It is always
interesting to read about investments. My first was $10,000 for original bonds
at
Sun City
Arizona - they paid 10.625%
- I borrowed the money at my bank for 3.25%.
Over a period of 29 years thereafter I
made 19% annually on my invested money. Traded both stocks and bonds
- quit work - lived out of the income.
At that time
I compared my results for both items and found that bond dealing paid better
than stocks - essentially quit stocks. I try to buy long term bonds
of good quality at a discount and hold till the price is
higher. Due to the current low rates I have done little
for the last two years.
My
investments include - Citicorp 4.87s of 2015 - Cat 6% of 2011
- FHLB 5.25% of 2022 - Fannie Mae 5 % of 2013 -
Borden 8.375 % of 2016 -
A K Steel 7.75% of 2012 - Cat 5.25% of 2018 and a
batch of Trump that was backed by a mortgage on the original Trump Plaza went
thru bankruptcy and was 11.25% - replacement is 8.5% of 2015. and a bank
investment 4.25% for another year.
I will go
back to trading whenever I see a good deal.
Dealers and
advisors almost always recommend investing in stocks – they use tables showing
the big gains if current stock choices without mentioning the cost of trading
and the losses that occurred when companies collapsed. As a
professor once responded when I pointed out his bias in a report -" Tell
me what you want to prove and I will find the figures to prove it".
This is the same way that people are suckered in to trading too often.
ROBERT L
SMITH
6-13-05
WHAT HAPPENS IF THE
MARKET DROPS LIKE 2000?
7-5-05 by THE ALCHEMIST, AL
THOMAS
I was recently being
interviewed on a talk radio show when one of the callers hit me with the
question, “What happens to investors if the stock market has another crash like
it did in 2000?"
I said, “The same thing
as before. Nothing”, and went on to explain that brokers and financial planners
have not been taught how to protect their clients during bear markets so they
will tell them as before to hang on and do nothing because the market always
comes back. Investors will lose their money again.
The simple protection is
to sell out and go to cash in a money market, but brokers can get fired if they
recommend that to their clients. I am not exaggerating. The broker would be
terminated because the brokerage company always wants customers in some equity
position. The current market is in a cyclical bull move within a secular bear
phase. The secular bear has been shown for the past 100 years to last about the
same period of time as the previous secular bull
move.
These time periods last
about 16 to 18 years. As you recall the previous bull started in 1982 and turned
over in 2000. Are these exact periods of time? No, but they are relatively
close. Within a bull phase there are moderate downturns that take about 2 to 4
years and within a bear phase there are up moves that also run about 2 years and
then turn down again.
If you look at the
present market (Dow Jones Industrial Average) the up move climbed off the bottom
in October of 2002 and went up to about 11,700. During the past year the price
performance of the major indexes has gone flat and remains within a trading
range. Is this move going to make a new leg down? I don’t like to bet against
history (as well as many other technical indicators) so it is my guess that we
are on the edge of the next decline.
How far and when? Don’t
ask that. No one knows. If you are a professional trader or technical analyst
you will have a pretty good idea as it happens to protect your capital and also
take positions that make profits as the market declines. Brokers are told not to
do this and are not trained to help their
clients.
I hear from investors
that they will have to pay taxes if they sell. Folks, you won’t have to pay any
taxes if your equities drop 30, 40 or 50%. Last time the market lost seven (7)
trillion (T) dollars in value. It just disappeared. It is better to pay tax and
have your money than see it evaporate.
When, not if, this
market declines you should protect your savings by selling your equities and
having cash in a money market.
Copyright
2005
TRADING vs INVESTING
6-26-05 by THE ALCHEMIST, AL
THOMAS
I often hear from
people, “I don’t trade. I invest. I buy a mutual fund and I hold it”. Mr.
Investor, did you know you are trading on a regular basis? Are you aware that
mutual fund managers are changing their positions by selling certain stocks and
buying others?
Mutual funds must report
quarterly what stocks they are holding. You can get those reports if you want
them. I can’t see where it will do you any good if you are going to blindly hang
on to the fund.
A few professional
traders will request these breakdowns only if a fund is greatly outperforming
the market. They will see what stocks the fund manager has that is making this
fund do so well and may buy those stocks. Very
clever.
Did you notice that the
investor is only looking at the best funds and not at the underperformers or the
average performers? Now check your portfolio. Is what you own in the top most
profitable funds for the past 3 or 6 months?
I know your broker told
you that you have to look at the returns for the past 5 or 10 years. What
nonsense. Do you care what the fund has averaged for the past 5 or 10 years or
do you want to own one that is making money now?
Fund managers are
constantly trading trying to increase the return for their investors. It is a
shame most of them have not done a better job. They are always comparing
themselves to the S&P500 index. When they do that well they think it is
wonderful and they never stop bragging.
The S&P500 index is
an average of the market. Mr. Fund Manager gets excited doing an average job.
Does your boss like it when you are average? He expects more from you. And you
should expect more than average from any investment you make especially if it is
recommended by an “expert” broker or financial
planner.
If anyone does an
average job he will be employed until the boss finds someone who will do a
better job and then Mr. Average can find the door. That should be the same way
you examine the stocks and funds you own. The nonperformers should be sold and
new ones found that will make money or go to cash. Don’t rely on your broker.
