The Third Step You Have to Take to Get Rich In the Stock Market!

This step is really important and most people just don't get it. Listen carefully � you have to deferred, avoid, and reduce capital gains taxes to the bare minimum! Well, how do I do that you ask? The best thing to do of course is to completely avoid capital gains taxes. The only way to do that is to open a Roth IRA. The reason you avoid capital gains taxes is that you pay your income taxes first and then you never pay taxes on any profits of the money you put into your Roth IRA.

If you make a lot of money though, you can't open a Roth. In that case you need to open a Standard IRA and of course if your company matches in a 401(k) you need contribute up to the matching. In a 401(k) make sure that you only buy a no-load indexed mutual fund. Get your accounts open! Get your accounts open! Get your accounts open! I can't overemphasize or shout this loud enough. Once you have your account open you will be motivated to start investing � if you don't know how to trade through such an account I can teach you.

Here is a key point if you trade in an individual trading account where you are subject to capital gains taxes. You have to remember that the short term capital gains tax is double the long term capital gains tax rate. That means that if you buy a stock now and then sell it in less than a year you will have to pay your regular income tax rate which is as high as 35%. On the other hand if you buy low and hold for the big multi year stock price raises your capital gains tax rate is only 15%. This is huge! Look, that means that you have to earn 20% just to overcome the hurdle when you buy and sell real fast like the get rich quick gurus want to teach you.

Get your accounts open. Here is a recap. First check to see if the company you work for offers a 401(k) plan with matching and contribute up to the matching. If you work for a university than open a 403(b) plan which can be even better than the 401(k). Restrict your investing in a 401(k) or 403(b) to no load indexed mutual funds. Second, if you can save more than the matching amount your employer offers then open a Roth IRA and contribute up to the maximum. Third, if you are a really hard core saver and investor like my wife and me open an individual trading account. Fourth, open your Roth and individual trading account at an online brokerage like Ameritrade.com or Etrade.com. This insures that you won't get an earful of manure from a stock broker who just wants to nickel and dime you out of your account. Also by trading online yourself you will learn to become a self sufficient investor � the richest kind of all!

The Second Step You Have to Take to Get Rich In the Stock Market!

The second step you have to take to get yourself moving forward financially is to learn to monitor your finances. Computers can really help us today if we let them. Put all of your bills on auto pay and scrutinize everything monthly looking for wasted expenditures. If you have a spend thrift in your life that won't stop them throw them off the train � divorce them or cut them out of the family. Over time you will know how much you can set aside to invest in the stock market.

That amount may start out very small. I was just talking last night with a 78 year old friend of mine who is a stock market millionaire. He told me that when he started working in the 1950s $250 was a lot of money to earn in a week. Stock sold then, just like it does today, for $10-$15 in solid companies � he worked for a solid company. He told me that he and his wife believed in the stock market and methodically and with great discipline saved and invested each week into the stock market.

At the time other company employees who did not save and invest had a lot more money to spend on finer cars and furnishings. My friend's wife was a little frustrated to see the Jones always ahead materially but her husband assured her that things would be different in the future. Sure enough they are stock market millionaires now.

I asked my friend what advice he would give you. He said that it is imperative to just get started saving and investing in you retirement plan at work up to the matching. If you have extra money open a Roth and if you have more than that then the minimum Roth contribution open a individual trading account. The main thing he wanted you to know is that you have to get started no matter how small it is. If you don't you will never get ahead.

The First Step You Have to Take to Get Rich In the Stock Market!

I am widely recognized as a leading expert in the stock market and especially at teaching you how to become your neighbor's millionaire next door. I didn't start out as knowledgeable and skilled as I am now. I started out knowing nearly nothing. I was so inexperienced in my early twenties that I could only stand by when a full service stock broker stole $85,000 from my eighty year old grandmother. I watched the nationwide stock brokerage protect the interests of the full service broker and my grandmother lost everything.

