Wealth Education - Investment Ideas Personal Financial Advice

What Happens to The Dow Jones Industrial Average if America goes Japanese?

Brian — Wed, 11 Aug 2010 19:47:23 +0000

There has not been enough discussion on the ramification to the stock market of a stable dollar: one that is neither inflating nor deflating. Maybe the FED will be successful in printing just the right number of dollars to offset the ongoing credit collapse. This will move more and more impaired private (bank, GSE and otherwise) assets to the FED balance sheet. This sounds like a very good outcome for the stock market. But is it?

Japan is the best modern example of a credit crisis-led economic correction. There is only one other example among a major developed economy over the past 100 years, and that is the Great Depression of the 1930s. All other modern examples (since 1900) are in smaller and emerging economies with currencies that are not widely traded and therefore, do not really inform the debate.

The devastation wrought by the 1990 collapse of the Japanese banking system after several years of overheated real estate and stock market speculation is still being felt today. The Yen versus other major currencies, like the dollar, has continued to strengthen over the past 20 years (from over 1/150 a dollar to 1/85 a dollar, today), further exacerbating economic contraction in Japan as industrial exports are hurt. The result is the NIKKEI stock market average remains stuck near 25% of its peak of nearly 40,000, 20 years later.

Could this happen to the Dow Jones Industrial average (and other American market indexes)? Considering that the real estate asset collapse in America as of August 2010 is nearly as large as a percentage of the peak as the Japanese collapse, according to the Reinhart-Rogoff study in “This Time It’s Different”, my conclusion is that, yes, it could. The probability may not be more than 20-25%, but the impact would be so significant to the soon-to-retire baby boomers, that it is very much worth considering.

Even if the economy does not slip into deflation, there appears to be very little traction from the FED’s efforts to stimulate the economy by manipulating the money supply. There is a point where FED policy resembles “pushing on a string” and stimulation is not rewarded. It is quite possible we are at that point. Over one trillion dollars has been created by the FED to fill the void of credit contraction and stock market liquidation. This amount now shows up on the FED balance sheet. Bernanke announced on Tuesday that the FED would hold that amount of stimulus constant, replacing maturing mortgage assets with Treasuries. But while this QE action may have stopped the collapse of the banks, it has apparently not renewed growth in the economy. Whatever growth was achieved by fiscal stimulation was very expensive (and will be a burden on future tax payers). There is no more political will to extend such inefficient fiscal stimulation. So, the FED is in the proverbial box.

Most Americans under 70 are only familiar with equity markets (and debt markets) that function in an inflationary environment. It has been 60 years since we last had a low or no inflation economy. We are accustomed to see the value of the stock market grow in nominal terms by 10-12% a year, which was the much promoted long run return prior to 2007. But what about the “real” rate long run return? The real return is all that matters after subtracting the effects of inflation (the depreciating dollar).

What is the true appreciation in the stock market since the last great crisis, that of the 1930s? Some assumptions must be made in order to do this analysis. This is a “cocktail napkin” exercise, so the assumptions will be quite broad and general. One assumption is the amount of inflation (dollar depreciation) that has occurred in the American economy since 1929. There are many ways to derive this value, but I will use 20 times. Comparing CPI from government data delivers a 12 times factor. But CPI intentionally under reports inflation since it is used to calculate entitlement payments. Using gold as a reference will generate a 50 times factor ($20/oz versus $1000/oz). Using a commodity like bread shows a 30X factor (5 cents per loaf versus $1.50). So, 20 times is a reasonable compromise.

Backing out 20 times dollar inflation between 1929 and 2010 and using the Dow Jones Industrial average as the comparative index will provide a “real” value for the DJI of $520 based on today’s close around 10,400. Using the DJI introduces other assumptions, but if anything, the bias over time with the DJI is to the upside as it is regularly reconstructed with newer more modern companies replacing older and poorer performing (or merged) companies. If we could easily adjust for such bias, the equivalent value of the DJI would be less than $500. But we also ignore dividends in this simple analysis, so let’s call it a wash.

So, what is the compounded annual return on the DJI (as a proxy for the overall market) between 1929 and 2010? Using a CAGR calculation in Excel, I get 0.50% equity return per year. That is all. Not very much.