His company never wants you to sell.
Investors who buy for
“the long haul” are long term traders. They are not knowledgeable enough to sell
when the market is going down as it did in 2000. When there is nothing to invest
in then cash is the best position you can have. Having your portfolio in cash in
a one or two percent money market account will many times outperform owning
stocks or mutual funds.
Everyone who invests is
a trader. It is only the time period that is different.
Copyright
2005
PRICE
TARGETS
6-19-05 by THE ALCHEMIST, AL
THOMAS
Every day in any
financial publication you will find the Wall Street mavens giving their
predictions on many stocks. It was issued here and should go there. It is now
undervalued and is worth that much more. Really?
Has anyone gone back to
check out these predictions? I haven’t, but I know that as a stock increases in
price these same geniuses continue to raise their target prices. How they arrive
at these mysterious numbers is beyond me. When their price target is reached do
they ever tell you to sell? Not that I can recall. And if it starts down do you
ever hear from them again. Not hardly. They are now predicting some other
stock.
All this is done in loud
voices and big headlines. There are many reasons given as to why XYZ will go to
$230. And maybe it will, but when it gets there (if it does) what do I do? Not
one of the Maul
Street crowd ever tells you to
sell.
Price targets are like
doing research. Both are worthless
as far as making money in the stock market is
concerned.
Here is the secret of
how to make money in one of those hot-shot stocks. First don’t pay any attention
to projected price by any broker. They don’t know. All that talk is window
dressing to get you to buy. Remember there is someone willing to sell to you at
that price.
And second you should be
selling out near the top (not at the top). It is not that difficult to do, but
you won’t get this from your broker. Since no one knows where the top is then
you have to let the market action tell you when to take your profit. How? With a
trailing stop loss order.
Let’s say this hummer
took off from $14 and it is now $35. WOW! Should you buy it? If the public
relations is new and you want to take a chance then buy it, but have your exit
strategy in place. The media blitz for this stock says it will go to $90 and
sure enough it does, but it keeps on going. It went right through its target and
is now in outer space above $150 and still has rocket fuel to burn. Your
trailing stop is now somewhere about $125 to $135. This beauty tops at $255 and
plays around there for several weeks when it starts down and hits your stop at
about $230. Aren’t you glad you didn’t sell at
$90?
The above stock will be
nameless here, but I did see this happen and it finally ended down at $2.50.
That is why buy and hold should not be in your lexicon if you are an investor.
Price targets are there for the gullible investors. Learn to use this Wall
Street trick to your advantage by using a trailing
stop.
RETIREMENT IS A NUMBERS
GAME
6-12-05 By the Alchemist, Al Thomas
Someday you may want to
retire, BUT you have to have enough money to continue your present life style.
Wall Street puts that estimate somewhere between a million dollars or maybe half
that. Of course your house will be completely paid for and you won’t have any
other large debt. Dream on.
It seems Mr. Average IRA
Investor has less than $50,000 in his account. Just a little short here. Then
there is your 401K which I hope you have been adding to every week and that nice
company pension. Don’t forget Social Security. Total
these.
Let’s do some numbers.
Get your pen and paper and figure out what you are spending now. See if there
are some items that will not be appearing when you stop going to the job.
Believe it or not there won’t be that many. Put that final number on your paper
and subtract it from the total. You didn’t know it was that much,
huh.
Here is the big
surprise. Health coverage. As you get older this item is going to increase until
you find you are spending more each week than you did when you were working.
That is why you should be squirreling away as much as you can right
now.
Since you are going to
need all the money you have saved to date and more then you should be looking at
the stocks and mutual funds you currently own. Are these increasing in value?
Have any of them gone down?
The great secret of Wall
Street is not what to buy, but when to sell. That’s right. Unless you have an
exit strategy for every equity in your portfolio you will never keep your money.
If it isn’t holding its price or going up you want to ask that stock a question:
What have you done for me lately? If it is more than 10% or at the very most 15%
off its highest price it is time to sell. And don’t wait to get
“even”.
Waiting to get even is a
loser’s game. People get locked into holding bad positions that only get worse
when they are waiting for the stock to rally back up. Forget it. Get out before
it is a bigger loss. Learn to take small losses, but never hold on for big
ones.
To retire without having
to work is a numbers game all thru your life. You have to do the numbers on a
regular basis. Check out your spending habits. Keep your credit card debt to a
minimum. If it gets to be too much cut the card in half and work with cash only.
Sound difficult? It is, but unless you want to be eating cat food at retirement
you must keep your numbers in balance.
Buy stocks and mutual
funds, but if they start down you must sell at once. Never take advice from a
broker. He will make you broker. You must be in charge at all times. Doing it
right will not require the huge sums Wall Street says. Be prudent with your
expenses and sell those weak stocks and funds immediately. Keep control of your
numbers on both the debit and credit sides.
Al Thomas' best selling
book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make
money and keep their profits with his simple 2-step method. Read the first
chapter and receive his market letter for 3 months at www.mutualfundmagic.com and discover why he's
the man that Wall Street does not want you to
know.
Copyright
2005
