Project Management ROI A Step by Step Guide for Measuring the Impact and ROI for Projects_9 pot

Protect Your Wealth from the Ravages of Inflation

119
New Thinking in Technical Analysis: Trading Models from the Masters, by Rick
Bensignor (editor) (Bloomberg Press, 2000).
Practical Speculation, by Victor Niederhoffer and Laurel Kenner (Wiley, 2005).
Psychology of Trading: Tools and Techniques for Minding the Markets, The, by
Brett N. Steenbarger (Wiley, 2002).
Reminiscences of a Stock Operator, by Edwin Lefèvre and Roger Lowenstein
(Wiley, 2006).
Rules of the Trade: Indispensable Insights for Online Profits, by David S. Nassar
(McGraw-Hill, 2001).
Running Money: Hedge Fund Honchos, Monster Markets and My Hunt for the Big
Score, by Andy Kessler (HarperCollins, 2004).
Schwager on Futures: Fundamental Analysis, by Steven C. Turner and Jack D.
Schwager (Wiley, 1996).
Schwager on Futures: Technical Analysis, by Jack D. Schwager (Wiley, 1997).
Smarter Trading: Improving Performance in Changing Markets, by Perry Kauf-
man (McGraw-Hill, 1995).
Stock Market Wizards: Interviews with America’s Top Stock Traders, by Jack D.
Schwager (Marketplace Books, 2008).
Strategic Electronic Day Trader, The, by Robert Deel (Wiley, 2000).
Trade Your Way to Financial Freedom, by Van K. Tharp (McGraw-Hill, 2006).
Trader Vic: Methods of a Wall Street Master, by Victor Sperandeo (Wiley, 1993).
Trading in the Zone: Master the Market with Confidence, Discipline and a Win-
ning Attitude, by Mark Douglas (Prentice Hall, 2001).
Trading Systems That Work: Building and Evaluating Effective Trading Systems, by
Thomas Stridsman (McGraw-Hill, 2000).
Trend Following: Learn to Make Millions in Up or Down Markets, by Michael W.
Covel (FT Press, 2009).
Way of the Turtle: The Secret Methods that Turned Ordinary People into Legen-

dary Traders, The, by Curtis Faith (McGraw-Hill, 2007).
What Works in Online Trading, by Mark Etzkorn (Wiley, 2001).
When Genius Failed: The Rise and Fall of Long-Term Capital Management, by
Roger Lowenstein (Random House Trade Paperbacks, 2001).
Recommended Reading

120
Money and Investing
Contrarian Investing: Buy and Sell When Others Won't and Make Money Doing It,
by Anthony Gallea and William Patalon III (Prentice Hall, 1999).
Fiat Paper Money, by Ralph T. Foster (Ralph T. Foster, 2008).
Guerrilla Investing: Winning Strategies for Beating the Wall Street Professionals, by
Peter Siris (Taylor Trade Publishing, 2000).
Investing for Dummies, Fifth Edition, by Eric Tyson (Wiley, 2008).
Investment Gurus: A Road Map to Wealth from the World’s Best Money Manag-
ers, by Peter J. Tanous (Prentice Hall, 1999).
Money Game, The, by Adam Smith (Vintage, 1976).
Money Masters, The, by John Train (HarperBusiness, 1994).
New Rules of Money: 88 Simple Strategies for Financial Success Today, The, by
Ric Edelman (Collins, 1999).
Pied Pipers of Wall Street: How Analysts Sell You Down the River, The, by Ben-
jamin Mark Cole (Bloomberg Press, 2001).
Safe Strategies for Financial Freedom, by Van K. Tharp, D. R. Barton, Jr., and
Steve Sjuggerud (McGraw-Hill, 2004).
Miscellaneous
Art of War, The, by Sun Tzu (translated by Samuel Griffith) (Oxford Univer-
sity Press, 1963).
Black Swan: The Impact of the Highly Improbable, The, by Nassim Nicholas
Taleb (Random House, 2007).
Blink: The Power of Thinking Without Thinking, by Malcolm Gladwell (Back Bay

Books, 2007).
Labyrinths of Reason: Paradox, Puzzles and the Frailty of Knowledge, by William
Poundstone (Anchor, 1989).
Probability Without Tears: A Primer for Non-Mathematicians, by Derek Rown-
tree (Prentice Hall, 1984).
Way of The Warrior-Trader: The Financial Risk-Taker’s Guide to Samurai Courage,
Confidence and Discipline, The, by Richard D. McCall (McGraw-Hill, 1997).
Why Café, The, by John Strelecky (Aspen Light Publishing, 2011).
A P P E N D I X
B
Useful
Resources

