The Stock Market Cash Flow: Four Pillars of Investing for Thriving in Today’s Markets

这本书给我了Financial Independence的适合我的可能性: 用股票分红赚取足够的passive income

Title: The Stock Market Cash Flow: Four Pillars of Investing for Thriving in Today’s Markets
Authors: Andy Tanner
Edition: 1
Finished Date: 2018-11-11
Rating: 5
Language: English
Genres: Finance
Level: Entry
Publishers: RDA Press, LLC
Publication Date: 2011-06-19
ISBN: 978-1937832063
Format: ePub
Pages: 304
Download: ePub

The Stock Market Cash Flow



  • government’s policy

1. fundamental analysis

7 numbers to use in the fundamental analysis

  1. income
  2. expenses
  3. [1] cash flow = Income - Expenses: whether the company is currently making money
  4. assets
  5. liability
  6. equity (net worth) = Assets - Liabilities

  7. [2] $\frac{liability}{assets}$

  8. stock price: 供求关系
  9. [3] P/E: the value of a company. pay P/E to earn $1

    • stock price
    • earnings: how much money the company makes

      the lower P/E the better

  10. [4] PEG = $\frac{P/E}{growth}$ = $\frac{Price}{Earning \times Growth}$: the growth of a company

    • stock price
    • earning
    • grow: increase without percent sign

      For example: grow 20% => Growth in the formula = 20

    the lower PEG the better

sovereign fundamental analysis

cash flow = (Taxes Collected) - (Government Program Expenses)

  • fiscal policy by Congress: how a government chooses to spend its money

    • income: raise/lower taxes
    • spending: increase/decrease spending: budget


    • surplus: cash flow > 0
    • deficit: cash flow < 0

      • 若有存款, 短期deficit没有关系
      • 若没有存款, 需要debt来应付deficit

      debt: a promise to pay

  • money policy by Federal Reserve Bank

    • not federal, because it is not technically a United States government agency
    • not hold reserves in the sense that we often think of reserves
    • not a bank

      what can do, i.e., power

    • change interest rate

      • decrease interest rates: boost the GDP
    • buy bonds and other securities
      GDP: the amount of goods and services a country produces during a given year

People earn money , shown ad GDP => The government takes a portion of that money as taxes.

When GDP shrinks, the tax shrinks. The government has the power to change policy and take a bigger percentage of our money than it did before.

$\frac{debt}{GDP}$: whether the country has a strong enough GDP to enable it to collect the taxes it needs to pay its debts

Example: 2013 US

  • US $\frac{debt}{GDP} = \frac{15\ trillion}{16\ trillion}$ = 106%

  • Italy debt/GDP = 120%

  • Greece debt/GDP = 165%
  • Portugal debt/GDP = 107%
  • Ireland debt/GDP = 108%

good company

  • high cash flow = Income - Expenses: whether the company is currently making money
  • low $\frac{liability}{assets}$
  • low P/E

company’s fundamental analysis

valuation of a company: earning and growth

  • P/E: Price/Earnings ratio
    • earnings: how much money the company makes
  • trailing P/E: the ratio as of yesterday

    ttm: trailing twelve months

    * earning: the last 12 months
  • forward P/E: project what the fiscal year ahead might look like
  • PEG (Price/Earnings and Growth)
    • >2: not growing well
    • <0.5: growing really well

  • market capitalization: (number of outstanding shares) * (stock price)

    determine the value of an entire company = the price you would have to pay to buy every share and own an entire company

    • small cap: 300 million - 2 billion
    • mid cap: 2 billion - 10 billion
    • large cap: > 10 billion
  • EV (enterprise value) = market value of common stock + market value of preferred equity + market value of debt + minority interest - cash and investments.

  • price/sales = $\frac{share\ price}{sales\ revenue}$

    This is not earning because the expenses are not subtracted.

MRQ: the most recent quarter

  • Enterprise value/revenue: the value of the company in relation to its revenues
  • enterprise value/EBITDA: the value of the
    company in relation to its earning before interest, tax, depreciation, and amortization (EBITDA)

In summary, statistics required

  • Market Cap
  • enterprise value
  • trailing P/E
  • forward P/E
  • PEG
  • price/sales (ttm)
  • Price/book (mrq)
  • share price

Net worth doesn’t help you retire; cash flow does.

personal fundamental analysis

我的目标: 增加shares

增加capital gain => 增加shares => 增加cashflow => generate passive income stream that is greater than expenses, i.e., passive income > expenses => financial independence

并不像书里只能二选一: Capital Gain vs Cash Flow

我的目标assets是: zero-cost stocks

可以用来写每个月的personal fundamental analysis

income expenses
cash flow assets
liabilities equity/net worth
credit score education
* buying power: how large of an asset you could buy today

including borrowing from other investors and banks

> The rich invest as if they have no money

The ultimate goal for the super-wealthy is to never invest with their own money. They are masters of leverage and raising capital


Rich Dad says

  1. get educated
  2. build buying power
  3. buy assets

2. Technical analysis: strength of a market based on supply and demand which may not correlate with fundamental analysis

  • up trend
  • down trend
  • sideways trend

3. Cash Flow

Turning information into profit by positioning

different tax for earned income and capital gain

3 different purposes in the stock or option market

  1. capital gain
  2. cash flow
  3. hedge against a falling currency
    • gold

acquire assets for cash flow

  • long position
  • short position

    sell sth. that does not belong to you.

    sell first buy later

  • net worth position
  • cash flow position
  • leverage by debt
  • leverage by contract

return = $\frac{Money\ out - Money\ in}{Money\ in}$

increase return by 2 ways

  1. decrease Money in: leverage

    • real estate: use debt as the lever
    • options: an agreement – with another trader through a market maker – that gives us the right to buy or sell a certain stock at a pre-determined price
  2. increase Money out: buy a bargain


  • premium: the buyer of the option agreement pays the seller some money for the option
  • option chain: a table that includes all the essential information
  • intrinsic value: | current stock price - strike price |
  • time value: the option premium less any intrinsic value


  • buy a call option: buy stocks at the strike price

    profit when the share price goes up because that gives you the choice to buy the stock at a set price no matter how high the share price may rise

    make decisions

    1. At what price do you want the choice to buy the shares? (strike price)
    2. How long do you want the option to last (expiration date)
    3. How much will the contract cost? (option premium

  • sell a call option: sell stocks

  • covered options: 出借股票的人, 可以赚premium!!!


  • buy a put option: sell stocks at the strike price
  • sell a put option: buy stocks 若想买某个股票, 可以这样开限价单!!!! 赚premium!!!!

Cash flow and net worth are independent of each other.

usually 2 months or more


  • covered puts (sell put options): you can get paid to buy the things you want to buy
  • covered calls (sell call options): you can get paid to sell the things you want to sell