Dow 100,000?

I recently wrote an article where I mentioned the economic fact that nothing in the perceptual world has in itself any value whatsoever. The only reason anything in your world has value is because you believe it so AND so does at least one other person. Collective agreement is the only reason anything in our world has value.

On a deeper level you could say that the only reason our perceptual world even exists is because all of our minds agree it is so. Think about this for a moment. When you were born a group of other minds constantly persuaded you to think in a consistent manner so that in gradual agreement your mind assigned a symbol to every object you were shown how to perceive.

Your entire language, family history, and socialization was something continually taught to you in one way or another over the formative years of your life. If you had been born into a different family or even a different species like dogs (I am a dog lover) the way you assemble the world in your mind and thus your very perception of everything would be entirely different.

This impacts you as a stock investor. In my recent article "How To See The Stock Market Correctly!" I mentioned that this collective agreement process also dictates the values we assign to all goods and services in our economy. If our perception changes regarding a good or service then its corresponding value will change. It is human perception that creates value and not resources in our modern world.

Think about this a moment. It is the perception focused productive efforts of everyone in society that allows you to flush a toilet in the morning, brush your teeth, drive down a well maintained road to work, and live and work with roof over your head. It is the productive efforts of all of us that transform the stuff that appears to be out there.

I am constantly hearing and reading these days economic mumbo jumbo about secular bear stock markets for all sorts of macro reasons. I simply remind my friends and colleagues when I hear or read such nonsense that macro economics is the most dismal of sciences due to poor data. It is like fortune telling without a cheap crystal ball. But there is a phenomena occurring that people are not paying much attention to that is very likely to have an enormous impact on our world economy and hence our stock markets this century.

People seem to have forgotten that the Soviet Union has collapsed The Soviet Union's total population as of its final census, in January 1989, was 286,717,000 people. Think about this; over a quarter of a million minds and bodies have been added to the collective production pool!

This tells me as a financial economist that with such a large addition of human capital to the collective work pool the world economy can only expand. That means more quality goods and services for us in the United States. It also means more quality goods and services for them which are larger export markets for us. The recent opening of vast pools of human capital world wide I believe is creating the most striking economic expansion in world history this century. For this reason I firmly believe we will enter the largest bull market in world history this century and that the Dow will eventually hit 100,000. I am not only "bullish on America" I am "bullish on the world!"

Understanding the Forex Trading System

The forex trading system involves buying and selling foreign currency. Unlike the stock market there is no fixed market for the forex trading system. A good and effective forex trading system allows the traders to transact easily and provide more chances to increase the earnings. Forex, foreign exchange market, is a market place where a currency of one country is sold for another country's currency for some profit. Currencies are traded in pares, like, US Dollar and Japanese Yen or US Dollar and Euro.

Foreign exchange tradings are a great money making opportunity for those who know their way around, for newbie it's a dream world where they either fall hard, sail well or fly high, its not easy to be a successful trader in the forex trading system., it's a mix of luck and experience that must work to find success. There are a lot of companies and individuals over the internet and offline willing to help you earn money from the forex trading system but only a handful of these are true and can actually help.

Nowadays most of the calculations are done by easy to use software that need minimum input from the user. You will need help initially, and may take some time for you to get to know the forex trading system. The high degree off leverage can sweep you either way, in the forex trading system one has to assess the risk for self, think of the chance one may have individually or with the help of a broker and/ or signal provider one may have and the amount which one can safely risk without putting yourself into financial trouble. It's a law of nature, where there's potential to earn there' potential to loose so just be prepared before you dive in.

The Right Way to Look at the Stock Market!

Here is how economies really work in a nutshell. This is an extremely obvious economic fact that most people completely forget. If people work together in harmony value is created. If people fight among one another value is destroyed.

Nothing in the world we perceive is in itself of value at all. Only those things that at least two people agree are of value become worth something. Ponder this forcefully for a moment. Is gold really of value at all? It is just an inert metal. There are tribal societies who do not perceive any value whatsoever in gold. You can't eat it, drink it, or smoke it so it definitely does not directly change the way you feel. The only reason it is value is because people in general say so!

I was listening to a lecturer who is extremely competent at changing people's belief systems. I was amazed to hear him talk about the creation of fiat currency, money that is not backed by a physical commodity, as a bad thing. This to me was impressive. Here was a very intelligent person implying that an inert metal was somehow valuable in itself completely oblivious to the fact that the gold standard caused as many problems as it solved for country economies!

The gold standard did impose a common standard of value for all national currencies that gave some stability to international trade and investment, dampened interest rate fluctuations, and stimulated the expansion of commerce and investment abroad. In addition the gold standard imposed economic discipline on a country but these advantages were offset by a number of limitations such as the necessary maintenance of free trade, restriction of a country's money supply by its gold stock making a nation unable to respond to problems of lagging economic growth or rising unemployment.

Now I want you to ponder the stock market. If gold has no inherent value then of what value is a stock? Again, a share of a stock is only of valuable if at least two people consider it valuable. Stock market pundits push things like earnings and healthy financial statements both of which are subject to creative reporting within legal yet wide accounting standards.

Inside corporate executive have been caught red handed in the last few years cooking the books making estimates of any fundamental share value highly circumspect. Again, it all goes back to whether there are more people buying or selling a company's stock and executive corporate insiders with their gifted stock options are the biggest beneficiaries of the corrupt Wall Street machine.

Corporate America owns the American media. Executive insiders control corporate America. Don't let Wall Street fool you into thinking that the path to stock market investing riches is through laborious financial analysis because it is a fool's journey. Learn to read how the public's emotions in the stock market are being manipulated by unseen corporate forces and you will have the best shot at coming out way ahead!

Who Wants to Be A Stock Market Millionaire?

I know many people who want to be stock market millionaires. They ask how all the time on "The Wallet Doctor" Ezine. It is actually not that complex if you know what you are doing. Becoming a millionaire does require discipline and the more the better.

There are a couple of main concepts that you have to master to become a stock market millionaire. First, you have to control, reduce and eliminate your family expenses. If you can get past this step you are well on you way. Most people feel restricted when they lower their expenses but there are creative ways to do this. Don't take your children into stores and don't buy them junk.

My wife and I like to eat at fine restaurants. We reduce the bill substantially by sharing a plate. If a restaurant charges a "plate" fee we never go back. We also began accelerating our mortgage years ago and are now amazed at how little we have left to pay off.

Second, you have to optimize your income. You can do this by getting a second job or selling things or services in your off hours. I know this is a lot more work then your peers are putting out but financial freedom doesn't not come free. The first two steps amount to optimizing your cash flow which is the difference between your total income and total expenses.

Third, you need to insure against all insurable calamities. These calamities include illness, death of a breadwinner, vehicular accidents, and property losses. A good insurance agent is literally worth their weight in gold (or more) in helping you create an umbrella insurance plan that covers all insurance contingencies that are economically viable to cover.

Fourth, you need to dedicate yourself to a consistent, persistent plan of study in the area of stock investing that includes investing scams and understanding risk. Fundamentally you must learn how to buy stocks low and sell them later at high price. To become a stock market millionaire this will be come your guiding principal. The more you study techniques as well as people who have been fantastically successful in the stock market the more you are going to understand what it takes to make your personal finances work toward making you a millionaire stock investor.

Fifth, you have to absolutely believe you can do it. Only you can believe in you and when you do people fall in behind you to help. The more time you spend daydreaming that you can do it the more likely you will make it a reality. Everybody's financial path is highly personal. For me I felt I needed a Ph.D. in finance to get down my financial path but you probably won't. You may recognize that you need to do different things to put all of these five steps to becoming a millionaire into place. Believe you can become a stock market millionaire, wake up each and every day and do what you know you need to do to make it happen and it will!

How to Learn Stock Investing Without Risk!

Airline pilots practice fly in simulators before taking off in an expensive new jet. They do this so that they don't kill themselves or their passengers. They also do this so that a very expensive airplane does not get destroyed!

In the futures markets people who trade commodities have been practicing for years by "paper trading" the markets. Paper trading consists of using long term price charts to get a feel for the markets. This was done before we had computers by learning to recognize and analyze simple trend lines using a pen and ruler in a catalog of price charts supplied by a technical analysis chart subscription service.

Once the computer was invented an observant, entrepreneurial, futures trader named Lan Turner recognized that the entire futures trading process could be simulated with software. He noticed that this could be done just like the Xbox games kids play today that are a lot of fun (but don't teach you how to get wealthier).

Mr. Turner created a simple software application with a programmer friend and began showing it around. Futures traders immediately recognized the enormous benefit of practicing in these highly leveraged markets before actually trading; just like pilots learning to fly a new aircraft use a simulator. With this first application Lan began hiring more and more programmers and today his company Gecko Software (www.geckosoftware.com) has the best futures trading simulator in the world because it really puts you in the trading seat without exposing your hard earned savings.