While this list of resources may look a bit sparse, I’ve cut it down to only
the really useful resources I use all the time, rather than including a huge list
of everything to do with money and investing online.
Trading and Investments
pmkingtrading.com
finance.yahoo.com
Precious Metals
www.goldmoney.com
globalgold.ch
www.perthmint.com.au
bullionvault.com
Useful Resources

122
Brokers
interactivebrokers.com
Economics and Statistics

www.shadowstats.com
www.tradingeconomics.com
www.economist.com
Currency Interest Rates and Consumer
Price Indexes
AUD: www.abs.gov.au
CAD: www.statcan.gc.ca
CHF: www.bfs.admin.ch
EUR: epp.eurostat.ec.europa.eu
GBP: www.statistics.gov.uk
HKD: www.censtatd.gov.hk
JPY: www.e-stat.go.jp
NZD: www.rbnz.govt.nz
SEK: www.scb.se
USD: www.bls.gov
Products
qmatix.com
tradingblox.com
office.microsoft.com


I
Index
A
Acceptable real rate of return, 51
Assets
definition, 2
increase in, 5
Australian dollar, 53, 54, 110
capital allocation, 55

currency holdings after
purchase, 56
FX account
after rebalancing, 61
ideal and actual allocations, 60
inflation rate, 53
interest rate, 53
positive real interest rate
environment, 54
real rate of return, 53
B
Balance sheet
definition, 2
Miss Borderline, 3
Mr. and Mrs. Fit, 4
Mr. and Mrs. Unfit, 2
Bank, definition of, 48
Base currency, 57, 58
Basket of commodities, 19
Benchmark rate, 54
British pound, 53, 110
capital allocation, 55
currency holdings after
purchase, 56
FX account
after rebalancing, 61
ideal and actual allocations
of, 60
inflation rate, 53
interest rate, 53

positive real interest rate
environment, 54
real rate of return, 53
Brokerage account, 45
Bullion Vault Company, 44
Buy-and-hold strategy, 110–112
C
CAGR. See Compound annual
growth rate
Canadian dollar, 53, 110
capital allocation, 55
currency holdings after
purchase, 56
FX account
after rebalancing, 61
ideal and actual allocations
of, 60
inflation rate, 53
Index

124
interest rate, 53
positive real interest rate
environment, 54
real rate of return, 53
Capital
allocation, for currencies, 55
gains, 46
gains tax, 45
implementation of, 14

objectives and types, 14
Cash flow statement, 6
expenses, reduction of, 9
income, increase in, 8
Miss Borderline, 7
Mr. and Mrs. Fit, 7
Mr. and Mrs. Unfit, 6
Cash rebalancing method, 57
Certificate of deposit (CD), 52
Compound annual growth rate
(CAGR), 16, 17, 71–73
Consumer Price Index (CPI), 24
Consumer Price Index for All Urban
Consumers (CPI-U), 15, 16
Counterfeiting, 22
CPI-U. See Consumer Price Index for
All Urban Consumers
Currency
allocation of 100,000 US dollars, 56
devaluation, 23, 49
real rate of return on, 53
rebalancing, 67
trading, peculiarities of, 58
types of, 53
units, supply of, 22
weighting, 55
D
DD. See Drawdown
Defunct currency, 113
Devaluation of currency. See

Currency, devaluation
Discretionary expenses, 9
Dollar cost averaging, 32, 111
Drawdown (DD), 30
Dreyfus (WisdomTree), 59
E
EFA
annual rebalancing of, 34
ETF allocation, 33
Emergency fund, 14, 39
creation, 108
establishment, Mr. & Mrs. Fit, 46
objective, 109
purchasing power protection, 39
alternative solution, 47
increasing emergency fund, 40
precious metals, investment
on, 41
ETFs. See Exchange-traded funds
Euro, 53, 110
capital allocation, 55
currency holdings after
purchase, 56
FX account
after rebalancing, 61
ideal and actual allocations
of, 60
inflation rate, 53
interest rate, 53
positive real interest rate

environment, 54
real rate of return, 53
Everbank, 57
Exchange-traded funds (ETFs), 15,
30, 59
allocation, 33
inverse fund, 88, 91, 92
liquid, 90, 91
noncorrelated, 90
ranked by volume, 88–90
rebalancing, 67
ultra-short fund, 92
Index

125
Expenses
discretionary, 9
mandatory, 9
reduction of, 7, 9
F
FARCE strategy, 111, 112
Fiat (by decree)
counter-feiting, 22
currency, 22
paper currency, 43, 45, 47
Financial fitness, 1, 13
achievement, 107
balance sheet, 2
cash flow statement, 6
meaning of, 1

Financial meltdown, 114
Financial nightmare, 10
Fiscal policy, 21, 22
Foreign currency, 52
Foreign exchange (FX) trade,
57–59
after rebalancing, 61
ideal and actual allocations, 60
G
Global Gold Company, 44
Gold (GLD)
Australian dollars, price in, 43
control, 110
dollar allocation, 63, 64
ETF recommendation, 62
GoldMoney, 44, 109, 113
investment on, 41
and oil ratio, 37
prices in dollars, 36
savings account funding, 109
standard, 22
vs. US dollar, 47
GoldMoney holdings, 45
H
"Hedonic quality adjustment”, 25
HELOC. See Home equity line of
credit
Holding. See GoldMoney holdings
Home equity line of credit (HELOC),
48, 108

Hong Kong dollar, 53, 110
capital allocation, 55
currency holdings after
purchase, 57
FX account
after rebalancing, 61
ideal and actual allocations, 60
inflation rate, 53
interest rate, 53
positive real interest rate
environment, 54
real rate of return, 53
I
IB. See Interactive brokers
Income
characteristics, 8
increase, 7, 8
Individual retirement account (IRA),
69
Inertia, 81
Inflation
Consumer Price Index, 24
definition, 15
financial fitness, 13
inevitability of, 22
MAR ratio, 35
negative real interest rates, 15
purchasing power, 15
rates, on currencies, 53
responsibility, 28

market performance, 30
Mr. and Mrs. Fit, seeking
financial advice, 29
single-currency problem, 26
Index

126
Inflation-proof emergency fund, 42
Interactive brokers (IB), 57
Interest rates, on currencies, 53
International currency, 109
Inverse bond funds, 61, 64
Inverse Treasury Bonds (TBT), 62,
64, 110
Investment account, 14
Investment account management,
69, 111
construction of investment, 70
FARCE avoidance, 77
IRA, 69
Mr. and Mrs. Fit
portfolio managers. See
Portfolio management
visit a casino, 75–77
risk adjustment, 70
risk and return measurement, 70
CAGR calculation, 71, 72
drawdown (DD)
percentage, 73
MAR ratio, 73

performance achievement, 74
periodic value, 73
return value, 71
uncontrolled risk, 74
risk minimization, 75
ROI, 75
trading vs. investment, 78
annual rebalancing, 83, 84
buy and hold investor, 79
entry signal, 81, 82
exit strategy, 78, 82, 83
instrument filter, 80
market selection, 79
position-sizing method, 82
rebalancing portfolio, 78
setup conditions, 81
six components, 78
trend capturing
2% annual fee, 84, 85
average true range (ATR), 94,
96, 97
capital efficiency, 99
exit strategy, 101–103
financial spending, 86
instrument filter (see
Exchange-traded funds)
market selection, 88
NLV, 97, 98
no annual fee, 85–87
risk per trade, 100, 101

risk per share calculation, 98
setup condition, 93
true range, 94
volatility, 98
XLQ, 97
Investment portfolio ETFs, 113
iShares Trust Barclays 20+ Year
Treasury Bond Fund, 62
J
Japanese yen, 53, 110
capital allocation, 55
currency holdings after
purchase, 57
FX account
after rebalancing, 61
ideal and actual allocations, 60
inflation rate, 53
interest rate, 53
positive real interest rate
environment, 54
real rate of return, 53
L
Liabilities
decrease in, 5
definition, 2
Liquidity, migration of, 113
Low/negative real interest rate
environment, 61
M
Managed Account Reports (MARs)

ratio, 31, 35
Index

127
Mandatory expenses, 9
Market performance, 30
Momentum, 81
Monetary policy, 21
Money supply, factors affecting, 22
N
Negative net worth, 2
Negative real interest rate
environment, 52, 54, 61
reduction in, 15
Negative real rate of return, 26
Net capital gain, 45
Net cash flow calculation, 6
Net liquidation value (NLV), 97, 98
Net worth, 2
New Zealand dollar, 53, 110
capital allocation, 55
currency holdings after
purchase, 57
FX account
after rebalancing, 61
ideal and actual
allocations, 60
inflation rate, 53
interest rate, 53
positive real interest rate

environment, 55
real rate of return, 53
P
Palladium (PALL)
control, 110
dollar allocation, 63, 64
ETF recommendation, 62
investment on, 41
savings account funding, 109
Passive income, 8
Periodic rebalancing, 35
Perth Mint, 44
Platinum (PPLT)
control, 110
dollar allocation, 64
ETF recommendation, 62
investment on, 41
savings account funding, 109
Portfolio management
brokerage account, 104, 105
ETF and poor performance, 104
skills acquisition, 104
statistics, 105
Positive net worth, 2
Positive real interest rate
environment, 52, 54
Precious metal(s)
ETFs, 109
holdings of, 45
investment companies, 44

investment on, 41
emergency fund
establishment, of Mr. & Mrs.
Fit, 46
Gold vs. US dollar, 47
GoldMoney, working of, 45
inflation-proof emergency
fund, 42
practical problems, 43
owing, 112
Price inflation, 15, 21, 39
Procrastination, 107
brokers going out of business, 114
defunct currency, 113
emergency fund creation, 108
financial fitness achievement, 107
financial meltdown, 114
GoldMoney, 113
investment account management,
111
investment portfolio ETFs,
existence of, 113
owing precious metals, 112
precious metals ETFs, existence
of, 113
savings account, funding of, 109
Index

128
Purchasing power

emergency fund
maintenance, 40
protection, 39
reduction in, 15
Q
Quote currency, 58
R
Rake, 75
Random walk strategy, 117
Real rate of return
on currencies, 53
definition, 52
Rebalancing model curriencies vs.
ETFs, 67
Recommended reading, 117, 121
money and investment, 120
probability, 120
trading, 117–119
Recurring income, 9
Repeatable income, 9
Return on investment (ROI), 75
in TIP, 17
in TLT, 18
Risk-adjusted return, 66
Rydex (CurrencyShares), 59
S
S&P 500
index, 112
investment return, 30, 31
Savings account

funding of, 109
objective, 14
Savings and working capital, 51
acceptable real rate of return, 51
historical results, 65
low/negative real interest rate
environment, 61
positive real interest rate
environment, 54
currency trading, peculiarities
of, 58
Scalable income, 8
Silver (SLV)
control, 110
dollar allocation, 63, 64
ETF recommendation, 62
investment on, 41
savings account funding, 109
Single-currency problem, 26
Single-currency risk, 26
Smart money, 42
Sound investment, 31
SPY, 33
annual rebalancing of, 34
S&P 500 dollar cost averaging, 32
S&P 500 investment return, 31
Swedish krona, 53, 110
capital allocation, 55
currency holdings after
purchase, 57

FX account
after rebalancing, 61
ideal and actual allocations, 60
inflation rate, 53
interest rate, 53
positive real interest rate
environment, 55
real rate of return, 53
Swiss franc, 53, 110
capital allocation, 55
currency holdings after
purchase, 57
FX account
after rebalancing, 61
ideal and actual allocations, 60
inflation rate, 53
interest rate, 53
positive real interest rate
environment, 55
real rate of return, 53
Index

129
T
TBT, 62, 63
Time-for-money income, 8
TIP security. See Treasury Inflation
Protected (TIP) security
TLT, 33, 62, 63
annual rebalancing of, 34

return on investment in, 18
Trading Blox, 66
Treasury Inflation Protected (TIP)
security
ETF, 15, 16, 110
return on investment in, 17
savings and working capital, 62
US dollar allocation, 64
U
United States (US) dollar, 53, 64, 110
capital allocation, 55
currency holdings after
purchase, 57












FX account
after rebalancing, 61
ideal and actual allocations, 60
vs. Gold, 47
Index, 27

inflation rate, 53
interest rate, 53
positive real interest rate
environment, 55
real rate of return, 53
Useful online resources
consumer price index, 122
economics and statistics, 122
interactive brokers, 122
interest rate, currency, 122
precious metals, 121
products, 122
trading and investment, 121
Z
Zero percent tax bracket, 17