The pain of this was so intense that it drove me to complete my Ph.D. in finance � less than a hundred of us graduate in this degree worldwide annually because it is so mathematically difficult. My frustration and anger at the big rich forces behind Wall Street drove me to become a modern day master of money. This is what you have to do � wake up!!! Wake up to the fact that you can make it as a stock investor. Wake up to the fact that you control your destiny and that you can stop handing all of the control over to the Wall Street machine that could absolutely care less about your financial future. This is the first step � take full responsibility for you earnings, savings and investment.


I learned years ago from a friend of mine, Dr. Van Tharp, Ph.D., that if I didn't take full responsibility for my investing that I would never progress � I would simply break the fragile feedback loop that allows all of us to learn from our mistakes. Any time you blame anyone for a financial mistake you destroy the opportunity to learn and thrive from the situation. The simple decision you must make is to deeply, totally, firmly, and finally, say to your self, "I am the master of my universe � I am in control � Wall Street has no power over my mind" is the key critical change you must make in your thinking.

Some people will think that you are arrogant but just blow them off and laugh all the way to the bank. Stop listening to people � are these nosy little bug a bugs in your life that so quickly nay say your investment dreams paying your bills or giving you money to move ahead � no so blow them off! They just want to give you bad advice so that you fall into their same financial loser traps. In terms of investing become an island unto yourself and very carefully cultivate relationships with people who really do know what they are doing in investing. This is exactly what I did. I started seeking out people who really understand the markets. I found them over time and I asked them lots of questions.

The 1% rule � Stock Market Insiders Are Richer than European Royalty!

I was watching Oprah the other night. She was covering the reality of the crappy lie called the American Dream that says just work hard and everything will be Peachey keen in the land of the free and the home of the brave. She pointed out that 1% of the U.S. population now control 40% of the all American wealth. If you are not born into that 1% today, she pointed out, then it is much harder today to work your way into it. You have to work a lot more hours for a lot less pay and your extra hours are just making the 1% richer. Meanwhile if you have the right connections � especially if you are able to enter that special band of thieves called corporate insiders and play your corporate politics right � then you are instantly propelled to the top. Today with our hideously corrupt corporate governance system supported by divisions of corporate attorneys serving insiders and paid by unwitting public Joe shareholders membership pops you right into Oprah's 1%.

So what can you do if you weren't born into the Johnson & Johnson family and don't have a "richer than God" old money American dream trust fund? The answer is you have to learn to buy very low and sell very high like the robber barons did in the 1800s. I know times are tough on the American middle class but there are ways for you to get ahead. First of all you have to stop chasing pipe dreams. Ignore the get rich schemes like multilevel marketing, derivatives, and real estate short selling junk people will bring your way � all endorsed by some major public figure that make the con artist at the top rich to suck you in.

Learn to take your financial future in your own to hands and make the market pay you. How do you do this? Well, first you have to stop thinking like a cow. Most people in the public make all of their opinions based on what the group has decided is right. You have to stop doing this and take the attitude that the public as a group is a pretty stupid mass of livestock heading up the cattle chute into the inside corporate executives financial slaughter house. Right now the chute is closed because the stock market has recently crashed making stocks cheap �insiders are loading up while the media is strangely bereft of "stock market rags to riches dreams" it hyped up to suck people in to the market in 2000 when insiders were dumping on the public.

Learn to get really excited about the market when everyone hates it. Right now the stock market has crashed and you don't hear any good news out there. Ever wonder why? The big forces behind Wall Street, the secret buying consortiums, the inside corporate executives, and the experienced individual investors who are smart enough to know to buy, buy, buy when stock prices are extremely low and the Wall Street media machine is strangely quiet. There are a lot of really good companies out there at extremely low prices ripe for you to buy, buy, buy!!!

Should I Incorporate Fundamental Analysis When Trading a System?