Now they have finally created an equity version that is being beta tested called TNT High Finance that allows me to actually practice in any past time in any stock. The software allows me to place positions and then roll time forward like a video player. This virtual environment allows me to see each day unfolding in any stock I want to practice an investment technique in the market without risking my assets.

The reason I am writing about paper trading in the stock markets is that you must understand how vitally important it is for you to find a stock investing technique that is just right for you. Each of us has different ways of thinking (psychology). A stock investing method that is just right for me may be horrible for you and vice versa. Paper trading in the stock market allows you to hone in on a stock investment strategy that works for you. Learn to paper trade in the stock market and you can get years of trading experience in a few short months of practice that is absolutely critical to your financial health!

How to Get Out of Debt!

Controlling your debt is the first step to preparing for investing in the stock market. If your debt is high then your debt payments are high. This means that you have very little to save and invest each month as compared to if you had little or even no debt.

Here are two practical suggestions to get you out of debt. The first (1) is to always pay more than the minimum payment on any debt you have. The second (2) is to reduce the interest you are paying without lengthening the time that you have to repay the debt (known as the maturity or amortization) if you can. Don't ever forget that when ever you have a lender reissue a loan at a lower interest rate frequently you jump back the original length of the mortgage in months and years. Don't trust bankers because they are there to make a buck for their company at your expense!

Let me give you an example. If you buy $1,100 of Christmas gifts and pay %18 on your credit card balance after the one month grace period it will take you 12.5 years to pay it off if you make the minimum payment the credit card company wants you to pay. If you just paid $10 extra you would pay it all of in just 6 years which is half of the time.

But what if you had a $5,000 balance? At the minimum payment it would take you 46 years to pay it off! You would end up paying $13,000 in interest. If you reduce the interest rate to 9% you would pay it off in 20 years and save $10,000. What ever you do make sure you pay it all off.

The same concept applies to your home mortgage. If you have a 30 year $100,000 mortgage at 7% the monthly payment would be. If you paid an extra $100 per month toward the principal then you would pay it off 9 � years earlier. You also end up paying a LOT less interest over the life of the loan!

This is how you dig yourself out of debt. Just like filling in a hole you grab a shovel. You make that first scoop. You start filling. Same goes for getting out of debt just get started and in a few years you will be amazed where you will get. This is how you start as a stock investor by digging yourself out of debt. Once you have control over your debt the money that flows to you will not leak out but will grow and keep just on growing!

Become Financially Whole!

I was watching Suze Orman with my wife today. A woman called in who is trying to reestablish credit after a prior bankruptcy. She told Suze that she had gone to a "restore your credit" seminar where the speaker taught the audience to get two secured credit cards. Secured credit cards are where you go to a bank and give them something like $500.00 and they give you a credit card with a $500.00 limit (or whatever you plop down to secure the whole deal).

The woman wanted Suze's advice because after she ran the limit up on both cards she was downsized and the only work she could find paid a lower salary. She told Suze she could not pay the cards because she was now paid a lower salary and was late on one of the cards already. Suze told her that there was absolutely no advice she could offer the woman and hung up.

Why do you think she would say this? I mean the woman could go get another job. She could get a loan from a family member or a friend. So why would Suze say this?

Well, Suze said that as long as the woman blamed her financial problems on external problems that she would be stuck. This is completely in line with what I told you in my last e-mail about forgiveness. Suze was really vague (as usual) but let me give you concrete concepts that you can apply in your daily life so you never end up like the woman in the financial train wreck who called in to Suze.

We only have two emotions; fear or love. Fear really sucks because it causes ALL of the problems in our life like sickness, death, poverty, bad luck, and soured relationships with other minds. In our financial lives fear causes debt.

On the other hand love is really great because it causes all of the good in our lives like, health, wealth, and abundance of every kind. In our financial lives love allows us to achieve financial freedom in great part through elimination of debt because if you come from a love based thought system you will sagely recognizes that you don't need a lot of crap our modern day "you gotta have this" society waves in your face.

The truth is that many (if not most) super rich people are also super miserable because of all of the fear in their minds that someone is "going to take it all away!" The trick is to become rich AND happily content. The super rich that have achieved this have come to recognize that the most valuable thing in their life is something that nobody can take from them without their consent; peace of mind!

We wouldn't be in this nut case world if each of us did not have some fear in our minds. This would make you a super stock investor in the stock market. So if the trick to achieving everlasting peace of mind is erasing all fear from our minds then is there a "where the rubber hits the road" practical method that acts like a fear eraser? The answer is a resounding yes!

The practical method that will lead you to peace of mind is true forgiveness that I alluded to in the last e-mail. The Course In Miracles, as long as the darn thing is, really just teaches you how to forgive and nothing else. Once you erase the crap in your mind (which is really just fear) your life will transform your life in ways that will seem unbelievable because your interpretation of your life experience will change. Most importantly your financial luck will change as well. Remember always that we are minds not bodies. We are the dreamer not the dreamed and as such we can reset the rules through he application of forgiveness in our daily lives and become whole instead of fragmented by fear!

Financial Immortality!

I was just talking with a real estate professional in Northern California about how precarious the market for residential homes is becoming. My friend is an elderly real estate broker that started selling real estate in the 1970s and now has over three decades in the industry. She has seen the prices of houses appreciate radically as well as drop precipitously over prior decades.

We were chatting about the hard money lenders who are lending at 70% loan to value ratios instead of 50% and just how deadly this could be financially. I explained that the reason these younger real estate professionals are lending at unsafe ratios is due to a type of money thinking I call "financial immortality." This type if thinking is the tendency of human beings to extend what we know about the present into the future.

Think about it. When you get up in the morning you jump out of bed and walk a certain number of feet in certain directions and you get your usual food and sanitation needs taken care of. It's probably pretty much the same (if you are at home and not on the road) every day. You probably drive the same way to work every morning. You do pretty much the same activities each day to pull the pay check in or keep the business running. You generally assume that tomorrow is going to be much like today.

Your routine daily experience has taught you that if you do just a few things well which means pretty much the same way in a certain way you will get your money at the end of each month. In other words your daily routine is pretty static (doesn't change much) and to function in a static environment you need to have static thinking. Something that is static never changes and is immortal. The problem is that none and I mean NONE of our financial markets are static they are dynamic (change a lot). Worse yet when they change they often change a lot and really fast!

In order to survive as a real estate of stock investor you have to have dynamic thinking. Let me explain. I told you that there are hard money lenders in California that have been earning a good return. Hard money lenders start by either lending money to builders and rehabbers at the going rates for hard money funds which today are 15%. If they don't have money they will have people invest through them. The hard money lender pays his or her lender at a lower rate like 13% and keeps the 2% spread for managing the money.

The safety in the deal is making sure that the property is worth a lot more than the hard money loan amount when the project is finished. Many of them start lending at 50% of the value of the project (loan to value ratio abbreviated LTV). Once they get confident (static) with what they have to do to make money many are now lending a 70% of the value of the project because they can place more money in the market.

The problem is that many of these "financially immortal" thinkers don't remember when property values plummeted up to over 50% in some areas in the 1980s in California when the Keating scandal allowed Savings and Loans to lend at high LTVs and the real estate market collapsed when interest rates rose. Right now we have a combination of radical home price appreciation in markets like California where people have been accepting interest only mortgages tied to adjustable rates. The percentage of interest only adjustable rate mortgages in California is now over 40% where a few decades ago very few such mortgages were originated. Other states in this same predicament include Virginia, Arizona, and Colorado.

What few people today know is that interest only mortgages were a significant part of the problem in the great depression. In the roaring 1920's housing prices soared and banks begin offering interest only mortgages. When the stock market and banking system collapsed and up to one third of the U.S. population lost their job house values plummeted and people could not sell off their homes to get out of these bad mortgages. A flood of foreclosures ensued all because people were assuming the roaring 20s boom would just continue because they were using financially immortal thinking that that says "what goes up never comes down." The people who were dynamic thinkers cashed out their homes in the 20s and thrived in the great depression because they were not carrying lots of debt. THAT IS WHY I TEACH THE ENORMOUS VALUE OF FREEDOM FROM DEBT TO MY STUDENTS!

If the market does collapse and you are a dynamic thinker you might do well scooping up great deals from the financial immortals in their dying gasps. By the way this was the same thinking that got so many financial immortals in the stock market in trouble. The financial immortals believed The lie Wall Street was pushing that the stock market would never come down during the final part of the massive bull market in the 1990s. The dynamic thinkers were able to smell the bull$%^# on all over Wall Street in 1999 and 2000 when all of the insiders were dumping their high priced stock they optioned for nothing on the heads of the financial immortals!

15 Effective Niche Marketing Strategies.

This article was written to reply numerous of the most regularly asked questions on this topic. I wish you find out all of this knowledge helpful.

1. Making More cash - Most individuals desire to make more money. They want to keep off not being able to buy all their needs and wants. You could object product niches for employment, home businesses, networking marketing, affiliate programs, employment advancement, etc.

2. Increasing Profits And Sales - Most businesses want to increase their profits and sales. You could goal product niches about marketing, copywriting, advertising, cutting costs, publicity tips, etc.

3. Making fair Investments - Most individuals want to get high returns on their investments. You could object product niches about investing in the stock market, bonds, futures trading, etc.

4. Getting A elevate - Employees want to avoid being on a low pay scales at their place of effort and losing their job. You could aim product niches about communicating at work such as asking for a raise, promotions at work, etc.

5. Getting A Promotion - Most employees want to succeed and offer their employer their best. You could target product niches about moving up the ladder at work, career advancement, above or underachieving at work with the consequences of each, etc.

6. Working From house - Many individuals would somewhat work at home. You could target product niches about home business start-up, home business opportunities, affiliate programs, network marketing, etc.

7. Working Less - Most individuals want to work less but smarter. You could target product niches about businesses that require little or no work, automated income streams, part-time jobs that pay the same as 40 hour a week jobs, etc.

8. Eliminating Debt - Most individuals want to manage or eliminate their debts. You could target product niches about money control, debt consolidation, stopping debt collectors from calling, etc.

9. Having outstanding Credit - individuals want to maintain excellent credit. You could target product niches about improving their credit reports, financial management, how to increase their credit rating, etc.

10. Finding A Bargain - Most people like to find bargains. You could target product niches about being thrifty, negotiating lower prices, where to find fair bargains, etc.

12. Retiring Early - Most people want to retire beforehand or at least have money for their retirement. You could target product niches about planning for early retirement, investing for the long designation, goal setting, etc.

13. Being Educated - Many want to new their education. You could target product niches about college grants, college ratings, college loans, college living, etc.

14. Save Money - Most people want to save money. You could target product niches about starting a budget, lower bills, stretching their money further, shopping smarter, etc.

15. Being Successful - Most people want to be successful. You could target product niches about advancing and reaching goals, motivational techniques, getting into the right mind set, etc.

I hope you have gotten some acceptable ideas from this article and that you are able to use them.


Article Source: http://www.articleonlinedirectory.com

Investment Strategy: The Investor's Creed

Fascinating, isn't it, this stock market of ours, with its unpredictability, promise, and unscripted daily drama! But individual investors are even more interesting. We've become the product of a media driven culture that must have reasons, predictability, blame, scapegoats, and even that four-letter word, certainty. We are a culture of investors where hindsight is rapidly replacing the reality-based foresight that once was flowing in our now real-time veins... just like downhill racing, grouse hunting, and Super Bowls.


The Stock Market is a dynamic place where investors can consistently make reasonable returns on their capital if they comply with the basic principles of the endeavor AND if they don't measure their progress too frequently with irrelevant measuring devices. The classic investment strategy is so simple and so trite that most investors dismiss it routinely and move on in their search for the holy investment grail(s): a stock market that only rises and a bond market capable of paying higher interest rates at stable or higher prices! Just not going to happen�


This is mythology, not investing. Investors who grasp the realities of these wonderful marketplaces recognize the opportunities and embrace them with an understanding that goes beyond the media hype and side show performance enhancement barkers. Simply put, when investment grade securities rise in price [As they are now, with the DJIA finally putting together a successful attack on the 11,000 barrier], Take Your Profits, because that's the purpose of investing in the stock market! On the flip side (and there has always been a flip side, more commonly dreaded as a "correction"), replenish your portfolio inventory with investment grade securities. Yes, even some that you may have just sold days or weeks ago during the rally. This is much more than an oversimplification; it is a long-term (a year or two is not long term.) strategy that succeeds... cycle, after cycle, after cycle. Sounds an awful lot like Buy Low/Sell High doesn't it? Obviously, Wall Street can't let you know that it is quite so simple!


[Note that Dow Jones 11,000 was last breached during the infancy of this century, and that the last All Time High in this much too widely followed average occurred late in 1999. When the DJIA banner is repositioned on that historical peak of 11,700 or so, it will represent no less than six years of zero growth in this, the most respected, of all Market Indicators! Would the media strip the gold medal from this Stock Market Icon if it knew that during these same years: (1) There have been significantly more stocks rising in price on a daily basis than moving lower. In fact, more than two-thirds of the last 68 months have been positive. (2) Since April 2000, there have been 120 more positive days in NYSE issue breadth than negative days. (3) 250% more NYSE stocks established new high price levels than new lows. (4) We are working on our sixth consecutive year of positive issue breadth!]


So understand that your portfolio statement values will rise and fall throughout time, and rather than rejoice or cry, you should be taking actions that will enhance your "Working Capital" and the ability of your portfolio to accomplish your long term goals and objectives. Through the simple application of a few easy to memorize rules, you can plot a course to an investment portfolio that regularly achieves higher highs and (much more importantly), higher lows! Left to its own devices, like the DJIA for example, an unmanaged portfolio is likely to have long periods of unproductive sideways motion. You can ill afford to travel six years at a break even pace, and it is foolish, even irresponsible, to expect any unmanaged or passively directed approach to be in sync with your personal financial needs.


Five simple concepts of Asset Allocation, Investment Strategy, and Psychology are summed up quite nicely in what I call "The Investor's Creed":

(1) My intention is to be fully invested in accordance with my planned equity/fixed income asset allocation. (2) On the other hand, every security I own is for sale, and every security I own generates some form of cash flow that cannot be reinvested immediately. (3) I am happy when my cash position is nearly 0% because all of my money is then working as hard as it possibly can to meet my objectives. (4) But, I am ecstatic when my cash position approaches 100% because that means I've sold everything at a profit, and that I am in a position to (5) take advantage of any new investment opportunities (that fit my guidelines) as soon as I become aware of them.


If you are managing your portfolio properly, your cash position has been rising lately, as you take profits on the securities you purchased when prices were falling just a few months ago� and (this is a big and) you could well be chock full of cash well before the market blows the whistle on its advance! Yes, if you are going about the investment process properly, you will be swimming in cash at about the same time Wall Street discovers the rally and starts encouraging people to weight their portfolios more heavily into stocks; the number of IPOs coming to market starts to rise exponentially; morning drive radio DJ's start to laugh about their stock market successes; and all of your friends start to talk about their new investment guru or the 30% gains in their growth Mutual Funds. What are you doing in cash!


This is what I call "smart" cash, because it represents realized profits, interest, and dividends that are just catching a breather on the bench after a scoring drive. As the gains compound at money market rates, the disciplined coach looks for sure signs of investor greed in the market place: fixed income prices fall as speculators abandon their long term goals and reach for the new investment stars that are sure to propel equity prices ever higher, boring investment grade equities fall in price as well because it now clear [for the scadieighth (sic) time] that the market will never fall again� particularly NASDAQ, which could double and still not be where it was six years ago. And the beat goes on, cycle after cycle, generation after generation. What do you think; will today's coaches be any smarter than those of the late nineties? Have they learned that it is the very strength of a rising market that proves to be its greatest weakness!

Money Rolls Downhill!

I remember when "The Millionaire Next Door" came out telling people how the authors, who are marketing professors, had come up with a big discovery. They discovered more high net worth (wealthy) people in middle class neighborhoods driving a "beat-up pickup truck" (hey, that's what I drive!) than in high class neighborhoods.

These were results we have been well aware of as economists for many years. The reason that these marketing professors thought they had stumbled on something new is because many people are confused about the difference between income and net worth. The difference is crucial to your financial health. Income is nothing more than how much cash you bring in on a monthly or yearly basis.

People focus on income a lot because it puts the bling in bling bling! In other words income is hard cold cash coming in each month to buy goodies right now. It also pays the bills but does not get rid of them. Your cash flow tells you how much of your income you get to keep.

Net worth measures what you owe compared to what you own of value. It measures how much you are worth. Passive cash flow tells you how much of your cash flow would come in if you decided to quit going to work. You can see why guys like Robert Kiyosaki emphasize passive cash flow in their wealth building books.

The trick is to figure out how to get to the point where you don't have to work anymore if you don't want too. As financial economists we have known for years that living well within your means while saving and wisely investing as much as possible is the road to pumping up both your net worth and passive income so that you sleep-in every morning if you want to.

Let me give you an example of a simple decision my wife and I made that has had an enormous impact on our financial health. When we were married we decided we wanted to live in one of the upscale communities here in San Juan. This gated community is so big it actually has sub gated communities and numerous amenities such as the largest and most modern Olympic pool in the Caribbean.

We decided to purchase a 3 bedroom 2 bath condo that was within our means at $125,000.00. Now that we are wealthier and the condo has increased in value to around $200,000.00 we could sell it and move to a $1,000,000.00 house like the ones at the top of the hill our condo is on. We decided to remodel our condo instead and live each day as if we were in a luxury hotel.

Why was this a great decision? By living in a modest priced home we were really able to deck it out. Also, this is really important for you to understand, we are paying only one fifth in property taxes to the local government as compared to what we would if we "moved up" like many people do when their finances improve. Money really does roll down hill because I sure would not want to HAVE to cough up a bunch of cash each year just to pay property taxes!

