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L. A. Finance Los Angeles Chapter of AAII October 2012

How to Analyze a Stock

By William Parmenter, Ph.D., editor

ayne Thorp, CFA. talked on How to Analyze a Stock at the Oct. 20 meeting of the Los Angeles chapter

of the AAII at the Skirball Center.W He is the editor of Computerized Investing, which is available to AAII members. Thorp is a senior financial analyst, who has been with AAII for 15 years.

Thorp talked for about two and one-half hours, taking the morning program. His talk comprised a discussion of the basic stock analysis process. He gave a guided walk through a company analysis, in this case Cummins (CMI), the world’s largest engine company.

Thorp explained DuPont analysis (ratio analysis), and dividend and earnings valuation models. Finally, he offered sources of company and industry data, via websites, investors can use in their own analysis.

His talk was a model for future AAII presenters, in that it was well organized, he followed his power-point presentation of slides, and his presentation was offered to the audience in the form of a 28-page handout. Thorp was a fluent and comprehensible speaker, who was willing to pause for questions.

Investors face the problem of too much choice with 10,000 companies on U.S. exchanges and internationally. Investors can

stock exchanges, and another 10,000 available

narrow their choice by using stock screening with AAII’s Stock Investor Pro, a Window’s based screening tool. For example, select a criterion of only selecting stocks that had 15 percent growth over the last five years.

Stock Screening

The Stock Screen area of AAII’s website is the most popular and is by far the most useful area of the website. It is available at www.aaii/stockscreen. It has “tremendous value,” Thorp said. The stock screening area allows you to tap into the methodologies and styles of 50 investment notables, with monthly updating.

Stock screening is just a starting point. After selecting likely stocks, individual stocks need to be identified for more intensive analysis. That analysis proceeds top down, by looking progressively at the economy (accounting for most of stock movements), the industry (AAII identifies ten), and the stock (the most promising stock in the industry).

The truism that stocks are affected by economic cycles, and the vagaries of events, make it essential to take the political-economy into account in any stock analysis.

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Table of ContentsHow to Analzye a Stock….Wayne Thorp…..….p.1Latest Innovations in ETFs….Doug Fabian…....p.4Real Estate Opportunities…Todd Rubinstein.…p.5Market Psychology……Mark Skousen………...p.6Investor Education…………Don Gimpel…...…p.7Letters to and From the Editor………….…...…p.8In Memoriam….William Parmenter…..…….…p.9Orange Country Meeting Announcement.....…p. 10

The relationship between the stock and its industry and, by extension, the political-economy, make the subject of new information sources a perennial hot button topic. Early accurate info (even illegal inside info) is the currency of the realm for opportunistic traders.

The five websites for hot and topical info, that Thorp shared with the audience was, by itself, worth the price of admission.

The five websites, that Thorp characterized as “very useful” are: www.investopedia.com/universityreleases www.federalreserve.gov (focusing on the economy and its regions, giving current snapshots and prospective views).

www.dimensional.com/famafrench (incisive economic analysis articles, monthly).

www.forbes.com/economy (Forbes take on trends and the economy).

www.briefing.com/investor/calender/economies (analysis of the economy).

Economic Cycle

Different asset classes outperform, depending where the economy is in its cycle. According to Merrill Lynch’s Investment ‘Clock’ the cycle and the outperformers are as follows:

In recovery: high-yield bonds, small caps, early cycle sectors, munis, and value stocks. In boom: commodities, overseas equities, late cycle sectors, TIPs and large caps.In slowdown: short-term Treasuries, defensive sectors, high quality assets and long- term Treasuries.

According to IBD three major factors can create a rising stock price: a rising market (the most important factor), a rising sector, and a rising industry. IBD reports that approxi-mately 75 percent of stocks rise in a bull market

One of Thorp’s favorite websites is www.stockcharts.com., an excellent source of free stock, sector and industry charts. He likes point and figure charts, as they eliminate price

noise. The toolbar at the stockcharts site contains a ‘chart school’ (for education), and a ‘market message’ (market info, but not forecasting).

It is well to remember that sector and industry typologies are not standardized, so you get different info with different providers, such as Morningstar, Yahoo, Thompson-Reuters, and at least three other popular sites. So, to avoid confusion, make a choice and stick with it.

Turning to AAII’s Stock Investor Pro, Thorp said there is not a better stock screener out there. Windows-based, it costs $198 per year, covers 2,200 stocks and is updated weekly, getting its info feed from Thompson-Reuters. To get started one can try the free version that AAII offers, updated on the 15th of the month. The data base contains seven years of cumulated data.

The next version of Stock Investor Pro, version 4.0 is forthcoming, and will allow daily updates.

Ratio Analysis

To illustrate single company investment analysis, Thorp singled out Cummins (CMI), the world’s largest engine company (whose major competitors are Caterpillar, Mercedes and Volvo). It is a bit of an economic bellwether, as its sales are linked to infrastructure projects.

Thorp discussed the DuPont method of earnings and growth analysis, developed by DuPont Co. to determine the factors affecting return on equity. The components of return on

equity (ROE) are: net profit margin, total asset turnover and leverage (an equity multiplier).

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L.A. County Meeting Announcement

Sat. Nov. 17, 9 a.m to noon, at the Skirball Center, 2701 N. Sepulveda Blvd. Los Angeles, Ca., admission at the door $10. How Money Supply, Taxes and Regulation Impact the Stock Market and Prosperity by Simon Reeves, Ceo TideRock Financial; and Dumpster Diving in Europe, by Keith Fitz-Gerald, chairman of the Fitz-Gerald Group.

For other meeting announcements, and information, consult the AAII Los Angeles chapter website at: www.aaiilosangeles.org.

The DuPont method illustrates the interaction between pricing, sales volume, and leverage.

The first ratio Thorp introduced was net profit margin, defined as net income divided by sales revenue. Using Stock Investor Pro tables in all illustrations, Thorp pointed out Cummins net profit margin improved over the last seven years, and was more than double the industry average.

The second ratio was return on total assets (ROA), defined as net profit margin times asset turnover. (Or, as net income divided by total assets). High profits link to low asset turnover; and contrarily, low profits link to high asset turnover. At Cummins ROA doubled in seven years, and Cummins’ ROA beat the industry by a factor of eight in three-, five- and seven-year periods.

The third ratio was leverage, or equity multiplier, defined as average total assets divided by average shareholder equity. Cummins leverage improved over seven years, and it was only about a third of that of the industry.

Thorp pointed out a little debt is good, but a lot of debt is very bad, because in an economic downturn, the company may go under, or require massive restructuring, as happened in the case of the company Cracker Barrel.

The last ratio was return on equity (ROE), defined as net income divided by average total shareholder’s equity. Cummins ROE over seven years fluctuated but overall increased, and was at least double the industry.

Thorp noted that valuations are important because it keeps the investor from overpaying for assets. But valuations are difficult to do. Stock valuations are a lot more art than science.

The investor needs to adjust to the reality of the market. Cummins now has short term headwinds, but it should rebound when the global economy improves. In 2011 Cummins brought in $18 billion in revenue, and initially

forecast $20 billion in revenue in 2012, but had to revise it downward 15 percent to $17 billion.

Cummins is laying off workers and closing factories, reacting flexibly to a declining economy. Thorp concluded that Cummins is an excellent company, but now is not the time to buy it due to unfavorable market conditions, and more downside stock price potential than upside. Put Cummins on your watch list.

Additional Resources

Thorp’s handout included more sources for market data, company analysis and industry comparisons.

They include: www.reuters.com. This is the well known Reuters news service, reputed as one of the most authoritative, readable and concise. It is the service used by Fidelity, offering a brief summary daily, explaining the political-economic activity explaining the context of financial index movements.

www.investor.com., the service of MSN Money.

www.morningstar., Morningstar’s service. Morningstar is a well-known and often used mutual fund analysis and rating service.

www.standardandpoors.com., the service of the Standard and Poor, which produces the S&P 500, a gauge of 500 large cap companies in the U.S. economy, a bellwether for the economy, as it captures 75 percent of the value of U.S. equities.

www.aaii.com/stock-investor-pro is AAII’s Stock Investor Pro 4.0 (find out more at (800) 428-2244), priced at $198 per year, featuring weekly internet updates. Coverage is of 9,000 companies, with 2,000 data fields and 2,000 fields for screening.

