lessons that will make us better human beings.

Let us invest our time, effort and money into making ourselves and the people around us better people than we are today.

I wish you all a safe journey.