Another danger people don't grasp is that local governments rely primarily on property taxes to fund their pork barrel politics. The primary source of revenue for most state governments is property tax! The local Puerto Rican government is now in a deficit. I guarantee that it has been discussed among the bone heads in the local capital that property taxes should be "reformed." That sure makes an expensive home a financial powder keg doesn't it!

Why do I suspect that most of the people in the million dollar community up above us are living above their means? Because they are the worst at paying their community fees and have had a lot of their services cut back! Just like they found out in the book "The Millionaire Next Door" many, many households in upscale homes are putting up appearances.

Many of these families are financially unhealthy, and deadbeats when it comes to paying what they owe. These families have less invested in the stock market because they have bigger bills to pay. These families are often less successful in the stock market because the pressure of their high debts focus them no short term stock investing where they are at a disadvantage.

Since we have lower costs in our modest home we are much less at risk if anything changes. Once we cash out the mortgage on our home we could even lose both of our jobs and get buy washing dishes at the local Taco Bell. That is certainly not the case when you have to pay property tax on a million dollar home!

The Gift of Psychological Drive in the Stock Market

The Jewish tribe has an interesting factor that has helped them become spectacularly financially successful. I call it "the gift of psychological drive to prove something." The Jewish tribe has considered itself chosen by God and oppressed by man at the same time (I contend that every ethnicity has been oppressed by man at some time or other but that is another story).

How in the heck has this helped the Jewish ethnicity progress you might ask? Well if you always feel like the underdog you have two choices. The first is to tuck your tail, give up, and hide. The other choice is to "toe the line" and work harder than other ethnicities in areas that are most likely to prove people wrong like education, professional trades, and as entrepreneurs. Steven Silbiger in his book "The Jewish Phenomenon" points to this aspect of the Jewish ethnicity that has allowed Jews to post spectacular financial and intellectual achievements as compared to other ethnicities on average.

You can use this psychological secret to your advantage as a stock market investor. Wall Street wants you to believe that you cannot (1) manage your own stock investments, (2) cannot pick your own stocks, and (3) cannot beat at their own game their "professional money managers." They project this on you because they want control your money for a hefty fee. You can learn to "toe the line" by dedicating yourself to an organized path of personal study in the field of investing. A chip on your shoulder to prove Wall Street wrong doesn't hurt to motivate you to study hard.

Study a major area of investing. Examples are Dow dividend strategies. Momentum strategies, value investing, long term technical analysis. Some of the better people out there to read about include, Warren Buffet, George Soros, and William O'Neill. The key point to remember is to be in a constant state of open minded joyful study. This allows you to eventually learn most of what is out there and find just the right investing style for you. The right style makes the most sense to you and is the most comfortable way for you to invest based on your psychology.

I personally know of a marine welder who retired a multi millionaire because he drove himself in his free time to master his understanding of the stock market. Another example is a family friend who is now a wealthy and retired beautician who invested her savings and those of her high school principal coach husband's in no load mutual funds, the very simplest of al strategies. They are now retired millionaires as well.

The only thing holding you back from fantastic success in the stock market is your own beliefs about yourself. Change your beliefs to an "I can too!" philosophy and you will change your reality. Today I was buying a bunch of tacos at Taco Bell. The cashier told me that I should play the state lottery with the numbers that came up on as the food price total. I looked her calmly in the eye, smiled, and remarked, "My dear why would I play the lottery when I have the stock market which truly is a much surer bet?"

Hidden Stock Market Riches In Your Mind!

Do you know what creative courage is? It is the internal psychological power to ignore everything outside your own mind to come to your own senses in what you want to believe. The alternative is to accept the junk being continually shoved down your throat by society as reported to you by your five senses. Many people are so psychologically downtrodden that they have abandoned all hope of thinking for themselves even though they may say otherwise. Many brilliant minds of the past have been put to death for views against the popular opinion.

The Spanish Inquisition, for instance, suppressed all counter poised thought (termed heresies by the inquisitors) within the Catholic Church. In the history of the Catholic Inquisition, the Spanish Inquisition is especially well-known, particularly in the nature of the "auto de fe", or trials, of supposedly converted Muslims, Jews, and Illuminists. This Inquisition also gave rise to the Peruvian Inquisition and the Mexican Inquisition, which continued until those countries split off from Spain.

Fundamentally, the Spanish Inquisitions, despite its political intentions of the King of Spain, demonstrates the ability of society as a whole to support mental slavery. We humans have a long history of bludgeoning one another to death in individual rise to societal dominance because material success in society comes from getting the most heads wagging in agreement with an "expert" regardless of whether the truth is expressed.

It has only been in recent years that freedom of speech has been tolerated in parts of the "modern" world. It has only been until recently that individuals have been allowed to openly question anything or everything they value in their lives if they so choose. Nonetheless, Wall Street derives its wealth from blind followers not dissenters in the stock market.

In finance for the last few decades there are a number of hard headed, steely eyed, mean mouthed professors who sternly defend the efficient market hypothesis of Eugene Fama at the University of Chicago. If you write material that went against the grain you were pretty much thrust out into the cold as a researcher. At least until recently when stronger technology and better data has indicated major flaws in the efficient market premise.

Positive change in our thinking is very hard work because society does everything possible to force us to think the same way. Stock investing is no exception. Warren Buffet for instance teaches us that if you know a company is good and the stock drops in price then you should buy more. How many people do you think follow that advice? I can tell you how many, "virtually zero!"

People don't follow this kind of sage advice because it has literally been beaten into them to not think in ways that are different from the group. Think back to your grammar school days. If you spoke out against the teacher you were so severely reprimanded that you very quickly learned that independent thinking is something severely frowned upon in "modern" education.

If you want to succeed as a stock investor you must develop the creative courage to see the market differently than the public does. You also have to develop the individual pride to act in the way you know is right even if those around you think you are crazy. They may even tell you that you don't know what you are doing for buying shares of stock in the companies you will come to see as the best buys because public is ignoring them as they are mesmerized by Wall Street's false pundits on shows like "Mad Money."

Learn To Be Wisely Frugal But Selectively Extravagant!

Have you ever wondered why so many solid businessman drive cruddy, old cars from a dingy, run down offices to their palatial homes in the suburbs? Warren Buffet, perhaps the greatest investor alive is known for this. The reason they live this life style is not because they are cheap misers but because they have a high level of financial intelligence that you can develop as well.

They understand that if they have $90,000.00 that they could either put that money into
1. reducing their debt
2. invest it into the stock market
3. selective home improvements
4. improve the appearance of their business facilities (I am assuming that this doesn't have an appreciable impact on their profitability and believe me it almost never does despite excuse mangers make to blow money)
5. buy a new Mercedes Benz for themselves
6. buy their children a new car.

The first two choices increase your net worth (equity) which is always a good thing and equity is not taxed. The third choice increases your enjoyment (utility) of your home. If you remodel your kitchen or bath appropriately you may also increase your equity. So if you have spare cash in excess of your debts and a solid investment, savings plan than this can be a good choice as well.

The fourth and fifth choices are TOTAL wastes of money because your business sits there for you to suck money out of and nothing else. A car loses a quarter of its value the moment it is driven off of the lot and then continues its downward slide to nothing. Depreciating assets are not investments they are financially undesirable necessities if you can't walk everywhere you need to go. An automobile is a financially undesirable necessity, nothing more, nothing, less.

The very last choice is the worst possible use of your money. Not only do you waste your money but you also teach and reinforce financial mismanagement in the minds of your offspring. Your children learn that they do not have to work for anything they want. Worse still they will mentally assign a value to the automobile relative to the amount of effort it took for them to acquire it and that is zero.

In Steven Silbiger's book "The Jewish Phenomenon" he describes in other ways why this concept of being prudently frugal yet selectively extravagant is a major key to the extraordinary wealth of the Jewish ethnicity. He shows clearly how Jewish families use this wisdom to convert their income into lasting wealth. Don't forget that this wisdom is not restricted to Jews and in fact is the underlying lying cause of financial stability in high income families of low income ethnicity. The most enduring wealth of course is a debt free life style with adequate passive income and the knowledge to recoup it all if lost.

Successful Investors Have Learned to Talk Their Walk!

Today, English is the most widely spoken and written language on the planet. English was first spoken in Britain by Germanic tribes in the Fifth Century AD. At that time it was known as the Old English (Anglo-Saxon) period. During the Middle English period (1150-1500 AD), many Old English word endings were replaced by prepositions like by, with, and from. We are currently in the Modern English period which started in the Sixteenth Century.

The number of words in English has grown from 50,000 to 60,000 words in Old English to about a million today; the largest of all languages by far. An average educated person knows about 20,000 words and uses only about 2,000 words in a week. Despite its widespread use, there are only about 350 million people who use it as their mother tongue.