What does this imply for the future? If the dollar does not significantly depreciate over the next 20 years and the FED is able to engineer a stable dollar from this point forward, the DJI may still be less than 12,000 in 2030. For there to be significant "nominal" gains in the DJI over the next 20 years will require significant Inflation. If the FED is unsuccessful in creating inflation and the American economy falls into the type of deflationary trap gripping Japan, the DJI could fall below 10,000 and stay there for 20 years with a zero return in nominal terms.

It has happened before in America (the 1930-1950 period). It is happening now in Japan and it could happen in America going forward.

Something to consider.

Disclosure: Short the market through SDS (double inverse to SP500)

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What ECB Must Do to Save European Economy

Brian — Sat, 05 Jun 2010 22:06:45 +0000

The European Central Bank (ECB) has acted much too slowly and without the consensus of its constituent countries during the current European sovereign debt crises. Rather than learning the lessons taught by the American Fed Reserve, Treasury and Congress in 2008, the ECB has equivocated, delayed actions and then subsequently had to reverse itself damaging its own credibility in the process. The head of the ECB, Jean-Claude Trichet, likely initiated the path to disaster by moving to raise European interest rates in early 2010 against the advice of other central bankers, including American US Treasury Secretary, Tim Geithner. This had the effect of further eroding already crippled Euro state economies including those of the southern tier of states: Greece, Italy, Portugal and Spain.

In the past two months, sovereign debt problems have grown worse with the indebted states paying higher interest rates, in large part because of the early 2010 ECB announced actions to tighten money supply. The lack of ECB commitment to support the over-levered states and work with them to reduce debt also contributed to the unwillingness of bond holders to continue lending at reasonable interest rates, pushing rates and budget deficits higher. It doesn't help government insolvency prospects that the debt has become more expensive to refinance and that higher interest payments further undermine national budget deficits.

There are only two ways out of these crises. And until very recently, Trichet and the ECB didn't appear interested in either approach. The least favored, other than breaking up the EU altogether, is to undergo sovereign defaults on the debt owed. This would allow for restructuring of the terms of payment through a process similar to bankruptcy, but without a court or judge. The resetting of bonds would lower interest payments and possibly principal payments reducing the burden on the distressed states. The problem with defaulting on debt is the ripple effects it will have through the global financial system. It would likely result in an unwinding of derivatives and a series of bank and investment fund failures in a replay of 2008. This would be very unsettling for world capital markets and could result in a second and deeper recession than in 2008-09 as lending and consumption freezes up. Higher unemployment and even civil chaos could be the result.

A second approach, more desirable for its less onerous consequences, would be to devalue the Euro by monetary quantitative expansion (QE), i.e. printing money. Of course, today money is not physically printed to increase the amount in circulation. It happens via accounting entries to each countries currency account at the ECB. A CNBC story today proposed that 10% of GNP be credited to each EU country's account. This would immediately increase national currency balances in Euro terms. Currency is an asset on the national balance sheets, so immediately goes to reduce the deficit, if artificially so. By having more currency in circulation without any commensurate liabilities or national productivity increase as measured by GNP, it would also serve to devalue the Euro by the same 10% amount. This is essentially what has been taking place in the marketplace anyway, as the Euro has lost over 20% of its value versus the American dollar so far in 2010. But to have the market make the adjustment can be unsettling for global markets and not as controlled as if the ECB manages the process.

The devalued Euro currency would be used to repay sovereign bond debt. Since the Euro would be worth less (an additional 10% reduction on top of the 20% devaluation to date in 2010), the bonds would be worth 30% less in an alternate currency, including gold. Interest payments on the bond principal would also cost 30% less in alternate currencies. So, in this way, bonds are reset to a lower principal level, without the negative global consequences associated with forcing bond holders to accept changed terms through the process of default.

If this inflationary action is not taken, the debt reduction programs underway in Europe will reduce currency in circulation and will act to deflate the Euro. Deflations result in a higher value currency versus alternate forms of currency, including gold. Without any counteracting inflating of the Euro, it will rise against the US dollar, possibly to 1.50 or 1.60 EU to the $1.00. This will further hurt European competitiveness and will extend the global economic contraction.