There's a common misconception about "Fundamental Analysis": People tend to think that the market should react in a certain way to news. Example: "Unemployment Rate goes down", which means that the economy is doing better, therefore companies should make more profits and stock prices will move up. Conclusion: If the unemployment report is positive, the market moves up.

But in reality the markets are driven by greed and fear, and not by supply and demand or anything like this. A report itself is meaningless: It's the traders reaction to the report that moves the market.

Here's a perfect example: On Friday, April 7th 2006 the unemployment rate for March was published. The market expected an unemployment rate of 4.8%, and the numbers came in better than expected: Only 4.7% (for details see http://biz.yahoo.com/c/ec/200614.html). That's good news, isn't it? The market should move up, right?

WRONG! On that day the e-mini S&P dropped 20 points. Why?

Well. here are some comments I got from a news-service:

"Not surprisingly, Friday's equity trade was dictated by the March employment report. More specifically, it was the Treasury market's reaction to it that set the stage for stocks." ...
"A lack of negative surprise caused the stock market to breathe a sigh of relief."...
"The Treasury market had a very divergent reaction to the data, and it took the stock market down with it. For Treasury traders, the in-line data essentially provided no evidence that the Fed will be inclined to soon end its monetary tightening cycle."

Oups. So the stock traders thought it's good news and the market was moving up, but the treasury trader in the other room thought it's bad data. So treasury instruments were rallying, causing the stock market to drop like a rock. But don't stocks lead the treasuries? Or do treasuries lead stocks? ...

As I am writing these lines another news hits the ticker: Oil prices trading above $69 per barrel. But what does it mean? Should the stock market move up or down? Here's a discussion that I heard this morning: "As crude oil prices continue to plug higher the debate over what it all really means will begin again. The questions that will be batted back & forth are "Are sky-high oil prices indicative of a coming economic slowdown or looming inflation?" And more important: How will the Fed react? Will they cease increasing interest rates or even lower the rates again? This would provide a boost for the stock market. Or will traders fear that there's an economic slowdown which might result in lower company earnings? This would move the market down.

As you can see, it's not the news that move the market; it's the reaction of the traders to news that let prices jump up and down.

Now, how should a computer model take these emotions into consideration?
In my opinion there's no way, and I haven't seen any models (incl. artificial intelligence) that is coming somewhat close to this (sometimes really weird) human behavior.

That's why I for one don't incorporate Fundamental Analysis into my trading systems.

The Sky Is Rising � Buy Stocks Low Now!

Back in 1998 I wrote an article warning people that the stock market was extremely overpriced. I was seeing obvious signs of idiocy in the stock market. The first big sign was a rampant hype of how great the big stock opportunity was in the popular press. I was seeing new investing shows pop up on TV. I was seeing young attractive women that look fresh out of am MBA program and dumb as dirt � CNBC's "Money Honey" Maria Baritomo on the floor of the NYSE gave a daily blow by blow account of how everyone in the public was going to get rich if they just bought in.

It all reminded my of Bernard Baruch's account of why he sold out at the top of the market in 1929. On his way to work he stopped to have his shoes polished. The shoeshine boy said, "Mister, let me tell you a bout a great stock I just bought� I ain't gonna be shining shoes for long." Baruch immediately went to his office and sold all of his stock. Later he told a reporter that when an inexperienced stock market idiot of a shoe shine boy is giving recommendations it is time to get out. In 1998 airline stewardesses were bragging about their stock buys and counting the days to quit their job.

Nothing could have been farther from the truth. The inside corporate executive controlled media firms were pumping investment sewage into the minds of the public. Why were they doing this? Because they had enormous holdings of employee optioned stocks that they needed to dump on the public. That is exactly what they did and public investors jumped onto the insider Punji stakes. In late 1999 and early 2000 just six months before the great stock market crash every time a greedy inexperienced idiot in the public bought into the great American rip off and bought stock an insider sold out for extraordinary profits. The vast majority of all inside corporate executives sold out their holdings on a stupid, greedy, public whipped into a buying frenzy buy the U.S. media that is controlled and operated from behind the scenes by large U.S. corporate insiders.

I just read an article in Business Week entitled "Blue Chip Blues." The article discusses the fact that the companies that comprise the S&P 100 have had a stellar 200%+ increase in earnings but share prices have increased less than one percent. This says that the public is not paying any attention whatsoever to the market. It is kind of like in high school where most of the kids paid attention to the cool kids even if they were stupid and wrong and can barely hold a job as adults.

We know in financial economics that the public is right in the middle of a major market move where all you have to do is buy and hold on tight � no brain required. The public is dumb as dirt at the bottom and the top of the market however. We are at the bottom right now. I know this because of the articles I am seeing about how much the stock market sucks right now. I was treated like Chicken Little in 1998 when I told everyone to get out as I ran around screaming "the sky is falling!" I was right. Now I am running around screaming the sky has crashed so buy, buy, buy! Yes folks right now is the time to buy and the sky is about to rise again. Chicken Little is always right in the end!

Tattle Tale

When I was in grade three I had this odious teacher that hated kids who squealed on other kids, regardless of the issue. It didn't matter if you complained about someone stealing an eraser, cheating on a test, taking your lunch money, or socking you in the mouth...she didn't want to have to deal with it. To her, integrity was found in silence.
If you were affronted by a fellow student and happened to mention it to her, she would respond by a) disregarding you, and b) pinning a long donkey's tail fashioned out of construction on your behind with the words "tattle tail" emblazoned on it.(you had to wear it for the remainder of the day). I tried to make it look fashionable


Personally, I'd like to think that the lessons we learned in elementary school help us out later on in life. If so, I'm certainly glad that Sherron S. Watkins wasn't in my class.
As you may, or may not know, Sherron S. Watkins was the Vice President of Corporate Development at Enron who told then CEO Ken Lay in a now-famous August 2001 memo that financial fraud could destroy the energy trading firm. She said his response was to launch a "bogus" probe and try to have her fired.

It was less than four months before Enron collapsed into bankruptcy at a cost of thousands of jobs and billions of dollars of stock-market wealth.

Enron's downfall sparked a federal investigation that resulted in the multiple fraud and conspiracy charges for which Lay, 63, and Skilling, 52, are now on trial. The two face decades in prison if convicted.


Did anything positive come out of the Enron debacle? I think we can finger two silvery-gray lined clouds. First, it's all about integrity. Ordinary people matter. Determination matters. Honesty matters. Diligence matters. There is a place for Truth.
Secondly...the Sarbanes-Oxley Act. The Sarbane Oxley Act of 2002 is considered to be one of the most significant changes to federal securities law. It came in the wake of a series of corporate financial scandals, including those affecting Enron, Arthur Andersen, and WorldCom.

Among the major provisions of the act are: criminal and civil penalties for securities violations, auditor independence / certification of internal audit work by external auditors and increased disclosure regarding executive compensation, insider trading and financial statements.

In the world of publicly traded companies, there is a lot at stake. Not only are the companies responsible for their staff, clients, partners, and customers, they're also responsible to the every-day, well intentioned, share holder who has chosen, rightly or wrongly, to believe that what the company says is true...is actually True.

We need to be able to trust the people in charge. Whenever a company does something noteworthy, the CEO is often the first one to step into the limelight and take the credit along with a big fat bonus. (Lay raked in $150 million in income, bonuses and stock packages. He still sleeps soundly every night in one of his several mansions.) But, when things are bleak, some CEO's seem to disappear into a world of meetings.


Integrity, honor and truthfulness aren't just virtues meant for the third grade. They're qualities for life...and what a better place the stock market (and society at large) would be if everyone lived these virtues more often.
While the stock market is still full of inherent risks...it may be just a little safer than it use to be. So hats off to Whistle Blowers like Sherron S. Watkins...and leave the donkey tails at home.

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at www.peterleeds.com