It is the official language of the Olympics. More than half of the world's technical and scientific periodicals as well three quarters of the world's mail, and its telexes and cables are in English. About 80% of the information stored in the world's computers (like this text) are also in English. English is transmitted to more than 100 million people everyday by 5 of the largest broadcasting companies (CBS, NBC, ABC, BBC, CBC). It seems like English will remain the most widely used language for some time.

The field of finance was pioneered by the United States of America as an extension of mercantilism. This was at a time when study of anything but economics was considered unworthy as compared to hard sciences like math, chemistry and physic and kissing up in the king's court was highly regarded. The first business schools were established in the United States for this reason and still maintain their dominance. Finance has many words such as "put" and "call" for which there are no translations in other languages.

It is critical that you develop your financial vocabulary. My understanding of the financial vocabulary is vast compared to the average person because of my Ph.D. that I hold in the field as well as my investing experience as a futures and options trader and long term stock investor.

Many years of study at the doctoral level combined with direct practice in investments has allowed me to develop a vast financial vocabulary. This allows me to capture the essence of investment readings and conversations that the average person does not understand. Many investors fail not for lack of intelligence (I am of average intelligence) but lack of comprehension of what makes the stock market tick. This is due, in great part, to a lack of vocabulary that the common man on the street has not developed. Take the time to develop your financial vocabulary and you will excel over time as an investor!

How To Stop Worrying

These tips on how to stop worrying come from experience. I've always been a bit of a worrier. Thankfully, I have learned some techniques that help me and others that have used them. Here are the best of them.

Make A Decision

A sure way to stop worrying too much about an unresolved issue is to make a decision. Even bad decisions may often be better than doing nothing. You may immediately resolve the stress when you finally decide to quit that job, buy that house, or make that phone call. Nothing can crowd and cloud your mind with worry quite so much as decisions waiting to be made. Just make them, and if they prove to be bad decisions, just make new ones.

Take Action

Action towards a goal tends to diminish worry. Doing nothing but thinking too much about a goal, especially if you dwell on the hurdles, will cause you worry and stress. Certainly you should plan well, but when planning drifts towards worrying, start doing something positive.

Confront Problems

Want to know how to stop worrying when there are real problems? Confront them head-on. When I had to sue someone over a business matter, I was worrying about it for weeks. I finally just filed the papers, got on the phone, and came to an agreement. My stress was gone. In fact, my worrying dissipated as soon as started acting, BEFORE the resolution.

Even if you tend to dwell on past losses, you can probably see that there is more mental pain in thinking about a possible loss than in the loss itself. Suppose you lost a thousand dollars in the stock market a while back. Today, you would probably suffer less from that than you would from wondering if you'll make it on time to a concert you paid $30 for. It isn't the problems themselves, but the anticipation of problems that causes the most worry. Deal with them head on as soon as is possible, and resolve them to the extent possible.

Mental Categories

When there are too many things going on in my head, I put them on lists and feel better. Maybe you've had similar experiences. If you're thinking too much about something, and you stop to schedule a time to work on it, it is easier to let go of it for now. Write down that phone call you have to make on tomorrow's list, and you'll feel less worried now. You're creating "mental categories." Just telling yourself, "There is nothing I can do about this until Monday," can put a worry into a category of "nothing to worry about now."

How To Stop Worrying By Meditating

Meditating can be a great way to relax and to stop worrying. What if you don't want to take the time for more involved meditative practices? Try this: just close your eyes, let the tension out of your body and take several deep breaths through your nose. There are also brain wave entrainment CDs that will do all the work for you. Pop on the headphones and they'll relax you by slowing your brain waves.

Whichever techniques you use to stop your worries, make them into habits. Nothing works if you forget to use it. In fact, until they become automatic, you might want to carry a list of your favorite tips on how to stop worrying.

The Case for Value Stock Investing...What If?

Wall Street Institutions pay billions of dollars annually to convince the investing public that their Economists, Investment Managers, and Analysts can predict future price movements in specific company shares and trends in the overall Stock Market. Such predictions (often presented as "Wethinkisms" or Model Asset Allocation adjustments) make self-deprecating investors everywhere scurry about transacting with each new revelation. "Thou must heed the oracle of Wall Street"� not to be confused with the one from Omaha, who really does know something about investing. "These guys know this stuff so much better than we do" is the rationale of the fools in the street, and on the hill (sic).


What if its true, and these pinstriped super humans can actually predict the future, why do you transact the way you do in response? Why would financial professionals of every shape and size holler "sell" when prices move lower, and vice versa? Would this pitch work at the mall? Of course not. Now lets bring this phenomenon into focus. Hmmm, not one of these Institutional Gurus ever doubts the basic truth that both the Market Indices and individual issue prices will continue to move up and down, forever. So, if we were to slowly construct a diversified portfolio of value stocks (My short definition: profitable, dividend paying, NYSE companies.) as they fall in price, we would be able to take profits during the following upward cycle� also forever. Hmmm.


Let's pretend for a (foolish) moment that broad market movements are somewhat predictable. Regardless of the direction, professional advice will always fuel the perceived operative emotion: greed or fear! Wall Street's retail representatives (stock brokers), and the new, internet expert, self-directors, rarely go against the grain of the consensus opinion�particularly the one projected to them by their immediate superior/spouse. You cannot obtain independent thinking from a Wall Street salesperson; it just doesn't fill up the Beemer. Sorry, but you have to be able to think for yourself to stay in balance while pedaling on the Market Cycle. Here's some global advice that you will not hear on the street of dreams (and don't get all huffy until you understand what to buy or to sell as well as when to do so): Sell into rallies. Buy on bad news. Buy slowly; sell quickly. Always sell too soon. Always buy too soon, incrementally. Always have a plan. A plan without buying guidelines and selling targets is not a plan.

Predicting the performance of individual issues is a totally different ball game that requires an even more powerful crystal ball and a whole array of semi-legal and completely illegal relationships that are mostly self serving and useless to average investors. But, again, let's pretend that a mega million-dollar salary and industry recognition as a superstar creates Master of the Universe quality prediction capabilities�I'm sorry. I just can't even pretend that it's true! The evidence against it is just too great, and the dangers of relying on analytical opinions too real. No one can predict individual issue price movements legally, consistently, or in a timely manner. Face up to this: the risk of loss is real; it can be minimized but not eliminated.


Investing in individual issues has to be done differently, with rules, guidelines, and judgment. It has to be done unemotionally and rationally, monitored regularly, and analyzed with performance evaluation tools that are portfolio specific and without calendar time restrictions. This is not nearly as difficult as it sounds, and if you are a "shopper" looking for bargains elsewhere in your life, you should have no trouble understanding how it works. Not a rocket scientist? Good, and if you are at all familiar with the retailing business, even better. You don't need any special education evidentiary acronyms or software programs for stock market success� just common sense and emotion control.


Wall Street sells products, and spins reality in whatever manner they feel will produce the best results for those products. The direction of the market doesn't matter to them and it wouldn't to you either if you had a properly constructed portfolio. If you learn how to deal unemotionally with Wall Street events, and shun the herd mentality, you will find yourself in the proper cyclical mode much more often: buying at lower prices and, as a result, taking profits instead of losses. Just what if�


Coming next: Developing a Value Stock Watch List and Profit Taking Targets.

RSS Provides Multiple Opportunities to Share Your Information

RSS content syndication is a relatively new member of the internet marketing family of campaign options. And, it seems as though new uses for RSS content are coming about very quickly. This is possibly due to recent changes in the way that major search engines like Yahoo! and Google want web site owners to advertise.

It seems like it shouldn't matter to the search engines � the way you choose to market your website. But, it does when your link popularity begins to fall due to too many links on irrelevant web directories, etc. With RSS content syndication, you will not face that problem. And the better your content, the better the chances of increasing your standing with the search engines (not to mention your site visitors).

RSS feeds are no longer just appearing on the large news sites in order to show the latest headlines. They are appearing on internet-enabled cell phones, PDA and other mobile devices. The reason this is possible is the simple XML format used to produce the RSS feed. By using RSS syndication to spread the word about your site, you are now using one of the best advertising methods for reaching the "non-traditional" web browsers installed on these mobile devices.

Anyone familiar with web directory will understand the approach recommended for RSS syndication that I will term "many doors." The many doors approach means that you are providing several different headlines for the SAME article! If you have done directory submissions, or worked with a directory submission service this is what you provided for anchor text and site descriptions.

So, you can see that while some level of time investment will be required� you will no longer need to generate huge numbers of SEO content in order to "trick" the search engines. As a matter of fact, you will probably want to concentrate your efforts on providing a few high-quality relevant articles that will gain and keep the attention of your site visitors.

You will need to generate content an update your website frequently if you want your RSS content syndication technique to be an effective form of marketing. Why?

The answer is simple, but often overlooked by those publishing RSS content for syndication. When site visitors become accustomed to looking at an RSS feed for teasers about new information they can use, and they notice that there have not been any new additions for a while they stop looking. If you decide that RSS content syndication is a good marketing tool for your site, understand that you are committing a small amount of time in order to draw and keep your web site traffic.

How often will I need to update? That is a question frequently asked by those new to the world of RSS marketing. It really depends on a few things. If you are publishing content about developments in the stock market, your readers may expect hourly updates. However, if you are publishing content on the week's hottest new movies you could probably publish once a week and keep your readers happy. Of course, if you are syndicating RSS content about new books written on the topic of antique shoe stretches you may only need to publish content annually. This also points out another thought to consider.

If your content is so specific that it applies only to a limited group of people, then either RSS content syndication is not the right marketing technique for your web site or you need to expand your content offerings. If you find your website traffic lacking, why not try expanding your content to include a broader audience?

When you publish content on your website that you want your visitors to see, but you also want to make that same content available to others interested in the same subject area, RSS feed services provide a great and inexpensive way to expand your readership!

There are actually new search engines (Example, Feedster) that are in place with the purpose of allowing people to search for syndicated content that can be placed on their RSS feeds in order to provide a service to their web site visitors. Because there is such a service, there must be a need for this type of content! Therefore, listing your syndicated content with sites like Feedster will enable other web site owners seeking your information to find it.

Here is a short overview of what you need to do in order to get your content out there for RSS syndication:

First, you will need to compile a list of the content articles provided on your website with their headlines, URL and description. From this list, you will need to create a simple XML file (RSS format).

Second, you submit the XML file to services that make RSS syndicated content available for other users.

Third, you wait for approval of your RSS feed from each of the services.

Fourth, after you are accepted by a site you need to find out how often they will update their system with your latest XML RSS feed. You then need to ensure that you are updating your information at the appropriate time!

Finally, you need to sit back and enjoy the fruits of your labor! This is when you will begin to see increased traffic and sales to your site.

Navigating the College Savings Programs

As a parent, the big financial concern with a newborn is how to set aside enough money to assist for a college education. Universities and state governments have developed many different financial savings plans to encourage parents to save money for college. Some of the plans include 529 accounts, Coverdell accounts, Roth IRAs and prepaid/guaranteed tuition costs. Unfortunately, few of the programs offer every benefit such as tax deductions, tax deferred savings, unlimited investment options, self directed investments and no penalties.

Selecting a university is a critical and expensive decision, and in my view it is foolhardy to make before the last couple years of high school. A drawback of the university-based or state-based plans (such as a 529 account) is that they impose penalties if a child doesn't attend a specific university or in a specific state. Who knows what aptitudes, skills or interests your child may develop that necessitate a specific school that is out of your home state. University and state-based plans also impose penalties if the money isn't ultimately used for qualified college expenses; another example where an event that is out of your control and may cause an unneeded expense. But the biggest problem with university and state programs are the financial rule changes they make � after you start the plan.

To me, the university and state-based programs are a lose/lose savings plan for parents. If the cost of tuition rises faster than forecasted, in spite their guarantees, they raise the price and leave you under-funded. Conversely, if tuition rises less than forecasted, then you end up overpaying for tuition. And the same applies to the stock market some plans force you to invest in; when the market fell in 2000 and 2001, many plans broke their promise to guarantee full tuition funding in spite of promises to the contrary.

Another drawback of state-based plans is that your investment options are severely limited to a few mutual funds run by the brokerage firm operating the account. I have evaluated several: and they have high fees and poor returns, and I'm wary of the lack of competition for many of these accounts. The brokerage firms blame economics for the lack of investment choices, saying that most of the accounts are small and not very profitable for them, so they want as little trading and customer interaction as possible. More reference material for this article is available at http://investing.real-solution-center.com.

The federal college savings plans are better because they allow the widest selection of investments (such as an educational Roth IRA or other education savings accounts), and can be applied to most any accredited university. These accounts offer tax-free growth and withdrawal is also exempt from federal taxes and some states taxes. Realistically, your situation may call for multiple accounts. Rules prohibit you from using these if your income passes certain thresholds.

In my opinion, the best place to start saving college is with U.S. government ibonds from TreasuryDirect.gov. These bonds offer the most flexibility and control, and require none of the paperwork and rules of other savings plans. They accrue a decent rate of interest every month, the principal is adjusted for inflation each quarter, the income tax is deferred, and you don't have any brokerage fees. And when the money is withdrawn for a university on their approved list, the money can be redeemed tax-free. (As for limiting rules: you cannot withdraw the money in the first year, and if you withdraw it within five years, there is a three month interest penalty � so ibonds are not the best savings plan after a child reaches about age twelve). Since ibonds are simply savings not an educational account, the money can be spent for any type of expense that may arise.

The government and brokerage firms keep updating these accounts, so my complaints will hopefully become moot in the near future. But the criteria that you need to watch for are: many investment options, few penalties, no taxes and total control. These will maximize the money you're setting aside for that expensive degree.

Compound Interest Doesn't Add Much To Your Wealth

The biggest gripe that I have with a few famous financial planners is their myth and awe of compound interest. They say, "compound interest is the 8th Wonder of the World according to Einstein, and will make you a million for your retirement if you'd only skip a few trips to your local coffee shop!!" In my opinion, compounding your return on investment is a tiny factor in wealth building compared to how much and how often you save money.

Growth charts used by the people struck by compounding ignore all forms of taxation, fees, commissions, inflation, and then misleadingly uses an average return of 10-12%. Let's start with the average stock market return of 10.7% This return rate is the most frequently published number to reflect a stock market average. There are many problems with market averages, but the 10.7% is not any kind of accurate annual compounded growth rate. As an example, if the stock market has a loss of 10% one year, and a 20% gain the next year, these zealots say that the average return for these two years is +5% (+.2-.1)/2). This is a mathematical failure to add. The correct return is only 3.9%, and again, this doesn't include fees, commissions, taxes and inflation. How are you going to compound your money when the stock market starts one of its frequent 5 year droughts of moving down and sideways ('73, '81, '87, '00). The after-inflation Dow Jones Industrial Average annual return for the last 55 years is only 4.8%; plug that little number into your calculator for 10 years and see how many Rolls-Royces you can buy.

Your growing portfolio will either be in a taxable account (knock another 25% off of your annual compounded growth rate for taxes) or in a qualified retirement account. The zealots talk about qualified accounts like everyone can have them, but there are mazes of rules for who can qualify for certain programs, how much they can invest, and even a ceiling to how much can be put in them. Sooner or later every dime of these accounts will be taxed as well. And when the baby-boomers start emptying the government's social security account in 2014, tax rates on these retirement accounts are not going to remain low. Politicians will take the easy way out and simply tax these retirement accounts to make up any deficit. The point is this: when money is in a retirement account, it isn't yours until the government taxes it and releases it to you. More reference material for this article is available at http://investing.real-solution-center.com.

If you start playing around with realistic compound rates, the serious increase in earnings doesn't start until after 50 years. So unless you are a 4 year-old with $50,000 in the bank and have the discipline to never spend it, even the concept of compounding is fairly irrelevant for your financial future. Today, half of the 50 year-olds in the U.S. do not have $50,000 in retirement assets. Even skilled investors are unlikely to build that into a tidy $2,000,000 by the time they turn 65.

The compounding that pays the most is the addition to your savings over time and investing skill. If you don't continually add to your accounts, they can not add up to much; "No big money in = No big money out." And if you don't continually accumulate investing skill and knowledge, you won't be able to keep your money growing faster than inflation is destroying it. Please note that there are no books titled "How To Get Wealthy By Putting Some Money Under A Mattress." Your money has to be invested and earning interest above the inflation rate or you are getting poorer.

Investing Without Brakes Is Hazardous To Your Portfolio

The business of investing in stocks is an inventory "buying & selling" business. Naturally, the companies that sell stock to the public want you to buy and hold it forever in order to maintain its value. But if you are buying without any selling, you are literally driving without any brakes. That is a horrifyingly unsafe position for your principal. The most effective defensive brake system for your money is a stop-loss order on your stocks.

A stop-loss order is an order you give your broker to sell your shares if a stock falls below a certain price. You can select a stop-loss price for your stock based upon chart patterns or a percentage drop from your purchase price. And some brokers automatically move them as a stock moves up in price to lock-in profits for you.

The first time I learned this lesson (not the last unfortunately), I was just 18 years old. One of my early stock purchases, recommended by a stockbroker from a famous brokerage firm, was stock in a famous airline � just before it trailed off into bankruptcy. Had I read this article before the airlines' financial calamity, I would have rescued most of my $5,000 and prevented my own financial calamity.

But you cry, "The greatest investor Warren Buffett is a buy & hold investor!" No, I'm afraid he is not. Mr. Buffett mainly buys whole companies or controlling interest in a company. He buys control so that if there are problems with the company, he can hire/fire/make changes. If there are critical problems with the company whose stock you own, the only control you have to protect your principal is to sell. More reference material for this article is available at http://investing.real-solution-center.com.

