Monday, March 28, 2011

Alexa Ranking: Visitors and pageviews up 50% over the quarter

Page load trend for which can be compared to my other post on the ranking and pageviews . The growth in visitors has dropped off a bit because I haven't blogged as much and haven't posted new material regularly.

According to my last post on ranking and page views(3rd February 2011), the Alexa ranking was 6,047,422 and as of yesterday, it is currently 6,031,033

My blog's ranking has improved by 16,389. That means that  this blog has recieved more web traffic than 16,389 other websites that previously ranked higher than mine, over the past two months. Netcraft's statistic from 2008 indicates that over 182 million websites exist. 

So my lame ranking of 6,031,033 could have been a lamer ranking of 182,000,000 lol ; )

So which sites are the top sites?
  1. Google
  2. Facebook
  3. Youtube
  4. Yahoo
  5. Live
  6. Baidu
  7. Wikipedia
  8. Blogger
  9. MSN
  10. Tencent
  11. Twitter
Google is a great search engine. It's been pulling up my blog onto the first page on a few web search phrases and that has contributed to the page view increases. I've also noticed that some visitors read up to 10 articles/posts before leaving.

In terms of SEO (search engine optimisation), I can surmise (because I'm not a technical SEO guru) that the increase in traffic is due to:
  • The amount of articles I have written increasing
  • Some of the articles I wrote have utilised "How to" and "What is" in the title of the article
  • The visitors from other blogs who have me on their blogroll (thanks to and for listing my link on their blogrolls)
  • Article content relevant to the blog title (Smart Money Guide) although I have strayed a bit from posting on purely financial and pf matters. My ravenous stomach has resulted in me churning out a lot of food posts recently
  • Regularly posting articles with good, informative content will ensure that visitors read a few pages before leaving and ensuring that they return later to check for new articles (this reduces the 'bounce' factor which is visitors googling, landing on the relevant page and then exiting without reading anything else)
  • Having a lot of images and photos that have been labelled properly prior to uploading will ensure that your images are picked up by Google's crawlers and end up in image search results, bringing traffic to your blog

Friday, March 25, 2011

Flying Fish: The restaurant, review and pictures

North Sydney just before reaching the Harbour Bridge, sunset was unbelievably fiery and gorgeous.
Restaurants boasting of harbourside or river views are such a waste at night. During the day, the views are stunning but at night, this is what we see at the wharf just outside Flying Fish. You can just barely see the Harbour Bridge in the distance:

View from Flying Fish wharf at night- not really a view...
Parking is a nightmare. We eventually decided on the valet parking at the location ($25) but if you want to keep running out to renew the 2hr parking ticket because the dining experience could span five hours, feel free to park on the street at $5 or so every two hours. Our friend had to rush out every two hours three times before we were finished for the night.

You can order individual dishes or you can choose the Tasting($110pp) or Degustation($150pp) menu. We settled on the degustation menu and this is what you get for the degustation menu:
Seared yellow fin tuna with ruby red grapefruit, sweet pork crackling and black pepper caramel - my favourite dish!!

Confit of Petuna ocean trout with pea and black sesame mousse, puffed quinoa and tangerine oil - my second favourite!
Crisp soft shell crab with black pepper curry leaf sauce, crispy shallots and coconut salad: a bit bland but then I have a weakness for soft shell crab with green mango salad aka the Thai way
Left: Pan roasted hapuka (fish) with hazelnut, white balsamic potato, Pantelleria capers & beurre noisette- the fish was incredibly tender and the potatoes looked like they had been tortured with a melon scoop since they were perfectly spherical. There was a single grape that had been peeled and cooked and it was exquisite, makes me want to denude all my grapes now lol

Right: The palate cleanser: Too sour for two of our friends but just perfect for me. The lime sorbet was so tangy and the pomegranates & jelly balanced out the sourness.

Wagyu Mb7+sirloin & braised short rib with smoked leek, king brown mushroom, beetroot and horseradish: The two sauces, smoked leek and wagyu was incredibly delicious. I could have give the chewy mushroom a miss and I gave the braised shredded beef away because it was just too rich in taste.