Here is a link to the CNBC article by Warren Mosler that recommends devaluing / inflating the Euro.

As I post this article, the economic leaders of the G20 nations are meeting in Busan, South Korea to discuss global economies and the policies needed to continue the recovery from the 2008-09 debt crisis. We are at a critical moment and the central bankers and government leaders must make the right policy moves on monetary policy, debt management and economic growth. Tim Geithner has been pressing the European nations and Japan to encourage consumption so that America and China do not have to bear the entire global load.

The next 2-4 weeks will tell the story whether the Europeans get it right and manage their currency and sovereign debt in a way that does not panic the capital markets and kill the global economic recovery. There is some promising news as on June 2, Trichet reversed the course previously set and offered to extend the low rate environment to ease the pressure on the over-indebted Euro states.

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Checking your credit score

Jared — Sat, 05 Jun 2010 02:47:27 +0000

Hey everyone, Jared here, I just wanted to take a minute to explain to everyone how important it is to always check your credit score. The other day I ordered my credit score since this past year has been pretty rough for me and I wanted to see where I was sitting. Much to my surprise and dismay, I found that my credit had been hurt by a bunch of fraudulent charges on credit cards that were taken out under my name but were never in my possession. Luckily this happened pretty recently so I was able to fix the problem before it did any serious damage. If you would like to view your credit score there are many ways to go about it, but I have found that creditscorequick.com is a great way to get your full, accurate score for a reasonable price. Don't let identity theft happen to you, with the economy the way it is right now, the last thing anyone needs is to be a victim of identity theft.

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Bill Ackman’s Take on the Goldman Story

Brian — Tue, 27 Apr 2010 13:06:30 +0000

Those who talk finance with me know that I have an abiding respect for investor Bill Ackman. It comes close to man-love, I must admit. Bill is eloquent, thoughtful, intelligent, well-informed and any other adjective that gives praise.

My first experience reading about and listening to Bill came about this time last year when I was struggling with whether to invest in General Growth Properties. At the time last April, GGP was entering bankruptcy. But the market and economy had just begun to turn and I had personal experience with GGP properties and management and thought the company had excellent mall properties and was well run. I wanted to invest in GGP which was then selling for only $0.65 per share and had a total capitalization only around $200M on a business with properties once valued at $30B. If it were possible to solve the debt problem at GGP, then the company had an excellent chance of survival.

Enter Bill Ackman into my life. As I was researching GGP, I came across research that Bill had put together as his hedge fund, Pershing Square Capital Management. He had done a very thorough job researching GGP and was able to show that with even modest "cap rate" assumptions, GGP would do very well. All it needed was time to restructure its debt. Ackman proceeded to take an active role in buying time for GGP, first by offering to provide bridge (DIP) financing (later provided by another party), helping convince the court of the merits of GGPs survival and later by joining the GGP Board of Directors.

As the year 2009 progressed, Ackman's activism and my confidence in his research proved very profitable for both of us. I have now exited my GGP investment (much too early) but Ackman, to my knowledge, remains on board and has seen his investment return over 20-fold. I admire this type of clear vision and the courage to act on it.

Ackman was a noted short trader earlier in his career. He gained notoriety for his big short position in credit card company MBIA in 2005, for which he was investigated by the now-notorious Elliot Spitzer, then New York State Attorney General. He was able to demonstrate to Mr. Spitzer his innocence and turned the table on MBIA by exposing the Attorney General their fraudulent practices, the reason for his short position (presaging the debt crisis to come). He took a "sow's ear" and turned it into the proverbial "silk purse". That taxes moxy. That takes class.

Given his career path and the level to which he has risen, Ackman is very intimate with the inner workings of Wall Street. He shows himself to be rational and level-headed and has a thorough, first-hand understanding of the arcane financial instruments that Wall Street has created. So, when he gives his opinion on the Goldman Sachs situation, I listen (much more so than to EF Hutton). Today as guest host on CNBC Squawk Box, Bill Ackman shared with us his assessment. He comes down on the side of Goldman Sachs for all the reasons I have provided in the past two weeks, but with the conviction that can come from only an insider. Here is an excerpt from the show:

Goldman Sachs did not commit fraud and the insurance company that bought the product that is the subject of a government investigation should have known the risks, Bill Ackman, founder and CEO of hedge fund Pershing Square Capital Management, told CNBC Tuesday.

“I don’t believe that Goldman committed fraud,” Ackman told “Squawk Box Europe.” “(ACA, the counterparty to Goldman - Paulson Partners) took their own risks. "They’re sophisticated investors.” “I don’t think the (Securities and Exchange Commission) has a good case,” Ackman said.

“Having been the subject of investigation in the past (for the MBIA case referenced earlier)… I don’t feel sorry for Goldman Sachs, but they’re not being treated fairly (either).”

Not only does Ackman contend that Goldman is innocent of the charges of fraud, as I also maintain, in addition, it would even have been unethical if Goldman had disclosed that hedge fund manager John Paulson was shorting the housing trade to any investors taking long positions, Ackman said.

Ackman argued that sophisticated investors (the German and Dutch bank that bought the long positions from ACA) have the information at their disposal to make their own decisions, and are also responsible for their own mistakes.

“Imagine that Soros and Buffett were on the two sides of this transaction,” he said. “We wouldn’t even be talking about this now.”

But later in the interview, Ackman states that the true victims are the taxpayers as they do not know they are party to the trade via "too big to fail" and taxpayer rescues. This is true in Germany and the UK, as well as in America. It is the taxpayer that has to cover the losses made by overly aggressive bank managers who are playing with OTM (other people's money) in order to win large bonuses.

So, it is not Goldman Sachs that should be taking the fall for the financial crisis, but the bank managers that lost money and the regulators / government officials that are charged by the public with protecting the financial system. The "witch hunt" that is today's Congressional hearing is completely misdirected and intended to make the Congressmen who failed in their sworn responsibilities, look better, much better, than they really are.

At the end of this segment, the former SEC general counsel, Simon Lorne, appeared with Bill Ackman. Mr. Lorne offered his highly informed opinion that the case by the SEC against Goldman Sachs is "weak". This is the position I have maintained. The facts will show that there was no "fraud". If anything, there may have been some technical error of omission where disclosure is involved. This might justify a fine of some sort, even a large fine given the stakes involved. But Mr. Lorne says it all much better than me:

Disclosure: I am long GS with October Call contracts; If I could be, I would be short the Congress;

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The Goldman Saga Continued…

Brian — Wed, 21 Apr 2010 13:36:42 +0000

And now for the rest of the story, as Paul Harvey liked to say.

Today's post is a follow on to my post from last Friday, August 16. At that time, Goldman Sachs, GS, was being charged by the SEC in a civil suit for failing to disclose John Paulson's (Paulson Companies) participation in a CDO fund invested in sub-prime mortgages. This failure constitutes fraud if it is intended to deceive. The failure might be found a technicality in court of there was no intent. The SEC is hungry for a scapegoat for the banking crisis. GS, which went through the crisis almost unscathed, is an attractive target in the mind of the Obama Administration both because it is large and because it profited during the crisis. Getting GS would satisfy some of the populist blood-lust of Obama's public, even at the expense of the overall economy, as it hurts banks which just now on the mend.

But, as is often the case, this might be much ado about nothing. I thought as much last week and now the details are appearing that prove this point.

The first big new piece of information comes from an article written in the Wall Street Journal on Monday. In this article is a portion of an interview with Paolo Pellegrini who was the deal maker for John Paulson on the contested CDO case.

With this release the story became a little clearer the last couple of days. It turns out that Obama's government might be trying to deceive the public itself. The SEC covered up, or at least did not make public, the fact that they had an interview with Pellegrini of the Paulson company. In that interview it was revealed by Pellegrini there were discussions directly with ACA at the time of the selection of the CDOs and that ACA was made aware that Paulson would be taking the opposite side of the transaction (going short) which ACA needed to get the deal done. We also found this week that the SEC vote was partisan, (3) Democrats to (2) Republicans in favor of filing the lawsuit with Obama appointee, Mary Schapiro, casting the tie breaking vote.

Here is a little background on Pellegrini's role in the deal, from WSJ on April 19, Monday:

http://finance.yahoo.com/retirement/article/109342/paulson-point-man-on-cdo-deal-emerges-as-key-figure?mod=retire

The main contention of the SEC in bringing the civil charges against Goldman is that it deceived "the public" when it failed to disclose its client, Paulson Companies, was taking a short position in the sub-prime CDO deal, while Paulson had a hand in selecting the mortgages. Now it is revealed, that ACA, the "third party", was in fact the first party and the primary buyer of the CDOs it created, around $950M of the $1B. Goldman bought $90M itself. And, in fact, it sought out Pellegrini from the Paulson Companies to do the deal, not the other way around. So it seems this was a one-on-one deal and both the buyer and seller were in conversation about what comprised the deal. So, there was complete and full disclosure.

This blows a very wide hole in the SEC's case and in fact, brings a huge question mark to the motives for bringing the charges. These potential political motives are now under investigation by the Congressional watchdog committee run by CA Rep Darrel Issa, top Republican on the Congressional Oversight Committee.

http://corner.nationalreview.com/post/?q=YzRjOWZjZDdkYzhjYzVjOGIwMjU5MjNkZjVjNDc0OGU=

Steve Liesman of CNBC is on top of this case. Here is more detail from a piece on Wednesday morning:

http://www.cnbc.com/id/36640296

Also, this testimony (from Pellegrini to the SEC) reinforced the key point I have been making: ACA knew that Paulson was taking a short position. ACA was looking for someone to take the other side of the deal which is why they chased down Pellegrini on vacation in Jackson Hole to have meetings. They let Pellegrini suggest mortgage packages (RMBS) to get Paulson on board the deal. Also, ACA was the primary buyer of the CDOs and so there was complete disclosure directly to the buyer as to whom was the seller.

The SEC case looks like it may be going down in flames and there is a good chance there will be discovery of political motivations behind the accusations. Should be fun to watch.

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Is Goldman Sachs Guilty as Charged?

Brian — Sat, 17 Apr 2010 13:07:47 +0000

I think not. This is a politically motivated action brought against GS by an SEC controlled by the Obama Administration. That motive is to demonstrate to the public that the Federal government will hold accountable banks for activities leading to economic damage. There is a lot of pressure on the Obama Whitehouse to attack and punish "Wall Street" in retribution for the economic crisis and housing crash. Goldman is the "poster child" for perceived banker abuses and is seen by some as the cynical and greedy conductor of fraud to take advantage of innocents. But in reality, the processes charged in the SEC case as fraudulent are typical everyday practice.

The people on both sides of the sub-prime mortgage CDO trade are large, institutional investors who should know their risks and be prepared to accept losses. This is true of any trade. There are buyers and sellers of every financial instrument and subsequent winners and losers. It is common, in fact, for financial instruments to be created by "market makers" like Goldman Sachs at the request of a buyer or seller who believe they have insights that will allow them to profit at someone else's expense.

This is how financial markets work. The market maker may have an opinion of its own about which side is right and which side is wrong. For this reason, an independent third party is brought into to assess and vet the investment vehicle to insure it is fairly created and accurately represented. This appears to have happened with the GS CDO in question.

Jim Cramer, who at one time in the early 1980s, worked for Goldman Sachs and understands the inner workings of the investment banking world, explains what happened:

Before people went too far in their attacks on Goldman Sachs, as today’s charge of fraud by the SEC will train even more proverbial guns on the Wall Street titan, Cramer felt the need to clarify the case. He wasn’t exactly defending the firm, but he wanted viewers to know exactly what happened.

First, full disclosure: Cramer got his start on Wall Street at Goldman [GS 160.70 -23.57 (-12.79%) ] , and he still has friends there. But he insisted that that was in no way the reason he was challenging the SEC. He said that while he wouldn’t want to be associated with the trade, that didn’t mean there was anything “illegal … immoral or even unethical about it when you pull it apart,” he said.

So here it is pulled apart:

Goldman created a product, a collateralized debt obligation, for hedge fund Paulson & Co., which “at the time wasn’t known as a particularly smart client,” Cramer said, that allowed for a bet against the value of housing. To make sure the product was vetted ahead of its sale, Goldman hired an independent company, ACA Management, to do just that. And they released a report telling potential buyers exactly what was in there.

Now, Cramer would never have bought the CDO, but not everyone was as bearish on housing as he was in late 2006, which is when the product was put together. Though he could see how less informed clients may have found it attractive. But in the end, no one forced people to buy this CDO. And “a sucker was born the minute the trade was made,” he said, “and the loss booked soon after.”

So did Goldman do something illegal when it vetted the product, letting everyone know what was in it? Or was the buyer just plain stupid for wanting it in the first place?

“I think the latter,” Cramer said.

He likened the situation to the tech boom of the late ‘90s. If someone created a similar product to bet against these stocks, it would have been an entirely legal, but losing proposition until 2000. It was only after that run that the bet would have paid off. Well, housing was exactly like that, Cramer said, going into 2007. And the buyer of this CDO fully expected to continue making money, only to be shocked awake when the market collapsed. Now Paulson & Co. is known as a house of genius, while the people who went long on housing are the fools.

We learned today that Goldman sunk $90 million of its own money into the CDO. While Cramer’s not sure if that absolves the company, he does know one thing: The SEC is under tremendous pressure to bring cases against Wall Street right now. And he knows that Democrats in Washington are fighting for financial reform. So this is a great time to bring this case before the public and punish the firm perceived as the most arrogant and least reformed in the room.

But while arrogance may be a terrible personality trait, Cramer said, it isn’t illegal. And he’d be the first person to call out Goldman if the company were wrong. But he doesn’t think this is one of those cases. If anything, this was a case of “overzealous prosecution,” he said.

“That’s exactly what I think happened today against Goldman Sachs,” Cramer said. “And I think you’ll see it exactly as I do as time goes by.”

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Is This a New Price Floor at DOW 11,000?

Brian — Tue, 13 Apr 2010 19:14:09 +0000

The DOW punched through 11,000 at the open on Monday, April 12 (after moving through briefly on Friday) and the SP500 will possibly close above 1200 today, on Tuesday. If these two levels hold for the rest of this week, then a new psychological floor will be established.

The round numbers like 1000, 1100 and 1200 are easy for most casual investors to remember and relate to, so they do act as psychological barriers, both up and down. The true technicians can find many shades of grey in between those levels, by using various moving averages like 21 day or 100 day and stochastics / oscillators. But the round numbers are the stronger. Once four days pass, the duration defined by IBD's William O'Neil as having some permanence, the barriers become difficult to break down.

With 11,000 and 1200 setting up as new floors, then the obvious targets become the next round number up, 12,000 and 1300. Given continued good news on earnings and revenue growth, even at a slow pace, economic strengthening, and digestion of problems like Greece, those targets will become a reality by year end.

Jim Paulsen and Ed Keon, two very thoughtful and accurate forecasters, believe that the economy has turned a corner and that revenue growth will take up where profits growth has already gone. It has been a lack of "top line" growth that has kept the market in check. Paulsen and Keon both believe the indicators show the economy strengthning. A stronger economy in combination with high "operational leverage" from very trim corporate operations, will be earnings and cash flow rocket fuel if revenue grows significantly the next 12 months.

This throws a big question on the PIMCO "New Normal" thesis. If the economy picks up due to so much government stimulus and a generally strong global backdrop, US GNP could grow above 5% in 2010, which is of the "Old Normal" recovery variety. This would be a big change from where the market currently values the economic prospects and would take the DOW and SP500 up another 10-15% if it proves true.

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Oil Will Continue to Move Higher To $100

Brian — Fri, 09 Apr 2010 14:26:23 +0000

Oil continues higher towards $100 by July. It pulled back on the mini-panic yesterday morning, from $87 to $84. But the bottom for now seems to be at $80. Short of any major economic disasters, the price must go higher. Demand is only increasing around the world.

The data show that the use of oil per capita in America is over 25 bbls per year. In the growing economies of Asia (India, China, etc) and Latin America (Brazil) where 2/3 of the world population lives, the per capita use is less than 2 bbls. As those economies "Westernize" their population will require more oil. Even if the developing world only gets to 10 bbls per capita in the next 20 years, where will all that oil come from. A quick estimate will be a requirement to more than double current world production of around 85 mm barrels per day. That is just not possible. There isn't that much more oil to find. Oil companies today have a hard time just finding enough oil to replace the depletion of older wells.