When a public company goes bankrupt, 70% of the time the shareholders receive no money at all. How many stocks do you want in your portfolio worth $0? I know exactly how many that I want, and I know that stop-loss orders prevent it from happening.

There are a few "loss-recovery" methods, but you'll never sell enough covered calls to recover from a stock trading under $5, or be able to buy puts on a stock that has been de-listed from an exchange. But the nearly certain protection is to place a stop-loss order on the stocks you own. You can choose any percentage loss amount (5%-25%) based on your experience, but you must have a stop-loss order in place to protect your capital.

There a zillions of old stock market sayings. Here is one of them for those of you who are still skeptical, "If the smart-money has sold and moved on, what type of money still own the stock?"

Teenage Gambling and Addiction

Gambling today is all around us. From the local lottery to football pools at work, gambling has become as much a part of our lives as shopping or eating with the family. But for millions of teens it may develop into so much more than the occasional bet with friends. It can become an obsession, a way of life. The problem of gambling compulsively is a crippling illness that can destroy families, friends, jobs, and lives.

Many history books specializing in the study of the legal aspects of gambling, argue that gambling in the United States has gone through three historical phases. Gambling thrived during the colonial and post revolutionary periods. Governments supported and encouraged lotteries. Lotteries however were not the only type of gambling during this time. Wagering on horse racing was another popular form of gambling. Racing though was not quite as organized or as complex as modern day horse racing. Instead the gambling was only between a few owners of horses and their partisans. The first racetrack in the United States was built in Long Island, New York in 1665.

With the end of Jacksonian morality, came the end of the first phase, gambling scandals and outright fraud caused the ban of lotteries and gambling. By 1862, all states expect Kentucky and Missouri outlawed lotteries. The second phase began after the civil war. Southern states that were desperate for revenue turned to lotteries. New laws were enacted legalizing gambling houses so that states could collect taxes on them. As gambling moved west it became more pervasive, and laws were much more difficult to enforce. In the 1890s scandals in the Louisiana lottery resulted in new anti-lottery laws.

Legislation banning lotteries in many states soon followed, some were even written into the State Constitution.

The second wave of legal gambling was short-lived. Scandals and the rise of Victorian morality led to the end of legal gambling. Virtually all forms of gambling were prohibited in the United States by 1910. There was legal betting in only 3 states, which allowed horse racing, but even that number shrank in years following.

The thoughts about gambling ran so strong that Arizona and New Mexico were required to outlaw casinos to gain statehood. The prohibition however did not stop gambling. There were many types of illegal gambling houses. Some operated openly for many years, but had to pay protection money to the law enforcement authorities for this privilege. The third and present phase began during the great depression of the 1930's. The great depression led to a much greater legalization of gambling. The antigambling mood changed as major financial problems gripped the country, especially after the stock market crash of 1929.

This societal problem, like teenage smoking, drinking and drug abuse, is yet one more area we will need to give attention to.

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A New Wall Street Line Dance: Performance

It matters not what lines, numbers, indices, or gurus you worship, you just can't know where the stock market is going or when it will change direction. Too much investor time and analytical effort is wasted trying to predict course corrections� even more is squandered comparing portfolio Market Values with a handful of unrelated indices and averages. If we reconcile in our minds that we can't predict the future (or change the past), we can move through the uncertainty more productively. Let's simplify portfolio performance evaluation by using information that we don't have to speculate about, and which is related to our own personal investment programs.


Every December, with visions of sugarplums dancing in their heads, investors begin to scrutinize their performance, formulate coulda's and shoulda's, and determine what to try next year. It's an annual, masochistic, rite of passage. My year-end vision is different. I see a bunch of Wall Street fat cats, ROTF and LOL, while investors (and their alphabetically correct advisors) determine what to change, sell, buy, re-allocate, or adjust to make the next twelve months behave better financially than the last. What happened to that old fashioned emphasis on long-term progress toward specific goals? The use of Issue Breadth and 52-week High/Low statistics for navigation; and cyclical analysis (Peak to Peak, etc.) and economic realities as performance expectation barometers makes a lot more personal sense. And when did it become vogue to think of Investment Portfolios as sprinters in a twelve-month race with a nebulous array of indices and averages? Why are the masters of the universe rolling on the floor in laughter? They can visualize your annual performance agitation ritual producing fee generating transactions in all conceivable directions. An unhappy investor is Wall Street's best friend, and by emphasizing short-term results and creating a superbowlesque environment, they guarantee that the vast majority of investors will be unhappy about something, all of the time.


Your portfolio should be as unique as you are, and I contend that a portfolio of individual securities rather than a shopping cart full of one-size-fits-all consumer products is much easier to understand and to manage. You just need to focus on two longer-range objectives: (1) growing productive Working Capital, and (2) increasing Base Income. Neither objective is directly related to the market averages, interest rate movements, or the calendar year. Thus, they protect investors from short-term, anxiety causing, events or trends while facilitating objective based performance analysis that is less frantic, less competitive, and more constructive than conventional methods. Briefly, Working Capital is the total cost basis of the securities and cash in the portfolio, and Base Income is the dividends and interest the portfolio produces. Deposits and withdrawals, capital gains and losses, each directly impact the Working Capital number, and indirectly affect Base Income growth. Securities become non-productive when they fall below Investment Grade Quality (fundamentals only, please) and/or no longer produce income. Good sense management can minimize these unpleasant experiences.


Let's develop an "all you need to know" chart that will help you manage your way to investment success (goal achievement) in a low failure rate, unemotional, environment. The chart will have four data lines, and your portfolio management objective will be to keep three of them moving upward through time. Note that a separate record of deposits and withdrawals should be maintained. If you are paying fees or commissions separately from your transactions, consider them withdrawals of Working Capital. If you don't have specific selection criteria and profit taking guidelines, develop them.


Line One is labeled "Working Capital", and an average annual growth rate between 5% and 12% would be a reasonable target, depending on Asset Allocation. [An average cannot be determined until after the end of the second year, and a longer period is recommended to allow for compounding.] This upward only line (Did you raise an eyebrow?) is increased by dividends, interest, deposits, and "realized" capital gains and decreased by withdrawals and "realized" capital losses. A new look at some widely accepted year-end behaviors might be helpful at this point. Offsetting capital gains with losses on good quality companies becomes suspect because it always results in a larger deduction from Working Capital than the tax payment itself. Similarly, avoiding securities that pay dividends is at about the same level of absurdity as marching into your boss's office and demanding a pay cut. There are two basic truths at the bottom of this: (1) You just can't make too much money, and (2) there's no such thing as a bad profit. Don't pay anyone who recommends loss taking on high quality securities. Tell them that you are helping to reduce their tax burden.


Line Two reflects "Base Income", and it too will always move upward if you are managing your Asset Allocation properly. The only exception would be a 100% Equity Allocation, where the emphasis is on a more variable source of Base Income� the dividends on a constantly changing stock portfolio. Line Three reflects historical trading results and is labeled "Net Realized Capital Gains". This total is most important during the early years of portfolio building and it will directly reflect both the security selection criteria you use, and the profit taking rules you employ. If you build a portfolio of Investment Grade securities, and apply a 5% diversification rule (always use cost basis), you will rarely have a downturn in this monitor of both your selection criteria and your profit taking discipline. Any profit is always better than any loss and, unless your selection criteria is really too conservative, there will always be something out there worth buying with the proceeds. Three 8% singles will produce a larger number than one 25% home run, and which is easier to obtain? Obviously, the growth in Line Three should accelerate in rising markets (measured by issue breadth numbers). The Base Income just keeps growing because Asset Allocation is also based on the cost basis of each security class! [Note that an unrealized gain or loss is as meaningless as the quarter-to-quarter movement of a market index. This is a decision model, and good decisions should produce net realized income.]


One other important detail No matter how conservative your selection criteria, a security or two is bound to become a loser. Don't judge this by Wall Street popularity indicators, tea leaves, or analyst opinions. Let the fundamentals (profits, S & P rating, dividend action, etc) send up the red flags. Market Value just can't be trusted for a bite-the-bullet decision� but it can help. This brings us to Line Four, a reflection of the change in "Total Portfolio Market Value" over the course of time. This line will follow an erratic path, constantly staying below "Working Capital" (Line One). If you observe the chart after a market cycle or two, you will see that lines One through Three move steadily upward regardless of what line Four is doing! BUT, you will also notice that the "lows" of Line Four begin to occur above earlier highs. It's a nice feeling since Market Value movements are not, themselves, controllable.


Line Four will rarely be above Line One, but when it begins to close the cap, a greater movement upward in Line Three (Net Realized Capital Gains) should be expected. In 100% income portfolios, it is possible for Market Value to exceed Working Capital by a slight margin, but it is more likely that you have allowed some greed into the portfolio and that profit taking opportunities are being ignored. Don't ever let this happen. Studies show rather clearly that the vast majority of unrealized gains are brought to the Schedule D as realized losses� and this includes potential profits on income securities. And, when your portfolio hits a new high watermark, look around for a security that has fallen from grace with the S & P rating system and bite that bullet.