Banana tart with salted peanut semi freddo, popcorn and banana curd: The tart is good but I would have preferred a huge piece of semi fredo and lashings of the crumbled popcorn. Or a big bowl of banana curd -YUM!

"Taste and Textures of Apples": Apples in several different ways, apple puree, apply jelly, apple mousse, apple sorbet, apple in rose water and some type of cake with cream cheese. The apple bits were so GOOD!! I couldn't eat the apple in rose water, it's too controversial for my taste buds and the sliver of cake with cream cheese was the odd one out. The sorbet is yummy!!

The coffee was beautifully frothy and creamy. The rock sugar was in little packets- I liked that because it gives the impression of being hygienic
Petit fours: wasted because I was sooo full already ;_; full that I ended up with a stomach ache from over indulging!
Hand cut chips with delectably flavouring: A bit soft and I would have like them a bit crispier but it reminded us of the mamee noodle snack sachet that you sprinkle on the noodles - fingerlickin' good!
The interior. So pretty. The lights were dangling like little stars in the sky. They look like quartz rock with inserted lights, dangling from the ceiling.

I'd go back again to Flying Fish but next time, I know what I want to order larger serving sizes of. It was a great night and now, back to the kitchen again for some more food preparation for our dinner party tonight :)

Thursday, March 24, 2011

Entertaining at home

Friday night dining out

I've got a huge weekend coming. Busy!! It's Friday and that's my favourite day of the week :)

To cap off my favourite day, we have a booking at Flying Fish Restaurant & Bar tonight. Peter Kuruvita is renowned for his seafood dishes and I'm really looking forward to it. I'll eventually write up a post on fine dining in Sydney soon because all those luscious food photos are really starting to pile up.

If you're a foodie, a gastronomist or into gastronomy then continue reading. If you're just a steak and three veg kind of person, then I'll be boring you to tears.

Saturday dinner preparations

How often do you entertain at home? It requires a lot of planning and in the past, when I haven't planned beforehand and stocked up on some of the ingredients, it becomes a nightmare to prepare on the day.

A few important things I've learnt to prepare:

* Plan the menu
* Plan the timing of the food preparations and the cooking
* Don't try to cook all the dishes on the stove OR try to cook all the dishes in the oven - I've tried to cook three dishes back to back in the oven and it's a nightmare with the temperature either too hot for one dish and needing to wait for the temperature to drop for the second dish
* Have nibblies on hand, so that if you're running late with the dishes, those who are starving can snack
* Try not to test drive all your new recipes or you'll be very stressed
* Have some dishes that you can prepare beforehand and keep in the fridge

I've outlined a menu that I've planned to cook. It's a bring-a-dish do, because it would be torture having to cook for a lot of friends without any help and if it's not bring-a-dish then I don't know who would put their hands up to host.

* Chips & biscuits
* Crackers with brie or roasted chilli capsicum dip

* Leafy salad
* Potato salad (trialing a new recipe so that could be a hit & miss)
* Drunken & bruised salad (an Alvin Quah ex-Masterchef contestant recipe!)
* Baked salmon with teriyaki sauce, ginger and shallots
* Chicken middle cut wings marinated three ways (sweet chilli, pepper & cajun style, honey & soy)
NB: Having chosen two oven baked dishes is not ideal but I'm not in a stir fry mood

* Coconut & butter cake with passionfruit icing (I heart passionfruits)
* Fruit salad
* Mango sorbet

Sunday dinner preparations

I should really take it easy on the weekends... keep telling myself that but then I keep flouting that advice to myself...
I've been meaning to try some of Adam Liaw's recipe (Masterchef winner)...his Angry Bird dish:

* Adam Liaw's Angry Bird Recipe (a Korean dish called Bul Dak)
* Honey, soy and hoi sin sauce pork rib marinade
* White chocolate and berry scones

Decadently sublime recipe for coconut and butter cake with passionfruit icing

 If you love butter cakes like I do then you'll love this cake. It is wickedly creamy and the passionfruit icing is *SO* good! I've adapted a Karen Martini recipe. Of the few recipes that I've tried from Martini, every single one of them has been spot on and because of that, I'm sure that she's tested them.

It's so simple to make as well so if you love butter cakes and you love passionfruit then you have to try this. Unfortunately I had the cravings for this passionfruit butter cake when each passionfruit is $1.30 each! Doh...