Additional AAII investment resources include: investment e-books. Titles include: Investment Basics, Portfolio Building, and Stock Investing Strategies.

Thorp can be contacted at wayne@aaii.com, and www.twitter.com/aaii_ci.

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Latest Innovations in ETFs

By William Parmenter, Ph.D., editor

oug Fabian presented the Latest Innovations in the World of Exchange Traded Funds at the September 15

meeting of the Los Angeles Chapter of AAII at the Skirball Center. Fabian, well-known to the chapter, is the president of Fabian Wealth Strategies.

DThe development of ETFs has been

rapid, with 1,300 products, capitalized at $1.2 trillion and over 30 ETF providers now available. More than 100 new ETFs were launched in 2012.

Fabian categorized available ETFs in 13 categories, including: indexed based, sector, fixed income, dividend, region specific, commodity, currency and multi-asset. The number of categories is an indication of the versatility of ETFs.

Among the recent innovations in ETFs have been: asset allocation, equal weight indexes, fund of funds, actively managed, and low volatility.

Top ETFs by Assets and Inflows

The top three ETFs by total assets are: SPY (S&P500) at $103.7 billion; GLD (gold) at $65.7 billion; and VWO (Vanguard Emerging Markets) at $50.6 billion.

The top three ETFs by 2012 inflows are: VWO (Vanguard Emerging Markets) at $7.4 billion; LQD (iShares Investment Grade Corporate Bond) at $4.9 billion; and HYG (iShares High Yield Corporate Bond) at $3.7 billion. Dividends are currently a popular investment theme. VIG (Vanguard Dividend Appreciation) brought in $1.8 billion year to date.

Among bond ETFs BOND, Pimco’s Total Return is a clear winner, with $2.9 billion in assets, since its launch at the first of March, 2012. Since then it has gone from a base of 100

to 108, which is an increase of about 10 percent, with a very smooth up slope. It is an aggregate bond ETF with 737 holdings, and an expense ratio of .55 percent.

Fabian reviewed a number of other promising ETFs. Their ticker symbols were:IYLD (asset allocation) with a yield of 5.28 percent; AMLD (energy sector) with a yield of 6.18 percent; CVY (asset allocation, income) with a yield of 5.46 percent; SPLV (large cap equity), with a yield of 2.95 percent.

RJA (agricultural commodity pool) with an expense ratio of .75 percent; MOO (agricultural stocks) with 48 securities and an expense ratio of .53 percent; IEZ (energy) with an up and down price curve that has fluctuated between $59 in March, $43 in June and back up to $55 in September, 2012; EWS (Singapore, single country) that has appreciated over 25 percent in 2012; and GDXJ (gold mining stocks) that has disappointed in 2012 by dropping in price from $26 to $24.

The Fabian Top Five

Fabian’s top five ETFs for income, in a low-interest rate economy, where retirees are starved for income, are: DEM, BOND, IYLD, CVY and SPLV.

For those willing to take a flier on growth in a choppy market trending downward due to multiple stiff headwinds, Fabian has top five ETFs for growth: VWO, GLD, QQQ, IEZ and MOO.

For a complete list of ETFs, go to Fabian’s website at: www.fabianwealth.com.

Fabian’s trading tips for ETF investors were to be thoughtful and cautious about: position size, volume, price history and sell orders.

For an ETF report, which Fabian calls “the ultimate income strategy report” check out his Monday morning podcast, free at www.fabianwealth.com. By now it should be clear how to contact Fabian for more

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information and queries, yes, go to www.fabianwealth.com.

SoCal Real Estate Opportunities

By William Parmenter, Ph.D., editor

odd Rubinstein presented on the opportunities available for the small investor in real estate at the Sept. 15

meeting of the Los Angeles AAII chapter at the Skirball Center. He is a senior partner of the Rubenstein Group at Told Partners.

TThe goals of his talk was to: help

investors diversify their portfolios, to explain types of real estate, to review market trends and statistics. Further, he explained acquisition and investment analysis, pointed out pitfalls and common misperceptions, and commented on sourcing properties and opportunities.