What's different about this approach, and why isn't it more high tech? There is no mention of an index, an average, or a comparison with anything at all, and that's the way it should be. This method of looking at things will get you where you want to be without the hype that Wall Street uses to create unproductive transactions, foolish speculations, and incurable dissatisfaction. It provides a valid use for portfolio Market Value, but far from the judgmental nature Wall Street would like. It's use in this model, as both an expectation clarifier and an action indicator for the portfolio manager, on a personal level, should illuminate your light bulb. Most investors will focus on Line Four out of habit, or because they have been brainwashed by Wall Street into thinking that a lower Market Value is always bad and a higher one always good. You need to get outside of the "Market Value vs. Anything" box if you hope to achieve your goals. Cycles rarely fit the January to December mold, and are only visible in rear view mirrors anyway� but their impact on your new Line Dance is totally your tune to name.


The Market Value Line is a valuable tool. If it rises above working capital, you are missing profit opportunities. If it falls, start looking for buying opportunities. If Base Income falls, so has: (1) the quality of your holdings, or (2) you have changed your asset allocation for some (possibly inappropriate) reason, etc. So Virginia, it really is OK if your Market Value falls in a weak stock market or in the face of higher interest rates. The important thing is to understand why it happened. If it's a surprise, then you don't really understand what is in your portfolio. You will also have to find a better way to gauge what is going on in the market. Neither the CNBC "talking heads" nor the "popular averages" are the answer. The best method of all is to track "Market Stats", i.e. Breadth Statistics, New Highs and New Lows. . If you need a "drug", this is a better one than the ones you've grown up with.

Change is good!

Good Luck

Good luck, people called it, when a couple I know had a business handed to them for free. It was making a little money, but the owner didn't want to deal with it anymore. Other things were going on in his life, and he just wanted to drop the whole business. However, the lease on the building the business was in still had nine months to go.

This is where my friends enter the story. The owner had a problem, and they had a solution. Here are three reasons they had a business given to them, and why they were so "lucky."

1. They let the man tell his story, and they listened.

2. They looked at the business, and saw the opportunity.

3. They worked, doing what it took to benefit from their "good luck."

Good Luck Comes From Preparation

You can say they were lucky. The owner agreed to give them the business if they would simply take over the lease on the building. The biggest reason for their good luck however, includes the ones given, and goes beyond them: They were ready.

Having some money in the bank made it possible to handle the transition. They had previous experience with a small business. They were willing to learn what they needed to learn, and were mentally prepared to work.

Another example: John was "so lucky" to get a $6,000 car for $2,000 at an auction, a friend told me. I mentioned that John went to the auction regularly, that he had made himself familiar with car values, and that he always kept money available for such opportunities. Of course, it didn't seem to register with my friend.

My friend could have been "so lucky," too, but he had to be ready. He might have saved $2,000, or obtained a credit card with a high enough limit, or arranged with someone to borrow the money and split the profits when deals like this came up. Since he didn't do any of these things, there was no opportunity here for him.

If you want good luck, aren't there always thing you can do to prepare? To be lucky in love, you comb your hair, right? If you want opportunities in the stock market, start studying, setting aside money to invest, and exploring the possibilities. Prepare for opportunity, and it will come more often. Good luck!

Investing, Are you ready?

Before entering the world of investing, it is important to honestly analyze your present situation. Doing so will allow you to effectively manage your own money in a way which maximizes returns while limiting unwanted risk. Questions to consider include:

What is my investment goal?
How much time do I have to attain this goal?

Methods of saving for a down payment on a house differ greatly from saving for retirement. The reason for this lies in the factoring of time. Over short periods of a few years, individual companies and the stock market as a whole can experience dramatic fluctuations which in no way represent longer-term trends. Because of this possibility, a smaller percentage of your portfolio should be allocated into stocks as the time for cashing in your investments draws near. Conversely, the longer the time period you have to invest, the more aggressive your portfolio should seek higher returns.

How much do I initially have to invest?
How much can I afford to consistently add later?

Einstein described compounding as "The Eighth Wonder of the World" and for good reason. Being able to earn interest on your interest allows investments to increase exponentially faster than with simple interest. A one-time investment of $5000 earning 10% interest compounds to a total of over $54,000 after 25 years. Using simple interest, it would take over 95 years to reach the same amount. Naturally, the larger your initial investment and the more you can afford to add later on, the more you can expect to gain in returns.

Am I carrying any high-interest debt, such as on a credit card?

Before saving for future events, you should consider your present finances. Paying off any high-interest loans function as an "automatic" return. Writing a check to Visa to pay down your debt may not feel as satisfying as starting a nest egg, but by eliminating those 22% interest payments, you have effectively "made" a 22% return. Although you need not completely eliminate your debts, getting such payments into a reasonable area should be a more pressing priority.
This fiscal reckoning is also a good time to examine budgeting and expenditures. Look for unneeded or overpriced purchases, and consider the feasibility of paring them down and saving the extra money. Unused gym memberships, that $5 whipped mocha-hazelnut cappuccino, and extra cable channels all add up. The true cost of these and all other purchases involves understanding the "time value of money", but for now it should suffice to say that $5 added to the previously mentioned investment account compounding 10% for 25 years turns into $54.17.

What is my risk tolerance?
What will my investing style be?

These questions lead us to selecting individual investments. Consider your investment timetable for when you'll need the money, recognizing that more conservative selections should be made the shorter the window. Everyone's risk tolerance is different; while one person may feel comfortable with small-cap biotechs another may need a blue chip to feel equally sound.

Analyzing the risk to reward ratio here is a good first step. The more risk you take on, the more you should expect to get in return if your investment pays off. The inverse is also true: the more stable an investment, the less return one should expect. Government-backed I Bonds pay over 6%, but involve tying up money for years in order to fully benefit from them. While this gives you one target, the average return of the broader market indices is about 11% per year. There are two primary schools of thought about investing: growth and value.

Growth

Growth investing is a higher-risk strategy which focuses on finding smaller companies poised to rapidly grow earnings. Stocks here tend to be micro-caps or small-caps, and the occasional mid-cap (under $10 billion). In their younger lives, many of the well-established companies of today found themselves considered here (Think of Apple Computers (AAPL) or Starbucks (SBUX)). Growth companies can be found in many different sectors, although such companies often have similar traits. A growth company usually has a unique product or service to offer which can fundamentally change how business is done. When found early enough in their growth cycles, these companies have the potential to return enormous profits to investors.

Value

Value plays usually are found in larger companies, although the strategies used to find them can be applied to smaller corporations as well. Looking for value stocks is similar to looking for values in a store: find a good product at a price below what you would normally expect to pay. These bargains are often found in the form of companies which have been unfairly beaten down through overselling. Finding value stocks usually involves using a discounted cash flow model (DCF) to find a company's intrinsic value. This is the form of investing advocated by Benjamin Graham, and popularized by Warren Buffett.

GARP

GARP, or Growth At Reasonable Price, is a combination of the above forms. As the name implies, the focus is finding growing companies trading at reasonable prices. Quick measures of this include the PEG ratio (Price to Earnings to Growth) and Forward P/E. Although not a specific style, GARP is utilized by many investors because of its flexibility. The average, diversified portfolio will have many GARP-type stocks in it.

Once you know your goals, the amount your going to invest, your relatively debt free and know your risk tolerance it's time to look at the market and start thinking about selecting stocks.

Getting Started: Learning the Market and Selecting Stocks

If you were going to spend several thousand dollars on a refrigerator or television, you would thoroughly research the market for those goods to find the product which best suited your needs. Investing is no different. Before buying into a company, you should be well-acquainted enough with it to give a short presentation. Knowing the basics of how a company operates, what it sells, how it makes money, how much money it makes, and what kind of growth the company is expected to experience are all crucial questions that any investor should be able to answer.

Developing a better understanding of the stock market is a long, but hopefully rewarding, process. Immediately investing in stocks with real money, however, is equivalent to taking a test without being introduced to the material. Formerly called "paper trading", beginning investors would normally spend several months tracking their stock picks without having real money on them.

Thanks to technology, you can now find sites that automate (for free) the process of tracking price changes for you on the internet. Simulated investing is a risk-free way of beginning to understand market fluctuations and the forces driving them. Examining these trends will payoff in the future, as an increased understanding of the stock market can only help you on your path to building wealth.

Once you become comfortable picking your own stocks, you can still continue to "paper trade" online, as it offers the opportunity to explore and experiment with other investing styles. Gordon Gekko, the famed villain in Wall Street played by Michael Douglas, said "Information is the most valuable commodity I know of". Ignoring for a moment that the movie ended with indictments for insider trading, the statement is true: you will not regret being an informed and intelligent investor.

The market is constantly changing, but by learning the ropes of investing you too can pull off a "One Up on Wall Street".