Pyramid, Good, Ponzi, Bad

There are a lot of people who are quick to put down investing in the stock market. They will point to Enron or Ponzi schemes and spout about fools investing and the greed of brokers and those in the financial community. On the opposite end are the people who are so eager to be in the market that they don’t see the forest for the trees. Or more accurately they see the mighty sequoia and neglect saplings that will grow into mighty oaks.

Had enough tree talk? Good, then we’ll get down to business. How do you decide what stocks you are going to buy? What factors influence you, or do you just go with whatever your broker (or your next door neighbor or the guy at the water cooler) suggests? The real question is, do you have a system to analyze what you are considering?

What are the important deciding factors that determine if a stock is going to rise or fall in price and is that all you should be concerned with? The loud and clear answer is no. If all you are doing is looking at the share price that’s like buying a car (also an investment of sorts) by picking a color. It might be pretty or whatever, but how’s it going to perform over the long haul? Looking into the company is akin to looking under the hood of a car. Doing research is the key to finding out the long term prospects of either one.

What does a company do? That’s a real key to this decision. It’s all well and good to analyze the price and its 52 week fluctuation and the patterns over the years and whatever else you want to consider, but long term (and sometimes even short term) it’s about ownership in the company, so you have to look at what they do and how they fill their share of the market.

For example, I used to recommend a company called Zebra (Nasdaq ZBRA) which fluctuates between 18 and 30 dollars a share. It has been doing that for a while, and if you work the timing, it was fairly easy to make money buying low and selling high. But to me the most attractive thing was that the company made industrial printers that were used to make bar codes and things for manufacturing facilities and logistical companies, and they dominated the market share. Most companies used Zebra printers and their supplies. That last part was the key. Printers are fairly inexpensive, and the supplies get re-ordered over and over. The printers are also very reliable, so companies tend to stick with them.

What’s the lesson? Solid value in a company that’s been around a while, and has a large share of the market. They are not going anywhere and will retain their value – at least until a technological upgrade comes along – and I’m sure they are working that angle as well. The point isn’t to buy stock in Zebra; the point is that stock means you are buying part of a company and you want to make sure you check under the hood.

If you really are interested in controlling your own investments and using a stock evaluation tool that can help separate the winners from the dogs check out Seleting Value Stocks my step by step guide.

If you have any questions on any of the articles that I post please contact me and I will be happy to answer them to the best of my ability Robert Britt

Many people recognize two types of markets; a Bull and a Bear. You hear these terms all the time and they both have adherents in almost any given economic situation.

Lotsa Bears These Days

Bears are folks who feel the situation ahead is looking gloomy and an economic downturn is inevitable short  term and it will last a while. As Chekov said, “the long cold winter of our discontent.” Which doesn’t sound good,  but keep in mind it is only an opinion.
Bulls, on the other hand, have an upbeat positive look on the future. Also just an opinion.

Amazingly enough these creatures live among us. And among each other. These terms are also seen pertaining to  sectors of the market as well. You can be bullish on Energy, or Textiles, or Manufacturing. People were very bullish  on the Dot Coms a few years ago, until the bottom fell out. Now that sector is starting to gain momentum again,  but this time there is more caution, and companies need to show growth and at least some value.

Now to the meat of the letter. What can you do when there is a bear market to retain value in your portfolio?  I suggest looking for companies that are not quite so dependent on the overall economy and ones that have solid  value. No matter the economy people need to eat, so grocery stocks are going to keep value, as are heating oil,  gasoline, or staples of life. On the opposite hand, luxury items such as jewelry or high end autos are going to suffer.  People still need to drive, but in tough times, new cars are put off to future dates.
In my investing, I hold value stocks during the Bull or the Bear. Looking at underlying value and growth, you can hardly go wrong. Investments in diamond mines might rise and fall, but for long term growth, you can stick with  steel. There may be more glamour in luxury and more growth (in spurts or even long term occasionally) but staples  are with you for life.

Don’t take that the wrong way. I do have diamonds in my stock mix, (so to speak) but I know to keep a close eye  on those stocks. Other investments can sit for years without a thought to sell. Long term stable growth will take  you through life and treat you right. Taking a chance can pay huge dividends, but remember to only risk what you  can afford to lose. With careful due diligence long shots are exciting and can pay off in spades.

As a closing note, life is what you make it. I have a realistic view of the future. I know we will go through multiple bulls and bears throughout my lifetime, but I prefer to see the light at the end of the tunnel and beyond.
As always, I welcome questions and comments and will answer them individually.

*showing it’s constant cycle, I wrote this more than two years ago;  still is relevant probably always will be.

Your credit score is important. More so now than years ago, since even prospective employers are looking at credit scores during the hiring process. They are looking for responsibility and reliability and believe the credit score can help them in their hiring decision. (And your ‘reasons’ for a low score don’t carry much weight.)So it’s imperative to keep track of your score and to review on an annual basis, but not more than that because, amazingly enough, checking your credit score can lower your credit score. Keep that in mind any time you apply for a new card or a loan. Each of those applications also includes a check into your score. But where do you go on your annual check to get your score? How bout those three singing dudes on TV? They have a ‘free report’ website – or do they?

They may have had a catchy jingle years ago, but by now you are probably tired of those three guys from Free Credit Report commerical. Oddest part is, even though they only play extremely simple songs, they are not playing their instruments or singing, simply miming the action and lip syncing.

The downside to the commercials, apart from the fact that they are really getting old, is that the service they are offering is not really free. You’d think it would be, with a URL like that, but the service is definitely trying to upsell you from the moment you plug that web address into your computer. So what should you do?

Well, on this one the federal government has come to the rescue. (to some degree) AnnualCreditReport.com is the website of choice if you want to get your numbers without the barrage of ads and pop-ups. To begin the process, just got to the site, select your state and press the request report button.

Advertising drives spending in most countries. Until you see an ad for product X you weren’t even aware it existed, and suddenly you go from blissful ignorance to “gotta have it” in 30 seconds. That may be a slight exaggeration, but instant gratification has become a way of life for many people.

It's raining - Men or Pennies from Heaven?

Some of this is ingrained in us. Take for example advertising to American youth. Since 1980 the amount spent to convince children of product desirability has increased from $100 million a year to more than a billion dollars a year. Is it any wonder that Christmas has morphed into this giant consumer driven event? Think about how much advertising a person is subjected to over a lifetime. It’s staggering.

How do we counteract this effect? As parents and grandparent we have to try to instill in the next generation that they can’t have it all and have it now. I recall as a child wanted a skateboard and saving diligently over time to buy the individual components. I longed for winter and the snow, so I could go out and shovel and make extra money, but not once did I approach my parents for a loan or a gift. I knew the answer before I asked that question.

I am keeping that same principal with my children. A cell phone is not a luxury item, it is a need to help you keep track of your children, or so the phone companies would have us believe (or our children try to convince us.) But in truth, what does a ten year old need a phone for? Anything given freely is often taken for granted and as a right and that propagates a mind set. “I have a right to have “X” now.” What?

Anyone alive now has seen countless hours of commercials, whether on television, through radio, billboards or other media. We need to keep in mind that advertisements are arguments to convince us to part with out money, but sooner or later the cost of that catches up with people. Whether it’s interest paid on credit cards or a lack of savings by the time you retire, the high cost of giving into implanted desires can take a huge chunk of your life and your money. Take the time to think before you spend, and try to pass that along to those you love.

There is widespread dissatisfaction with jobs and lives that people are leading these days. Some folks want to blame that on the direction the world is taking. Unfortunately we are splintered as a race and the “right direction” for one group is not going to match the “right direction” for another, so we have strife and conflict. This is part of the whole terrorist thing that is evolving in the world right now.

Target, Goal, