Get Notified By Email or Cell Phone of Profit opportunities FREE! Register Now!

Seven Steps to Increasing Your Net Worth 32% in Five Months


One of the important reasons why you became a subscriber to TaipanFinancialNews.com is to learn how you can increase your net worth 32% every 5 months. And that’s exactly what TFN is going to help you do. How? If you’re thinking saving more money is the answer to building incredible personal wealth, think again.

TaipanFinancialNews.com is not a web site about saving money. Because saving money will not help you build wealth. Now don’t get me wrong, saving money is fine. But let’s face it: Clipping coupons and counting pennies never made anybody rich. If you need proof, just look at how rich people live. They eat at fine restaurants. They take exotic vacations. They send their kids to expensive private schools. Rich people don’t save money, instead they MAKE money. But there’s something else you need to know about building wealth.


Grow Wealthy Without Working
You may have figured this out by now, but it is worth repeating: you’ll never get wealthy by working. Uncle Sam swipes as much as 35% of your paycheck in federal income taxes. After state and local taxes, you end up taking home only about half of the money you worked hard to earn. But what if – instead of living paycheck to paycheck, you could earn extra income from as many as seven different sources? I’m talking about money that arrives like clockwork, whether you’re sitting at a desk, playing a round of golf, or taking a nap. The IRS calls it “unearned income.” In other words, money you didn’t have to work to receive. But here’s one of the biggest secrets and benefits of unearned income: it’s taxed at a lower rate than earned income.

Not only is TaipanFinancialNews.com going to show you how to tap into unearned sources of income, we’ll also show you how to exponentially expand that income. Once you start doing that, you’ll build wealth at a much faster rate than you ever imagined possible.

This web page is going to show you the fundamentals necessary for quickly expanding your wealth.  You’ll notice most of the page talks about investing in the stock market.  That’s one of the key ways we’re going to help you create a fortune. For some people investing in the market can be a bit daunting because of the risk involved. But it’s important to know that while there is some risk, you can minimize those risks so that in the end, you come out ahead. In fact you can think of investing in the market similar to playing poker…

What Great Poker Playing Can Teach Us About Wealth Creation: Seven Key Steps from the World’s of Hearts, Clubs, Spades and Diamonds and How They Make You a Real Wealth Creator

“Gamble: To play at any game of chance for stakes. To stake or risk money, or anything of value, on the outcome of something involving chance.” – Random House Dictionary

Invest: To put money to use, by purchase or expenditure, in something offering profitable returns.” – Random House Dictionary

In life, taking no risk is often the biggest risk of all. Every serious choice that a man or a woman makes is a leap, more or less frightening, into contingency. Not to make those choices, not to open oneself to misfortune and the fear of misfortune, is a tempting choice, but one gives into it at the risk of never living a fully human life, says Nelson Aldrich, multi-millionaire investor and author of the best-selling book, Old Money.

Aldrich is simply saying what is already obvious to legions of risk-loving Americans – that risk is not only at the core of two of mankind’s favorite pastimes, betting on poker and betting on the stock market, it’s what makes those pastimes so appealing to participants. Make that millions of participants.

According to PartyPoker.com, the world’s largest online poker Web site, more than 35,000 simultaneous players are online during peak traffic time every day. That is no insignificant achievement considering the site only launched in August 2001. With the incredible upsurge in poker around the world, greatly driven by televised poker, poker has undergone a renaissance of sorts, with bricks-and-mortar poker rooms experiencing a 40 percent increase from 2003-2004, while online gaming has jumped a whopping 500-600 percent during the same time period.

But even those numbers pale in comparison to the amount of money pouring into Wall Street these days. According to the Investment Company Institute, mutual fund investors alone account for $7 trillion worth of assets through mid-2004. And, according to the New York Stock Exchange’s Shareownership 2000 survey, it estimates 84 million direct and indirect shareholders in the U.S. in 2000, representing 43.6 percent of the country’s adult population. That figure is up 21 percent from 1995’s 69.3 million and up 61 percent from 1989’s 52.3 million.

Why Minimizing Risk Is the First Step to True Wealth
Are there that many risk-takers in the poker world and on Wall Street? You bet – and risk is a big reason why. Part aphrodisiac, part clarion call, the element of risk is to poker players and stock investors what King Kong is to a movie about apes or what the blues are to the Memphis musical scene. A narcotic? Maybe. An addiction? Probably. A passion? Most definitely.

Risk is the common denominator that ties poker players and stock market investors together (that and the ability to separate others from their money). Risk is a big reason why those who excel at poker are usually those who excel on Wall Street. Each industry rewards those participants who take matters very seriously and understand risk, just as they understand preparation, discipline, and recognizing opportunity and knowing when to exploit it. Good poker players, like good investors, also understand human emotion and leverage that information to separate other people from their money.

Consider the legendary financier Jay Gould, who made a fortune in the railroad industry and was a dominating force on Wall Street for the latter half of the 19th century.  Gould was so good at separating people from their money that he earned the moniker “The Devil of Wall Street.” Once when Gould was attending his local church service on Monday, the minister pulled Gould aside and asked him how to invest a $30,000 windfall that had fallen into the congregation’s lap. Gould advised the minister to invest the entire sum in shares of Missouri Pacific Railroad. The minister did so and watched happily for a short spell as the stock rose. But after a while the stock slid precipitously, finally falling below 50 cents per share. The minister, distraught over losing virtually all of the $30,000, poured his woes out onto Gould, who snapped open his checkbook and covered the entire loss with one sweep of his pen. Then the minister confessed that despite Gould’s request to the contrary he had passed the stock tip along to other members of the congregation. “Oh, I guessed that,” Gould replied merrily. “As a matter of fact, they were the one’s I was after.”

No Funny Business
The best lot of us can reduce risk by preparation. Take W.C. Fields. After watching the canny comedian survey his poker hand, a man asked, “Is this a game of chance?” “Not the way I play it,” answered Fields.

What can investing teach you about poker – and vice versa? Plenty, if you know where to look (and we do). Primarily, there are seven keys to expert poker playing that translate well to Wall Street and playing the financial markets. All of these themes are critical to your financial future.

Key #1: Playing for Financial Gain
In professional poker, there is a “poker mindset” that champion players bring to the table; the notion that poker is a zero sum gain where not everyone can win. It’s the hunter’s instinct that Wall Street investors should have – but almost never do. That’s where a clear, compelling understanding of money management comes into the picture. That, in turn, will give you good decision-making skills based on risk evaluation. There is, after all, a great deal of risk when you buy stocks. First and foremost, the value of your stock may go down, even disappear. But that doesn’t happen often, especially if you do your homework and invest in companies that make good products, have good management, and generate solid profits. Still, as part owner of a given company, you’re taking more risk in actually owning the stocks than you are if you, for example, loan a company your money in the form of a bond investment. At least with bonds, there’s a guarantee built in to your investment that you’ll get your principal (the amount you invested) back, plus accrued interest. It’s set in stone.

Stocks aren’t like that. There’s no flat-out guarantee that you’ll earn any money. Heck, you can even lose it all. If the company pulls an Enron and goes bankrupt, shareholders are among the last folks to get their money back, behind the armies of bankers and lawyers and IRS agents standing in line ahead of you.  If there’s anything left the shareholders can divvy up the proceeds. But by then, after the professional vultures have filled their belly, there’s usually nothing left on the carcass of any value. That’s the bad news.

The good news is that, sooner or later, the stock market will notice the company you diligently researched and invested your money in. When it does – and sees the wonderful things that your company is doing – it rewards the company and its shareholders by increasing its value by raising the price of the stock. When a stock price goes up, that means demand for the stock is high (i.e. everybody wants in on a good thing). Since more folks want to be like you and own your stock, the price of the stock goes up correspondingly. It’s all supply and demand, folks. If you really harness your portfolio to a winner – a Disney; a Microsoft, a Wal-Mart – the return on your investment can go much higher than the 11% or 12% that stocks historically earn. Those stories about Microsoft secretaries retiring as multi-millionaires aren’t urban legend. Plenty of people who bought that stock early and hung on to it saw their investments rise astronomically. But that’s the payoff for taking more risk with your investments. That’s also why good risk management skills – the heart and soul of good money management practices – are essential to your success both on Wall Street and at the poker table.

Key #2: Luck in the Short Run, Skill in the Long Run
Okay, get ready for a narrative on “managing luck” – a key theme in the wealth creation game and a mantra for professional poker players who make money by harnessing opportunity and pulling the trigger when the time is right. The key is recognizing where opportunity and luck coincide. Too often, unfortunately, our own emotions get in the way of a local, clear-eyed investment decision. Greed, in particular, is a human emotion that, left unchecked, can ruin an investor or a poker player.

In his speech, “What Poker Can Teach You About Investing,” given at the Mandalay Bay Resort in Las Vegas on November 7, 2003, David Nelson, senior vice president, Legg Mason Funds Management, opined that people make all kinds of bad decisions at the poker table. They get too greedy and they get frightened. They don’t analyze things on a probability basis and they don’t know how to control their own emotions. Nelson, a guy who knows where poker and investing intersect, draws the following analogy on gambling, greed and the importance of exercising probability scenarios on a poker game:

“In a five-card draw game, with a four flush (four cards to a flush plus one other card) or a four-card open-ended straight draw (let’s say a 6,7,8 and 9) is it correct to call a $10 bet with $50 in the pot? You need to go through a mental process in considering this problem. If you have five cards in a draw game, there are 47 cards that you have not seen. If you are drawing to a flush, there are nine cards out of the thirteen in the suit that can help you and there are 38 cards that are of no help to you at all. Therefore the odds are 4.22:1 against making that flush. In the case of the straight, the four fives and the four tens help you, so there are eight cards out of the 47, and the odds are 4.88:1 against making the straight. The answer is that you are advised to make the call because the odds of making the flush or the straight are less than the pot odds (your $10 in a $50 pot).”

It’s Nelson’s point that the toughest part of poker, and one of the toughest parts of investing, is that people have a difficult time making decisions on a rational, logical, rather than emotional basis. “There are a number of behavioral issues: cognitive illusion, attitudes towards risk, mental accounting, overconfidence, at work in a poker game. All of these are quirky ways in which people make decisions that causes them to be bad poker players and poor investors. In poker and in investing, “hope” can be a very expensive word. When you’re in a poker game and you start out with three good cards in a seven-card stud and then the next two cards are nothing, you should be out of that hand. You shouldn’t be hoping that the sixth card or the last card will save you. That kind of decision process will cost you money. That’s true in the investment process as well.” He has a point. In poker and investing, you have to have a game plan and the patience and discipline to stick to it. You have to minimize your losses and maximize your gains. You must understand the probabilities involved. You must understand human nature, especially your own. And you must be able to control your own emotions. If you can’t, you’ll wind up the type of risk taker who confuses luck with skill, and who doesn’t know when to leave money on the table and walk away.

Key #3 : A Taste For – and An Aversion For – Risk
Lets talk about key themes of probability and the element of risk – specifically, controlling risk through discipline and diversification (otherwise known as spreading risk). How do the best poker players manage risk and how can investors use that same knowledge to bulletproof their investment portfolios? In both poker and investing, assessing risk – and knowing when to pull back and when to march confidently forward – is no luxury – it’s a necessity. You have to recognize when the odds are in your favor and when they aren’t and take action accordingly. In poker, the term “raise or fold,” is a common one, meaning (essentially) either get in or get out. When you feel like you have a good hand then raising the pot is a good idea. But if you have a lousy poker hand then folding is a good idea. If it sounds that simple, well, that’s because it’s true. Risk assessment, knowing when to get in or get out, is the single biggest factor in success in poker and on Wall Street.

Using risk to walk away becomes more complex when the human emotion factor is weighed in. People don’t like to leave money on the table, even a little. It’s against our human nature. But giving up a little now to save a lot later (and, as they say, live to fight another day) is a common denominator in both past times. Again, that really goes against the grain of the average poker player and the average investor. After all, nobody wants to fold, they want be aggressive and raise and win the big pot. A little celebratory end-zone dance, complete with finger-pointing and lots of “Boo-Ya-ing” might be in order, too. But in the average neighborhood poker game there may be only 30, 40 or 50 hands in a given night. In a game with five other players,  mathematical probabilities estimate that in a game with 50 hands and five players, you’ll draw the best hand roughly once every five hands. Consequently, four out of five hands you could very well be folding. In a game with 50 hands, that means 40 of them you’re cooling your heels on the sidelines. That’s 80 percent of the time. For the average player who may sit down with his or her friends only once a month or so, it goes against human nature to back down 80 percent of the time at the poker table. People want to get in there and swing the bat, take the shot, go for the gusto. If not, where’s the fun? Yet in poker, like in investing, the best players are the ones who have the patience and discipline to fold a bad, or even mediocre to decent hand, when the situation calls for such a move. But the poker player who exercises good patience and practices good discipline is more likely to come out ahead than those who jump in willy-nilly and start raising hands like a drunken tourist in Vegas for a long weekend. After all, that’s how wealth is created on Wall Street, slowly, incrementally, a steady drumbeat of portfolio accumulation day by day, week by week, year by year, and decade by decade.

In the end, your success at either poker or in the stock market isn’t decided by that $500 hand you won last year at the social club poker tournament or by that technology stock that doubled your money in a week’s time.

Instead, success is measured by how you play the game over the long haul and by what point you meet and exceed your financial goals. For those goals to be met, characteristics like patience, discipline, and good decision-making skills trump negative traits like impatience and recklessness every day of the week. Good poker players and good stock traders know that exercising risk probability scenarios, and using the information found in such scenarios to accept some losses, is the single most critical strategy they have in their arsenals. In other words, thinking rationally, and not emotionally – especially when you’re gauging what decision to make.

Key #4 : Controlling Your Emotions
Any follower of Wall Street has heard about the “herd” mentality – the tendency by investors to buy when the market is going up and selling when the market is going down. Legendary financiers like Warren Buffet and Peter Lynch urge investors to do just the opposite – buy when prices are going down (when they are cheaper) and sell when prices are going up (for larger profits). Unfortunately, investors’ emotions often get the better of them. They don’t trust their own instincts to sell high and buy low. In short, they panic. It reminds me of the line from the old Pogo cartoon “We have met the enemy and it is us.” So it goes in poker, where understanding human emotion and evaluating behavioral management is the clearest path to success. Let’s face it, under pressure, people usually don’t make the best decisions and they don’t demonstrate the soundest judgment. In the stock market that character trait is manifested in what Wall Street gurus call the “herd mentality.” That’s when investors buy what everyone else is buying (when prices are usually at their highest), and selling when everyone is selling (usually when stock prices are at their lowest). They say fear is a great motivator and that’s true of the average stock market investor and the average poker player. Fear of being left out of a bull market or fear of walking away from a pair of 10’s when a face card comes up in the draw. Fear leads to bad decisions on a Wall Street trading floor or at a high-stakes Vegas poker table.

Key #5: Identifying – and Beating – Weaker Opponents
Remember Jay Gould – and how he fleeced his church’s hapless congregation? (Herd investors – every one of them). A big key in poker is “reading” your opponents and analyzing their strengths and weaknesses. Once you find the weak spots, the best poker players say, then you can exploit them. The same holds true on Wall Street, where the market, every hour of every day, has vulnerable points or weak spots that beg to be exploited by investors – if they only knew how. The key for investors is knowing how champion poker players identify and exploit other players’ vulnerabilities – and how investors can do that in the financial markets, too.

They do that by “reading” the market and looking for “tells” that suggest the market will go on one direction or another. Easier said than done. But it really closes the information gap if you start paying attention to economic indicators like gross domestic product (indicating how well the U.S. economy is performing) or the movement of interest rates (another great economic indicator).

Good information, more than any other factor on Wall Street, will separate you from the herd and provide you a
clear path to significant wealth.

Key #6: Patience and Discipline
Investors by nature are an impatient lot. So too, are average poker players, who don’t recognize the value of “playing tight” (or sitting out pot after pot because their cards aren’t strong enough). In poker and on Wall Street, patience is not only a virtue, it can be a lifesaver.  The savviest poker players are the ones who are disciplined and patient. In short, they are the players who know themselves best.

Think about it. Only you know what kind of hand you’re playing at the poker table. And only you can exercise the appropriate judgment and demonstrate the correct level of patience that’s going to result in your walking away from the table with more money than the other guy. Of these attributes, it’s patience that separates the great players from the woulda-coulda-shoulda players. Like investing, poker is a game of incomplete information. There are myriad factors in a poker game that you just don’t know and that you can’t control. But the smart poker player doesn’t leave things to chance and divine providence. Nope, you can’t make a living relying on that.

Instead, the champion poker player invests a great deal of time and effort, immersing himself in scenario analysis and probability analysis. If you apply enough examination to the process, and conclude from that analysis that you have the best hand, you can increase your odds of taking a big poker hand. Another infamous maxim of the poker world – that you can learn the game in five minutes and spend the rest of your life trying to master the complexities of the game – also applies to the stock market.

It’s not difficult to pick up the phone or plug into your favorite online discount broker and buy 100 shares of ABC Corporation. But is it a good stock to buy? Are you buying it at the right time? Does it fit into your overall investment strategy? At what point will you sell the stock if it rises or if it falls? What weaknesses do you see in the company? What strengths? Are you sure of the decision you’re making?

You see where I’m going here. These questions are exactly the same questions a poker player must ask himself when sitting at a table with five other players and a big pot of money at stake. In that sense, the skill sets for poker are a lot like the skill sets you need to succeed at investing. And let’s face it. Decision-making and poker go together like peanut butter and jelly. As Warren Buffett says, “As they say in poker, ‘if you’ve been in the game 30 minutes and you don’t know who the patsy is, you’re the patsy!’”

Key #7: Evaluating Probabilities (and Pulling the Trigger)
Hey, it’s no secret that there is a gun-slinger mentality in the poker world. The most successful players like Amarillo Slim, Phil Henseth, Doyle Brunson, Annie Duke, and Phil Ivy (among many others) know exactly when to strike and put another player out of his or her misery. The “trigger” concept is obviously equally important on Wall Street, where a matter of mere seconds can mean the difference between profit or loss. And it’s all about decision-making. Make no mistake, decision-making goes hand in hand with poker and investing. Nobel prize-winning mathematicians Amos Tversky and Daniel Kahneman produced a decision-making test that goes as follows: In decision number one, you have (A) the opportunity for a sure gain of $240 or (B) a 25% chance to gain $1,000. Which would you rather have? In decision number two, you have (C) a sure loss of $750 or (D) a 75% chance to lose $1,000. Which one of those two most appeals to you?

Given a choice between the $240 and the 25% chance to gain $1,000, 84% of the people choose the sure gain (A). Given the choice between the sure loss of $750 or the 75% chance to lose $1,000, 87% of the people select the 75% chance (D). Overall, 73% wanted the sure gain and the 75% chance of a loss (A and D together) and only 3% selected the 25% chance of gain and the sure loss of $750 (B and C together). According to Tversky and Kahneman, if you choose both A and D, then 25% of the time you gain $240 and 75% of the time you lose $760. If you choose C and D in aggregate, you have a 25% chance of gaining $250 and a 75% chance of losing $750. In the B and C aggregate, you make more when you win and lose less when you lose, so this combination is the most valuable. Yet, only a very small percentage of people actually choose this. The researchers concluded that because people are risk averse in the domain of gains (they would love to have a bird in the hand or a sure thing), but in the game of losses, they are risk seekers (people do not want to take a loss and they will do almost anything to avoid it). One of the things people do to avoid a loss is take a risk at losing even more in the hopes that luck will favor them. People, therefore, make sub-optimal decisions.

Six Investment Plays that Demonstrate the Rules of Successful Poker
Investment Play #1
The trick is to find the stocks that abide by the golden rule of risk management –  find stocks that do well – pretty much no matter what happens in the markets, the economy, or out there in the real world. When we think that way, we start thinking video games. Take-Two Interactive (TTWO:NASDAQ) fits that bill. If you’ve heard of the Grand Theft Auto gaming franchise, you’re familiar with TTWO. But just in case…

Take-Two Interactive Software is a global developer, marketer, distributor and publisher of games and accessories for the PC, PlayStation game console, PlayStation2 computer entertainment system, Xbox, Nintendo GameCube and Game Boy Advance.  They publish and develop products through their wholly owned labels Rockstar Games and Global Star Software, and distribute products in North America through their Jack of All Games subsidiary. That’s in addition to manufacturing and marketing video game accessories in Europe, North America and the Asia Pacific region. Game’s not over yet.  Sure, the company managed to one year’s profit into the next year’s loss. Its 2005 guidance story might give some pause, but its arsenal of new games should make for a profitable year. True, the company’s Q1 2005 guidance of $1 to $1.10 per share is far short of the Street’s estimated $1.19. But revenue didn’t disappoint.   In fact, thanks to ESPN NFL 2K5, revenue came in at $160.9 million, bettering expectations of $130.7 million. Better still, Q1 revenues could come in around $420 million to $460 million, with fiscal year 2005 revenue at $1.2 billion to $1.3 billion. The real kicker: There are no forecasts calling for slowed gaming growth. According to DFC Intelligence, forecasts are for worldwide sales to increase from $23.2 billion in 2003 to $31.6 billion by the time 2009 rolls around.

Investment Play #2
Here’s a nice exercise in logic and patience. How about a nice, steady stock that pays an 8.6% annual dividend? After all, dividends are our second favorite wealth-building investment. Think about it for a minute. You’re paying a good chunk of change for your stocks. Why not invest in companies that are actually making money and paying back their shareholders? Take a look at America 1st Apartment (APRO:NASDAQ). Its 8.6% dividend is very nice. It amounts to roughly $1.00 a share. Now, if the stock you own trades for $35 and you get an additional buck, big deal. The lower in price your stock is, though, the sweeter that dividend will be. That’s why APRO is a great buy in early 2005. At just over $12 as this is written, the stock is only about 30 cents away from hitting a new 52-week high.  APRO’s performance has been decent over the past year. Since May 2004 APRO has grown steadily and has especially picked up more steam in the past two months.

While recent quarterly returns were not exactly sparkling, coming mergers paint a better picture for the near future. So view APRO as a long-term play. This stock will probably not hit $40.00 anytime soon, but a combination of two wealth-building factors and the strong advancement of this company make for a solid play.

Investment Play #3
A good gold stock is ideal for managing risk by exercising discipline and diversification for solid long term gains. This play offers a higher probability of risk, but with some patience, which should pay off handsomely in the long run. For one of the more volatile, riskier gold stocks in the bull market, try Placer Dome. It’s a Canadian gold mining company that’s traded in the U.S. under PDG. From September 1, 2004, to the end of the year, the stock rose 33% before settling back down a bit in early 2005. But the longer term prospects for the stock are strong. By the end of 2005, the company will produce 3.7 million ounces of gold, which is an increase over 2004’s 3.6 million ounces. Placer has mines in Montana (in the U.S.), Tanzania, and Australia that have seen an increase in milling, which has led to a significant spike in the company’s production.

Investment Play #4
One way to make yourself stand out from the herd is to strike out on your own and tread where other investors fear to go. What they don’t realize is that you’ve done your homework (the “money management” key) and you know the place you are going is primed for growth. Why not China? There’s no doubt about it: China is the world’s fastest growing economy. But China’s growth is no different from that of any other emerging country. Take the United States, for instance. The U.S. experienced tremendous economic growth in the 1800’s, mostly attributed to the influx of immigrants.     

Now China is doing the same thing, except there are two differences. One, the Chinese are expanding internally simply because of the huge birth rate. Two, China is growing twice as fast as the U.S. did back in the 1800’s. Despite the government’s efforts to decrease the number of births through its “one child per family” program, China’s population has still increased by 141 million people since 1990. China is not dependent on any outside labor to grow its economy. It has plenty of workers.

And now we’re seeing a migration of these workers from the rural to urban areas, where labor is in higher demand. The number of people living in rural areas fell to 61% in 2002. That’s down from 79% in 1982 and 88% in 1952. This is exactly what happened to the U.S. from the 1800’s through the 1970’s. In 1800, 94% of the US population lived in rural areas. But by 1900 the percentage fell to 60%. And in the 1970’s it fell to a record low of 26%. Because the Chinese rural population is decreasing at a faster rate than it did in the US, we could see more than half of China’s people living in urban neighborhoods by the end of the decade.

Let’s put this into perspective: China’s rural population decreased 13 million in 2002. During the same period, the Chinese urban population grew roughly 20 million, which has been the average growth since 1996. That means China has to build a Philadelphia each month to accommodate this migration. And it may be doing just that.

So where to look for a good long-term growth play? How about the Chinese energy sector? China’s massive population and constantly expanding economy is straining the country’s energy producers, causing somewhat regular power shortages.  Energy prices are skyrocketing as well, especially in coal, causing inefficient power producers to drop out of the game. What does this mean? The electrical sector will be growing by leaps and bounds for years as the country struggles to correct its supply and demand imbalance. A good selection pick in this sector is Huaneng Power International (HNP:NYSE). Huaneng is a large and efficient Chinese energy producer, and it’s not yet fully valued.  The company’s energy production increased 22% in 2004 but shares are trading for only 13 times the expected return on 2005 earnings.  And Huaneng has a 4% annual yield, so you can try and accumulate HNP stock against market weaknesses.

Investment Play #5
Yet another poker principle calls for an investment that speaks to “you,” i.e. one that you’ll feel comfortable with. Here’s a vote for real estate. Throughout 2004, real estate values have ballooned in some areas of the United States. The cost of a house in Maryland, for example, increased by 22.3% in the past 12 months. And Maryland only ranked sixth among the 50 states and the District of Columbia. The national average was 13% for the year ending September 30, a whopping 4.6% during the third quarter.  Real estate in Nevada appreciated 35%, 28.3% in Hawaii and 27.2% in California. But there were laggards, too. Texas only chalked up average gains of 3.8%, Indiana 4%. In 2005, we will see a continuation of the trend. Prime growth areas will be the suburban belts along I-95 from Boston down to Florida, with flashpoints in the satellite suburbs between major metropolitan centers. With mortgage rates fluctuating between 5.3% and 6.2% depending on demand, average real estate appreciation should be around 11%, with sustained gains around 18% in the prime markets. 

The most convenient way to profit from the continuing real estate boom is holding stock in a great real estate investment trust (REIT’s). Take a close look at Impac Mortgage Holdings (IMH:NYSE) and Anthracite Capital (AHR:NYSE). Both pay hefty quarterly dividends and accordingly have some interesting price dynamics that play out between the announcement of dividend payouts and the ex-dividend dates. What goes for real estate goes twice for the stock market. If you accept the reality that stocks can increase and decrease in value and take the most basic precautions – such as establishing and observing trailing stops – you can and ought to take advantage of all the potential the market offers.

So let the Chicken Little’s cluck and run for cover at every shadow. With a basic grasp of risk management, true investors should follow Peter Lynch in his assessment of the mainstream’s recurring phobias as “noise”… and make the most of what the real estate market has to offer.

Investment Play #6

Nowhere is the probability issue out into play more than it is in the oil and gas sector. With oil prices reaching north of $50, and with natural gas and energy markets reporting strong growth, there is no shortage of investors who view the oil and gas sector as a bull market right now. After all, many of the largest, most profitable companies in the world – including Exxon, Mobil and Shell Oil, are oil companies.

Such companies performed especially well in 2004, as evidenced by the 26% gains earned by the Standard & Poor’s 500 energy sector index. Earnings growth in the fourth quarter of 2004 was expected to reach 68%, following 46% growth in the third quarter. True, the skyrocketing cost of crude oil, gasoline and other energy products produced some real Maalox moments in 2004. The Dow Jones index landed with a thud when oil prices hit $55 per barrel, but rallied when petroleum prices abated. Now, energy experts anticipate oil prices remaining high though possibly below their peaks through most of 2005. Further analyst estimates for the price of one barrel of oil in 2005 are about $40 per barrel (true, not the $55 per barrel we saw earlier this year, but still high historically). FirstCall estimates that oil prices are now trading at a level over 80% higher than they were 15 months ago.

Two top-rated oil & energy stocks that were given “A” ratings by Schwab Equity in late 2004 were Tesoro Petroleum (TSO:NYSE) at 97.7%, an oil and gas refining, marketing and transportation firm; and Hydril (HYDL:NASDAQ), an oil and gas equipment company. Tesero is a strong buy on most analyst ledgers, and the stock has continued a strong run-up in 2005; up 10 percent through mid-February. Hydril tells a similar story, leaping from the mid 40’s in early January, 2005, to $57 by mid-February. One humorous note on the stock’s Yahoo Finance message board entitled “I’ve had it with this dog” earned the reply “Why? Did you short it?”

Better Poker Skills, Greater Profits
If you pull those key elements together – especially the parts about understanding human behavior, understanding money management, and knowing yourself and your acceptable levels of risk, you’re fully equipped to succeed in poker and in investing. These are the cornerstones of what eventually will become your decision-making process; i.e. deciding whether to raise, fold, buy or sell. Legendary mutual fund guru Peter Lynch had it right. The former Fidelity Magellan mutual fund manager once said, “An investment is simply a gamble in which you’ve managed to tilt the odds in your favor.”

Just knowing that the key to success in any risk venture, be it poker, stock investing, or running for president, is “tilting the odds in your favor.” How to do just that, and how to apply the skills champion poker players use to hone your own investing skills and to use those lessons to create more wealth than you could have ever imagined; to see opportunity where others don’t, is all right in front of you. All you have to do is study the cards and study the players. The rest is just counting your money.