Re diversifying, according to Rubenstein, 15 to 25 percent of your portfolio should be in real estate. That will improve your return on investment, and provide monthly income and an increase in equity.

Five Kinds of Real Estate Investments

Rubinstein identified five different kinds of real estate investments: 1) commercial, 2) single family, 3) residential income with two to four units, 4) apartment houses with five or more units, and 5) notes, mortgages and trust deeds.

The advantages of investing in apartment houses are well appreciated by investors. The advantages include: retirement income, economies of scale, and that increases in property value are not needed to generate a positive cash flow. Rents cover expenses, taxes and mortgage payments. Depreciation gives a tax advantage. Paying down the principal, and appreciation increases equity.

On apartment houses in Los Angeles the asking price declined between 2008 and 2012,

when it bumped up. Between 2010 and 2012 the sale price of apartment houses declined 17 percent, and then bounced up a little.

The 30-year fixed mortgage rate dropped from 6.2 percent in 2008 to a little under 4 percent in 2012. Meantime the 10-year Treasury note yield dropped from 4.7 percent to 1.8 percent. These trends tended to push money into real estate investments, as the cost of borrowing declined by 37 percent, and the yield on the 10-year note dropped 62 percent.

The attractive buying opportunity for real estate is highlighted by a 30-year fixed mortgage rate at 3.55 percent, just above the record low of 3.49 percent attained in July.

Comparing rates, the Federal Funds rate has been at near zero since March, 2009, while currently the 15-year mortgage rate is 1.8 percent, and the 30-year mortgage rate is 1.6 percent.

Vacancy, absorption and completion rates are all running at about 4 percent. The cap rate has been falling since the third quarter of 2009, and now stands at 6.3 percent, inching its way down to historic low rates last observed in 2007.

What are some other reasons to make investing in real estate attractive now? They would include: decreasing vacancy rates, increasing rental rates, a decrease in the homeownership rate, baby boomers are retiring, and GenY is avoiding homeownership.

Acquisition Criteria

Criteria for acquisition include location and condition of the property, return on investment, the cost of initial investment and financing, and going through the investment analysis.

To illustrate purchase costs and returns Rubenstein ran through several examples. Figures are appropriate for today’s market.

Example one, a short sale with a seller owned short payoff (pending escrow) of a Los Angeles property of 2,100 square feet with four

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units. Purchase price $245,000; down payment, 25 percent, i.e. $61,250; estimate of closing cost, $5,513; total cash investment $66,763; amount financed, $183,750; interest rate, 4.5 percent; loan term, 30 due in 10 years; monthly payment $981; gross rate multiplier, 7.04; net operating income, $21,024; capitalization rate (income producing rate of the property), 8.95 percent; return on investment, $10,154; cash on cash return after debt, 16.58 percent.

Example two, a developer owned active, standard sale of a Sherman Oaks 7 unit building with 10,760 square feet. The purchase price: $2.2 million with a 25 percent down payment of $550,000. Closing cost estimate of $27,500. It was financed with a new loan, $1.65 million at 4.5 percent interest rate. The net operating income was $102,960, with a cap rate of 5.15 percent (broker states 4.8 percent). Return on investment of $2,636. (See the slides on the www.aaiilosangeles.org website, presenters slides for more details and examples of purchases.)

All-to-Common Pitfalls

Some common pitfalls are poor acquisition strategy, faulty investment analysis and poor management skills. More pitfalls include: a bad location, bad purchase timing and lack of analysis (eg. High entry and exit price). Also, inappropriate financing, and poor understanding of the risk versus reward possibilities. More pitfalls include an incoherent strategy; no budget for contingencies, rehabbing or repositioning; following bad advice and having an incompetent team.

Property management issues include tenant screening, regular property checks, leasing and resident retention, following proper eviction procedures, competent accounting, rent control and the three Ts (tenants, toilets and trouble).

Other management issues are: self-management; on-site management (required for

16 or more units under Calfornia law CCR Title 25, section 42), and off-site management via a property management company.

Slide 35 would be of interest for its list of 18 websites, including those of Zillow (www.zillow.com.) the investors guide to private money lending, Fannie and Freddie Mae, the national apartment association, and, many others.