125ml milk
80g plain yoghurt
1 1/2 tsp vanilla extract
250g plain flour
1 1/2 tsp baking powder
1/2 tsp bicarbonate soda
1/4 tsp salt
120g dessicated coconut
130g unsalted butter
200g caster sugar
3 large eggs

Passionfruit icing:
150g unsalted butter, softened
350g pure icing sugar, sifted
5 passionfruit, strain the juice from the pulp to separate into two bowls

Steps for cake:
  1. Preheat oven to 180C fan forced (200C conventional). Grease and line a 25cm round cake tin
  2. In a bowl, combine milk, yoghurt and vanilla.
  3. In a separate bowl, sift flour, baking powder, bicarbonate soda and salt together then add coconut
  4. Using an electric mixer with a whisk attachment, beat butter and caster sugar together until pale and fluffy. Add eggs one at a time. Then in alternating small batches, add milk mixture and flour mixture, blending well after each addition
  5. Pour batter into tin and bake for 35-40 mins until a skewer inserted into the middle of the cake comes out clean. 
  6. Allow cake to cool in the tin on a wire rack for 20 minutes
Steps for icing:
  1. Beat butter with whisk attachment in an electric mixer, add icing sugar and beat to combine, add the passionfruit juice and mix thoroughly
  2. Cut the cooled cake in half and spread some of the icing in the center and icing on the top
  3. Garnish the top icing with the passionfruit pulp
Autumn gardening

We planted some carnation seeds back in Spring last year and have been reaping flowers for the past two months. The carnation plants just keeps blooming every single week : ) Ideally you should cut the blooms from the plant so that they keep flowering. Check to see if there are any new shoots on the stems and cut the bloom just above the new shoots so that the plant can keep growing and blooming.

My favourite colour out of my limited range would be the egg yolk coloured carnation with the pink edging. Although I do love the white one as well with the streaks of vivid red. Then the light pink and the deep pink. If you love gardening and plants, then Autumn and Winter is a great time for planting bulbs so that they can bloom for Spring.

I have gorgeous irises and daffodil bulbs which I've got to plant soon. See how beautiful the carnations are in my clear vase: 


Thursday, March 10, 2011

Is technical or fundamental analysis a load of bull or bear crap?

One of the blog that I read occasionally recently wrote a post lambasting stock market technical analysis as a "load of bull crap and bear crap".

Just because someone hasn't found a trading technique that's satisfying them in making them thousands or millions of dollars in profit or whatever they're seeking to gain, doesn't mean they should just write something off as crap. Just because a technique hasn't worked for you doesn't mean it's a bunch of crap.

Have you ever heard of the phrase self fulfilling prophecy?

This is an important concept and can be applied to your own personal life and also to your investment life. In Wikipedia, self fulfilling prophecy is defined as,
A self-fulfilling prophecy is a prediction that directly or indirectly causes itself to become true, by the very terms of the prophecy itself, due to positive feedback between belief and behavior.
If you tell a child that they are smart and will grow up to be successful, there's a greater possibility that the child will grow up into your expectations of them. If however, you tell them every day that they're dumb, stupid, useless and will amount to nothing, then there's a higher chance that they will grow into that type of person (unless their character is defiant enough to prove your wrong).

How does self fulfilling prophecies affect technical or fundamental analysis (known as TA and FA)?

Stock prices aren't insular, as such, technical or fundamental analysis does not work perfectly in pricing a stock. You can churn out all the financial ratios, analyse everything you want, and or apply technical analysis and find out the support and resistance points blah blah blah - then you draw a fully informed conclusion that the stock that you want to trade or invest in is worth $X but the market doesn't price the stock at $X just because technically the stock should be valued at $X.

Instead, the stock could spike beyond $X, exceeding your expectations or they can drop below $X, disappointing you. Why? Because the market moves as a result of several thousands or millions of investors out there with different expectations at what $X should be. Also, when a group of bearish investors outnumber a group of bullish investors, the the market will generally swing towards the bearish end. Investors and traders expectations change from day to day. This is why there's stock market volatility.

FA is good for determining what the value of the stock should be. TA is commonly used by traders to predict roughly how the stock is trending, whether up, down or sideways.

If you perform your FA due diligence and then trade using TA, why does the stock that you're analysing differ from your expectations that it should be $X?

Because that stock isn't insulated from the market. If FA and TA points to the stock being priced at $X but then tomorrow, President Barack Obama makes a sudden announcement that the US has been incorrectly accounting for the deficit. That instead of a $11 trillion dollar national deficit, the national deficit is actually $20 trillion, then expectations of the whole market in the US and everywhere around the world will turn bearish. Because of negative expectations, people behave negatively, they cut their spending, then businesses cut staff hours, then the government collects less tax revenue and cuts back on infrastructure and budgetary spending, which sees government employees made redundant and so on and so on. The stockmarket crashes and the negative expectation becomes a self fulfilling prophecy. It works conversely as well.

For example, if I decided to trade in CCL shares at $11.82 cents each and the stock market had a bearish month, causing CCL to drop to $10, does that mean that fundamental analysis is a load of crap? No. does that mean technical analysis is a load of crap? No.

Both FA and TA have evolved over the decades as a measure of valuing the price of a stock. TA evolved as a method in predicting price movements, particular for support or resistance. If enough people believe in those methods, then those methods will be influential on the stock market. If there are a lot of stock market traders who use TA thinks that CCL will find support at $10, they'll submit buy orders at $10 and then the moment that CCL drops to $10, traders activate their buy orders creating a floor. Large buy orders will indicate demand and CCL's price doesn't drop below $10. Again - a self fulfilling prophecy.

All stock prices are affected by several factors. With FA, you can identify a good stock that can survive recessions and any difficulties so that once the economy picks up again, they'll be back into a growing, profitable business again. TA is good as a general guildline to trade with but does not help in identifying which stock to buy and hold for the long term.

TA is superficial. If there's enough traders around using TA, then the stock price will behave roughly in line with expectations.

Basic technical analysis in action:

Technical analysis is also known as charting. Why? Because you use a bunch of charts and statistics to draw conclusions and trend directions for stock price.

Chartists use such measures as: Simple/exponential/weighted moving averages, Bollinger bands, volume analysis, stochastics, MACD, prices from open/high/low/close, line charts, candle charts, percentage change etc

You can have a perfect TA trading technique that makes you money regularly but if suddenly September 911 happened again and the stock market crashes - does that mean TA is rubbish? No.

TA is a rough guide, no matter what chartists' insist. Remember, share prices are not insular. They react to the entire market and if you just pay attention to your charts in performing TA without paying attention to the stockmarket (nationally and internationally) as a whole along with the general mood/behaviour of the population then you'll never know what hit you when your technical analysis fails.

Following on with the CCL example:

I've got a screenshot of CCL and drew in some rough support and resistance lines. This has some classic TA evident on the graph. This graph here demonstrates that chartists are around. CCL was $10.67 at its lowest point in June. In December, as the CCL stock price dropped, there would have been a bunch of buyers with buy orders to be excuted when CCL price reaches $10.67 or thereabouts. This creates a floor for CCL, meaning that in future, provided CCL doesn't get banned from sellling their drinks in China or India or where ever, then if CCL drops down again due to general market bearish behaviour, it's likely that once again, there will be a bunch of buyers waiting to buy around $10.67 again.

I've drawn in four resistance lines. They're all suppose to be green but I was too lazy to fix it up. For technical traders, they get twitchy when the stock price approaches any price resistance levels so they set their "sell" order at or just before those price resistance levels.

The current price is $11.80 If you bought today, provided there aren't any dramatic worldwide events or CCL didn't get banned from selling Coke in China, you would be looking at the following scenarios based on TA:

i) Buy at $11.80
ii) Market is bearish, potential loss is $11.80- $10.67 (floor price) per unit
iii) Market is bullish, potential sell order can be placed anywhere near any of the top three green resistance lines. Although the middle two green resistance lines have been reached a lot more frequently so as a TA, you would likely place a sell order close to those prices.
iv)CCL shares however has been generally trending sideways over the past 12 months. They're a blue chip stock though and if you're expecting capital gains like the ones investors got from Apple, VM Ware and Google then you're better off looking for a chart with good FA and an upward trajectory.

Along with those simplistic TA conclusions, TA will also look at volume and various other charts to analyse market demand. I personally prefer to start off all investments or trades with FA and then use TA, particularly the candlestick charts with the high/low/open/close prices on them or the simple line chart above. I also like to look at the 365 day price list with open/high/low/close prices. For intraday trades, buy and sell volumes are really useful. Although the biggest determinant of stock price movement is the general enconomy and the population's expectations.

The stock market reacts to future positive or negative expectations. All the FA and TA in the world won't predict the stock prices accurately which is why all the large investment banks, trading firms and hedge funds have economists to try and predict the general behaviour of the country. Or else they have contacts inside government organisations so that they know whether the Federal Reserves' Ben Bernanke or the RBA's Glen Steven will be raising or decreasing interest rates. Changing interest rates change consumer behaviours and as a result, that changes consumers' discretionary spending and this is what ultimately affects companies' bottom line, which affects their profits/expenses and ratios in the future and thus, their share price.

A question from one of the comments on that blog:

There is no one in the world who can perfectly predict how the stockmarket will react unless they're Barack Obama or Ben Bernanke for example (only because they control monetary policy which wields a lot of power and influence). Anyway, this is what someone wrote:
I have spoke (sic:spoken) to many people that claim they are millionaires from the stock market without disclosing how they did it. If you have made millions from the stock market please share your tactics here. What stocks would you recommend, what investment company (e-trade)? Do not answer if you haven't made millions in the stock market!
*The traders or investors who made millions from trading the stockmarket probably had just as much capital to start off with.
*Typically the millionaires from trading are the hedge funds and traders working for the investment banks, not the small investors who started off with $20,000 or whatever
*To amass capital gains of a few millions from just a few thousand dollars would mean trading frequently and as such, impossible to simply just "share" without including pages and pages of buy/sell history
*Why would millionaire traders "disclose" their entire strategy to you for free? What would they gain from you?
*They could recommend a great stock for you to buy today but that will be valid for today and today's environment. If you bought that 'great' stock today and then next week, Obama states that unemployment in the US has gone up to 15% and the sharemarket crash - who will you blame for the advice?? Will you tell them that it was poor advice?

In the long run, I've worked out that a simple buy and hold strategy works just as well as trading, if not better! Because of the 50% CGT tax deductions from holding a stock beyond 12 months and also holding the stock through interim and annual dividend periods means that I also get franking credits (although these are only applicable in Australia - I mention this because there are a several readers from America on this blog and I don't want to mislead you).

Related posts to stockmarket investing:
* Calculating break even for stock investing or trading
* Stock investing fundamentals and a slice of my portfolio
* Quiz to determine your risk profile
* Breakdown of my retirement asset
* Picking low hanging fruits first

Wednesday, March 9, 2011

Relationship & Money Agony Aunt: Bossy Kate de Brito

Relationship + money agony aunt: Bossy aka Kate de Brito

Bossy, an Aussie blogger, cross sections several sensitive personal finance topics that people can't really discuss with their family and friends and yet they need advice. She's like Australia's agony aunt on relationship + money. Not only that, the comments that she receives are funny, interesting or illuminating. Readers write in with their tortured scenarios and hope that Bossy and her illustrious readers will help them find a solution.

Read a few here of the personal finance orientated posts here:

Or you can read the quirkier blog posts on relationships, etiquette and social issues here:
There's almost five years worth of archived material there if you enjoyed reading any of those posts.

Forget about peak oil and the future, high fuel prices is here today.

Oil prices have spiked again due to the recent turmoils and uprising in Egypt and Libya. When I filled up my tank on the weekend, it took $71.76 before my thirsty car was satiated !! The shock and the horror o_O This will eventually mean I'll have to switch back to public transport again with the trains. 

I wouldn't be surprised if it will take $100 and more to fill up my tank before 20011 is out. I'm hoping it won't, but with the current turmoil close to Saudi Arabia...

Are countries around the world experiencing fuel price rises?

Or is it just Australia? It's difficult to say whether Woolworths and Coles have increased fuel prices because their supply cost has increased or because they need to maintain their margin due to their discount fuel vouchers that they offer to shoppers when a certain amount is spent at their supermarkets. 