Price is what must give. The only way to balance is through higher prices that bring down Western demand.

Today, I bought additional PennWest (PWE), using the July $20 Call and Put Options. I sold the July $20 puts for $0.55 to pay the time premium on the July $20 calls which cost $1.75 with PWE trading today at $21.45. $20 is the new floor for PWE with 2006 price of $30 being the new target price.

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View the full PWE chart at Wikinvest

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Invest The Right Way To Prosper

Jared — Mon, 05 Apr 2010 13:16:43 +0000

Learn how to invest dollars and prosper; or don't learn the way to invest and continue to invest and lose money. It is pleasing to invest cash when you're profitable. Have a financial education and see for yourself. You'll NEVER feel left out once you discover how to invest with a sound investment technique. Let's start that financial education at this moment.

INVESTMENT Basics

You can not put together a complete investment strategy without an understanding of the investments that are included in the package deal. Nor can you assemble your own house without knowledge of the pieces, parts, and tools required. Give full attention to investment principles before you decide on what plan to go with, or you may not be able to finish the job successfully. This means that you must understand the investment factors of stocks and bonds, and how they compare together and to other investment alternatives.

Only then can you discover ways to invest and put together the entire investment strategy. Like I said, it's exciting to invest when you're making dollars; but you've got to begin with the investment basics. Almost all individuals do not know stocks from bonds. Begin by reading articles or other publications that get down to the basics. For example: how to define stocks, what are their disadvantages and potential advantages, and how do they compare to bonds and some other investment alternatives.

Now you are all set to learn about mutual funds, which are the investment of choice for the majority of average investors. For the majority of people they are easy and simple and best way to invest in stocks and bonds, plus various other asset classes. Mutual funds are simply investment products that are professionally managed for you personally. To pick the right funds you'll need to understand the asset class they invest in: stocks, bonds, money market or specialty (other).

HOW TO INVEST

Now you're ready to understand how to invest and put the pieces together with a sound investment strategy. ASSET ALLOCATION is a crucial part of your investing and financial education, because how you allocate your hard earned dollars to the various asset classes will determine your success or failure... more than anything else. Simply put, how much should you invest in stocks vs. bonds vs. other investments? This is also called your asset mix. It really is much more important than what specific investments or funds you pick.

Once you've put a balanced portfolio of investments together you've got a great foundation. But if you want to continue to build and prosper you'll need an ongoing investment strategy to make additions and changes over time as needed. Read articles on investment strategy, asset allocation, and how to invest. It will all come together for you if you start at the beginning and build a step at a time.

Learn to invest like your financial future depends on it. With Uncle Sam in debt up to his eyeballs and employers fighting to survive, it does.
learn forex trading

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Why Invest in Gold and Precious Metals?

Feds Need to Stick to Constitutional Mandates

Brian — Sun, 04 Apr 2010 21:54:39 +0000

The role of the Federal government is very simple, and is outlined in the Constitution in Article 1, Section 8. Congress's only roles are to establish national security (defense) and commercial regulation in all its forms including bankruptcy law, patent law, banking regulation, foreign trade, etc. And that is it! Everything else legislated by Congress jeopardizes the very idea of democracy.

Because I am compassionate, I accept a very minimal social safety net, as opposed to entitlements. A safety net should keep people from suffering, but should not allow some to live the good life on another's dime.

The best prescription for healthcare, as part of that social safety net that most of us agree is needed, is to convert the industry to a utility. Just like electric, gas and communications utilities, healthcare would be subect to regulated fees at the state level to some minimum federal level of service. This preserves the sovereignty of the states (which will be the subject of at least one Constitutional challenge of Obamacare) that are expected to administer the current and future Medicare, but without additional funding by the Feds.

The big advantage of state-administered healthcare programs is that it keeps decision making closer to the taxpayers and beneficiaries, and preserves the opportunity for innovation amongst states. One state might find a better way than another and pass that approach along. This, along with multiple private administrators of the programs, much like multiple telecom carriers, will preserve the benefits of competition.

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