If readers want a copy of the 36-slide presentation, in the first instance, they can read it and download it off the chapter website, under presenter’s slides, at www.aaiilosangeles.org. In the second instance, they can query Todd Rubinstein, and get the slide presentation, a glossary of commercial real estate terms, and the apartment outlook reports for 2012, at ToddR@told.com, or at ToddR@realtor.com.

Market Psychology

Edited by Mark Skousen, Ph.D.

Thanks to professor Mark Skousen, a speaker to the L.A. AAII chapter, who donated a copy of his book, The Maxims of Wall Street (2012), we can share with you a few aphorisms on market psychology:

“Psychology is probably the most important factor in the market—and one that is least understood.”

--David Dreman

“I can calculate the motion of heavenly bodies, but not the madness of people.”

--Sir Isaac Newton

“Nothing is more suicidal than a rational investment policy in an irrational world.”

--John Maynard Keynes

“A clear conscience is nothing but a poor memory.”

--Rick Rule

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Investor Education

Don Gimpel, Ph.D.

nvestors are getting increasing edgy about the impending fiscal cliff looming on Jan. 1, 2013 when tax increases and spending cuts

take hold, and government revenues increase, cutting into the unsustainable rate of government debt accumulation.

IWhat is the ‘fiscal cliff’ about that? No

argument but these steps will move the economy and the nation toward a more sound financial basis. However, the Cassandra’s of the marketplace have been sounding the alarm concerning the downside of this situation. It is that these spending and revenue adjustments are forecast to erode the fragile economic recovery Dr. Don Gimpel and push the economy into recession in 2013. Then, the economy is expected to recover and be on a stronger footing in 2014.

Neither Republicans nor Democrats are lifting a finger to ‘fix’ the situation, as all eyes are on the Presidential election. The attitude is wait and watch…or, fiddle, like Nero, while Rome burns. Or,…optimistic case…rush towards the edge of the abyss and pull back, if possible, at the last instant. Or….worst case… jump into the abyss and dash the economy on the rocks below.

Let’s step back from the cliff edge for a second to see where the economy is coming from. James Goldberg, president of Goldberg Economic Advisors, spoke at AAII Los Angeles chapter on July 21. He forecast how the economy would do in the second half of 2012.

Here is the table with the numbers:

With hindsight we see that Goldberg’s numbers are a bit dated, but they give context to a fiscal cliff forecast. (And, they offer a powerful warning concerning the fallibility of forecasting.)

Five Quarters of GPD Decline—Recession

Dr. Don Gimpel, in investor education, passed out a chart, prepared by financial analysts at Goldman Sachs, estimating the effect of the fiscal cliff and its various components on GDP growth for each of the five quarters from quarter four, 2012, through quarter four, 2013.

What are those numbers?

Quarter and Year Percent DeclineFourth, 2012 -.7 percentFirst, 2013 -4.2 percentSecond, 2013 -4.5 percentThird, 2013 -3.1 percentFourth, 2013 -1.8 percent

That amounts to five quarters of recession. Instead of being 1.5 percent positive in the fourth quarter of 2012, Goldberg’s forecast, Goldman Sachs has the fourth quarter at .7 percent negative—a big swing of 2.2 percent. The economy is forecast to relapse into a double- dip recession.

If you plotted the recession numbers, a line through the quarterly declines would look less like a cliff and more like an upside down hill, that sloped down fast and rose up slowly. Projecting a year in advance is too far out to be more than fantasy projection, but it is assumed that in 2014 economic growth would be again positive.

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2012 Forecast 3rd Quarter 4th QuarterReal GDP 1.5% 1.5%CPI Y/Y 1.7% 1.7%Unemployment 8.4% 8.5%10-year bond 1.5% 1.5%Fed Funds rate .1% .1%

This decline in the GDP is not just hypothetical, but has already started to take hold, as the board of directors of L.A. chapter of AAII pointed out in a group discussion on Oct. 29.