Have you decided what you'll do if fuel prices becomes unaffordable?

For the fortunate few who live near public transport facilities (trains/buses/ferries), they can always substitute driving their cars and use public transport but for the unfortunate ones who do not have any nearby facilities, they'll need to make plans for what they plan to do if fuel becomes increasingly unaffordable. Fuel prices are up. Fresh food prices are up. Processed food prices are up. Electricity prices and gas prices have gone up beyond the CPI rate. 

What can the Reserve Bank of Australia do? 

Pretty much, nothing. They can try and increase interest rates but that will just cripple mortgage holders, cripple investment loans, cripple small businesses who have borrowed funds to run their businesses. The problem is that the RBA and their monetary policy is mainly used to control consumer spending and reduce discretionary spending. No matter how high they increase the interest rates, they can't control electricity, gas, food or fuel prices because they're necessities and as such, demand won't reduce simply because the RBA has raised interest rates.

What can you do to help yourself (and incidentally help the environment)?

There are a few things that you can do if you find yourself in a similar boat in terms of rising living costs:

* Plan your travels using public transport
* Don't waste food, plan your meals, check your pantry and don't overstock nor overbuy. Australians buy too much food and waste a lot of it unnecessarily
* Unplug anything that isn't being used because they draw power 
* Insulate your home, install blinds and or curtains to keep heat out during summer, and retain heat in winter
* Install solar panels and solar hot water systems

Tuesday, March 8, 2011

What is break even analysis? How you can use the concept in analysing share trades

What does "break even" mean?

For a company -> When total revenue or sales equals total expenses
In general -> When you haven't made a profit and you haven't made a loss

If you haven't got any overheads, fixed costs or transactional costs then break even is very simple - if you sell the item at whatever it cost you to buy that item in the first place then that's considered as breaking even. If you sell the item at a price more than what it cost you then that's a profit.

Once you have overheads, fixed or transactional costs, then it gets a bit more complex to calculate the price that you need to sell your items or goods at to break even and not incur losses.

Examples to illustrate

1) If you buy an iphone for $800 and then sell it to someone else for $900, then you've made a profit of $100. To break even, you need to sell the iphone for at least $800

2) What if you rented a market stall for $30, bought the iphone for $800? Then you need to sell the iphone for at least $830 to breakeven

3) What if you rented a market stall for $30, bought 45 iphones at $800 each then what is your break even? You would need to sell the iphones for at least $800.67 each to break even. The maths: [(45* $800)+30]/45 = $800.67 per unit to break even. If you can sell the iphones at a price greater than $800.67 then you'll be making a profit.

It's so simple, not widely understood but yet so relevant in all applications - whether you run a business, whether you invest or trade in stocks or anything that involves buying and selling to earn a profit.

How do I apply the concept of break even in share trading as a practical scenario?

To buy or sell my stocks, it costs me $19.95 each time. So if I were trading in stocks, it would cost me $39.90 (the maths: $19.95*2=$39.90) to buy and sell. $39.90 is what I consider my fixed costs and what I use to calculate for my break even analysis.

Break even formula for trading stocks:

Break even price to sell each stock at = (quantity bought * buy price per unit) + total buy and sell costs
                                                                 quantity bought

Example 1:
i) I buy 2000 units of Coca Cola Amatil Ltd (ASX:CCL) at $11.83/unit = $23,660
ii) My transactional costs to buy and sell is $19.95 each way, therefore a total of $39.90
iii) Calculating my break even costs:
($23,660+$39.90)/2000 = $11.85/unit
iv) Therefore I MUST sell my CCL stocks for at least $11.85/unit to break even.
If I sell for anything greater than $11.85/unit then I've made a profit, which is known as capital gains.

Although if you're going to engage in trading stocks, then you also need to work out the opportunity costs and weigh whether trading gains will exceed the other uses of your funds - this concept however will not be explored in this post because it deserves a post of its own.

Before I invest or trade in any stocks, I ALWAYS use the above calculation to see what potential profits or returns are there. With fixed transaction costs, such as $39.90 used in the example above, then the more stocks you buy, the lower your break even costs. Let me illustrate using the above example to compare. This next example will see me buying 1000 CCL stocks instead of 2000 CCL stocks.

