HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
Fundamental analysis looks at the company; its products, competition, management, cash flow, debt, etc.
Technical analysis looks at price action and volume. Many people dismiss technical analysis as voodoo practiced by chart geeks. To rely only on technical data is momentum investing (very common in the futures market). It is certainly possible to make money, even a lot of money, but your position is held without conviction and you better be first out the door to avoid being buried in the stampede.
I prefer to use all of the tools at my disposal. I use fundamental analysis to determine what to buy (ex; I believe we are in a bull market in the precious metals that has many years to run) and technical analysis to determine when to pull the trigger, when to buy and sell.
An important technical point is when something “breaks out” to a new high. There is a logic behind something going to a new high. Investors, who were not willing to previously pay that price, are now willing to pay an even a higher price to own the position. The inverse is true if something falls to a new low. Investors who were previously unwilling to part with their position are now willing to accept an even lower price.
Consider the broad market. The DJIA closed at 10,729 in mid-January (see chart next page). It then backed off for 2 months into a “base period”, but last Thursday (3/18) closed above this level, with the highest number of individual stocks breaking to new 52-week highs in 12 years. Although the market was down on Friday, it still closed above 10,729.
Is the uptrend from last March intact or is this a “false” breakout, where a new high can not be maintained and quickly breaks down? The DJIA, by traditional valuations, is not under-priced, with a P/E of about 16 (the long-term average) and a dividend yield of 2.6% (far below the long-term average of 4.5%. I don’t know; we must just continue to watch. It is bullish that the NASDAQ and then the S&P 500 preceded the DJIA in breaking to new highs
The longer the base period, the more significant the breakout. Gold topped out at $850 in 1980 and then took 28 years to break to a new high. That is bullish.
A great individual stock to illustrate breaking to new highs is Apple (AAPL). On the daily chart (this page), note that AAPL topped at 215 in early-mid January. In the second week of this month, it then broke to a new high.
Now look at a weekly chart of AAPL (below). It peaked in late 2007 at 200. It rebounded and in May-June, 2008, approached the old high but failed to break out, and then sank with the rest of the market. Over the last several months AAPL has broken out to a new two-year high. This is very strong action.
RMD
Friend Diane has a nephew with Duchenne’s Muscular Dystrophy, so for the last 2 years we have attended the MDA Gala in Omaha. One of the silent auction items was a beautiful crystal bowl about 6 inches in height and 8 inches in diameter at the top tapering to about a 5 inch base. I wondered “How many one-ounce US Gold Eagles could you fit in that bowl?”
I had Diane Google the specific gravity of gold=19.3, i.e., gold is 19.3 times heavier than water (Platinum is the heaviest of the natural, non-radio-active elements with a specific gravity of 21.3). I estimated the bowl could hold about 1 gallon of water=8 lbs. If we round 19.3 to 20, this bowl could hold about 160 lbs (8x20) of gold, which just happens to be my weight. 160 lbs x 16 oz per pound=2,560 oz of gold. At $1,100 per ounce, my weight in gold, about the amount you could get in this bowl, is worth $2.8M.
1) If you are truly “worth your weight in gold”, you are worth a fortune. 2) A one-gallon milk jug can hold gold worth more than the vast majority of people could ever hope to accumulate in their lifetime. 3) Buy some gold.
Or think of this: The average physician makes $250K/year x 25 years=$6.25M. A physician really is worth their weight in gold.
Buying at a Charity Auction
Don’t!! The IRS rules are very specific: You receive a deduction only for the amount above the declared fair market value. Ex: A painting is valued at $500 and you paid $400. Sorry Charlie; you receive zero deduction for something you didn’t want in the first place and you never would have purchased otherwise. Bottom line: Do not purchase anything at a charity auction. If you want to make a donation, just give them the money. I assure you the charity will be very, very happy and you can deduct the entire amount.
Note: I donated an autographed copy of the second edition of my book The Physician’s Guide to Investing and a one year subscription to this newsletter to this auction. My declared value=Zero. I took no deduction so the purchaser can deduct the entire amount paid.
Also note: It is advice such as this you will find in no other newsletter and that over the course of your lifetime will save you really big money.
The winning bidder purchased the lot for her son’s high school graduation. Hint: A subscription to my newsletter and my book would make a great graduation present.
Site by Delta Systems powered by ExpressionEngine