Impacts that are already being felt include: market index declines; investors selling stocks and moving to bonds or money-market funds, businesses declining to spend and invest, a dampening effect on consumer spending, a negative impact of uncertainty, cuts in medical spending, and an expected reduction in the number of nursing homes. A question with an unknown answer is, how much has the market already priced in the fiscal cliff effects?

Blackrock Fiscal Cliff Report

What about a comprehensive look at the fiscal cliff that takes into account revenue, spending, the political situation, history and the future. The world’s largest asset manager, Blackrock, has prepared a comprehensive 16-page report, written in catchy language, accessible, intelligible, full of charts, graphs, color bars and other typographical devices to make the report interesting and arresting.

Check it out at www.blackrock.com which brings up the home page. On the homepage look on the right side and click on the report title, Will the U.S. plunge off the “fiscal cliff?” On the page that comes up, click on the blue box with the words, View US PDF, and that brings up the report, prepared in October.

Collaborating on the preparation of the report were Blackrock’s head of munis, its chief investment strategist, the head of government relations, the chief strategist of its investment institute, and the lead manager of its equity dividend fund.

Among the report’s summary findings: there is a dangerous disconnect between politicians and financial markets; three forecast scenarios are outlined, ranging from moderate to scary; an economic slowdown is occurring related to market uncertainty; taxes need to go

up; benefits need to come down; a political call to arms is needed to get Congress to act in a prudent and responsible way. (Examine the report for more information and detail.)

Investment Advice

Meantime, what to do with your money? If there is another U.S. debt downgrade it is unlikely to shock risk assets as much as it did in 2011, due to habituation. (It happened before.)

Treasuries are likely to remain AAA assets, but with low yields, that makes mortgage-backed securities preferable investments. U.S. equities are slumping, pointing investors towards investing in emerging markets. Retirees are still desperate for income, making dividend stocks attractive. Municipal bonds with relatively low risk and tax-exempt status are still attractive.

In regard to dividend stocks, investors are pressuring companies to increase payouts and CEOs are responding. Utilities stocks would be an exception, as having gained the most due to the tax cut, now they have the most to lose. Look for companies with strong balance sheets, exposure to fast-growing emerging markets, a record of dividend growth, and consider, cash-rich technology stocks—new to paying dividends.

Munis retain their sheen because it will be difficult to limit muni tax exemption in 2013 and beyond, when state financing needs all the help it can get. Demand for munis is driven by a shrinking market (now at $3.7 trillion) and strong investor demand, and, a tax-exempt income at fairly low risk.

Letters to and from the Editor

Edited by William Parmenter Ph.D.

watershed Presidential election is already in process via absentee ballots and will be punctuated Nov. 6 with the

general election.A

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The latest national poll had Obama and Romney tied at 47 percent each. No doubt the election will be decided by the electoral votes in the battleground states.

I Googled ‘polls in the battleground states’ to see who was in the lead. The two polls I looked at had Obama winning the electoral college vote, and the election, 281 to 254. Of the 10 battleground states, Romney was ahead in Florida and North Carolina. Obama was ahead in Ohio, Pennsylvania, Wisconsin and Nevada. Virgina and Colorado were ties. According to another poll, Romney was ahead in Ohio (18 electoral votes)

To win you need 270 electoral votes. Ohio’s 18; Colorado’s 9 and Virginia’s 13; all in play, make this race very hot and very tight—an election too close to call.

What are the Las Vegas odds, home of the planet’s top handicappers? No bets are being taken. But, after the second debate, Obama’s chances improved, such that if it were an NFL game, he would be a six-point favorite.But, stayed tuned, it is not over yet, and the game is ON.

Fortunately for the candidates, Dr. Don Gimpel, head of the chapter’s educational instruction, did his research, and came up with winning advice for the candidate who would chose to follow it. Gimpel had to go back to ancient Rome and consult with Quintas, who advised his brother Marcus Tillius Cicero in 64 B.C. on how to win the important office of consul.

The advice: Promise anything to anyone. Tell the

voters what they want to hear. Voters are forgiving of candidates who break their promises once in office.

Call in all favors. Let all your debtors know it is payback time. You can reward them later, only if they back you now.

Know your opponents weakness and exploit them. A winning candidate focuses relentlessly on his opponent’s weaknesses, and tries to distract voters from his strengths.