Example 2:
i) I buy 1000 units of Coca Cola Amatil Ltd (ASX:CCL) at $11.83/unit = $11,830
ii) My transactional costs to buy and sell is $19.95 each way, therefore a total of $39.90
iii) Calculating my break even costs: ($11,830+$39.90)/1000 = $11.87/unit
iv) Therefore I MUST sell my CCL stocks for at least $11.87/unit to break even.

Comparing the above two examples with the only variable being the quantity of stock purchased:

i) Assuming buy and sell costs are the same at $19.95 each way, and $39.90 in total
ii) In example 1, if I  bought 2000 stocks @ $11.83/unit, break even would require me to sell my stocks at $11.85/unit
iii) In example 2, if I bought 1000 stocks @ $11.83/unit, break even would require me to sell my stocks at $11.87/unit

In example 1, it only requires an upward price movement of 2 cents/unit to break even whereas if I bought less as illustrated in example 2, then I would need an upward price movement of 4 cents/unit to breakeven.

You would need larger price volatility if your transaction costs is flat but you buy a smaller quantity of stock for trading. Larger price volatility always implies larger risks.

For those keen on the maths behind the typical break even analysis (screenshot from Wikipedia):

Using the official BE formula:
X =  TFC
     (P - V)

Where X= unit sales, TFC= total fixed costs, P=unit sale price, V=unit variable costs
Using the numbers from my example 2, from above: X=1000 units, TFC=$39.90 to buy and sell, P=unknown unit sell price, V=$11.83/unit of CCL stocks

Because our CCL (Coca Cola share price) break even sell price (P) is unknown the formula becomes:
i) 1000=   $39.90
ii) 1000(P-$11.83) = $39.90
iii) (P-$11.83) = $39.90
iv) P = $39.90  + $11.83
v) P = 0.399 + $11.83
vi) P = $11.87 to break even

The break even analysis applied in a business context:

The break even formula or concept is commonly applied in a business context, although it can be used in any situation that requires you to work out the point at which you incur no loss. Let's apply this break even formula to the iphone example from above, where P is the break even price that you need to sell each iphone at:
i) X =  TFC
         (P - V)
ii) 45 iphones = $30 market stall rental
                       (P - $800 cost per unit)
iii) P =       $30         + $800
            45 iphones
iv) Break even selling price per iphone would have to be $800.67 minimum

Thefore you must sell each iphone @ $800.67 each minimum if you want to break even, and more than that price if you want to make a profit.
Anyway, you can also apply that same concept to any of your investment calculations.

Tuesday, March 1, 2011

Wedding, weeding, gardening and zucchini plants

It takes a lot of effort and dedication to maintain a blog

What a crazy busy weekend. I didn't have time to blog. I was aiming for roughly three posts or articles each week but it does take a lot of effort to post regularly like that. That's probably why the bloggers with huge number of followers eventually quit their jobs to maintain their site (eg: Corporette - my favourite female blogger who blogs about fashion, lifestyle and working in New York's legal profession).

The weekend was flat out with swimming, an all day wedding to attend, gardening and the usual bunch of household chores that occupies the weekend.

Since I haven't had time to write about personal finance, I thought I'd post up some photos from the hectic weekend. I only had my Canon point and shoot camera with me so the images are rather blurry and not as sharp as they should be.

The wedding

A friend of mine got married on Saturday. It was warm but a beautiful day to get married. They were married at St Phillip's Anglican Church in Sydney - this is Australia's oldest parish and was originally built at the location in 1793. The current structure replaced the older structure in 1856. This is a snapshot of the church's interior:

Afterwards, the wedding reception was held at the QVB The Tea Room in Sydney:

The weeding and gardening

My parent's garden needed some weeding done big time so I helped with their garden. This is what hard, sweaty and back breaking work looks like, the before and after shots are below:

Even a spotty black and white butterfly couldn't resist the lure of the flowering mint plants:

The zucchini plants that my parents planted are flourishing:

Hope you enjoyed the photos. Our Autumn season has just started so no doubt there won't be anymore gorgeous blooms and summer fruit and vegetables any longer. Although rhubarb season will be coming around and there's nothing better than rhubarb and apple crumble. Or a rhubarb butter cake :)