Flatter voters shamelessly. Learn the art of flattery, so essential when running for office. Look voters in the eye, listen to their problems and make them think they are important.

Finally, give your people hope. Bring hope to people, even if inevitably after the election you have to let them down. You will be reviled less for broken promises than for appearing ungenerous.

(Original source, Philip Freeman, translator of the book, How to Win an Election.)

In Memoriam

All that live must die, passing through nature to eternity.

--William Shakespeare

The sad news is that two beloved members of the board of directors of AAII Los Angeles died.

The two deceased are Mike Erdie, who handled posting information to the website and email distribution, and Gunter Hagen, who was on the board for 25 years and ran the Mutual Fund Special Interest Group for 20 years. Hagen contributed a great deal to AAII.

Don Gimpel reported that Hagen died with his boots on fulfilling a life dream. He had a heart attack while on a safari in East Africa, and was not able to be stabilized and expired. Gimpel remembers Hagen as a “righteous man,” with a Ph.D. in physics from UCLA and formerly employed at Hughes Research in Malibu.

I, too remember Hagen as kind, friendly, courteous and considerate. He and I shared a love of travel, and he asked me about my travels and encouraged me to write about them. I enjoyed the way he ran the meetings of the Mutual Fund/ETF group, seemingly as graduate

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seminars with people being encouraged to participate and share their views.

Joe Falcon said his most poignant memory of Hagen was Gunter’s love of life and of travel. Hagen was fulfilling a life dream to travel around the world, flying to various spots with different airlines. He succumbed to a failed heart condition while in Kenya on the safari that was the fulfillment of a dream.

As a well spent day brings happy sleep, so life well used brings happy death.

--Leonardo da Vinci

Mike Erdei was recalled by Gimpel as having been seriously and then terminally ill for over a year. He served the board by posting information on the chapter’s website, and by distributing the chapter’s publication, L.A. Finance by email.

I recall Erdei as an investor, with a sharp technical mind, interested in options, collaborating with Orvis Adams, former chapter president, on options strategies and tactics. Erdei lived in Long Beach, as I do, so we carpooled together to go to the monthly chapter lectures at the Skirball Center.

One of Erdei’s late avocations was his house remodeling project, which seemed to have no end in sight. As a work in progress, the house project was always good for a new anecdote.

Erdei was soft-spoken and considerate of others. On the way home from Skirball, we would go out of our way to stop at a favorite bagel shop on the Westside to pick up bagels for his wife.

Gentlemen, we are going to miss you.

There is no cure for birth and death save to enjoy the interval.

--George Santayana

Note to L.A. Finance Contributors

lease have your copy typed in Word in 12-point, using Times New Roman typeface. Articles from Special Interest

and Neighborhood Groups are requested. Letters to the editor are welcome and are run in a separate section. Articles from the Orange County and other area local chapters are solicited. Readers who want to email an article about investing or the financial system will have a chance to appear in print.

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Book reviews are welcome. Call if you want to check out your submission ideas in advance. Email articles and letters-to-the-editor at wparmenter@yahoo.com, or call the editor at (562)-437-2412.

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L. A. Finance is the financial education publication of the Los Angeles chapter of American Association of Individual Investors. All articles are exclusively for the purpose of education. L.A. Finance is offered free of charge exclusively via email and is also available to the public for downloading from the Los Angeles chapter web site at: www.aaiilosangeles.org.

The American Association of Individual Investors Mission: AAII is an independent nonprofit corporation formed in 1978 for the purpose of assisting individuals in becoming effective managers of their own assets through programs of education, information and research. Neither L. A. Finance nor the Los Angeles Chapter of AAII accepts any responsibility for investor’s investment decisions. The investor takes the total and complete legal and ethical responsibility upon himself. Caveat emptor.

Orange County AAII Meeting Announcement

Nov. 10, Techniques for Top-Down Investing and Trading by Jackie Ann Patterson, Stock Trader and Editor of Back Testing, www.backtestingreport.com.

At the Community Center, 1975 Balearic Drive., Costa Mesa, CA 92626, 714-754-5158 with $5 admission at the door.

For more information, go to www.robertsgeneral.com.aaii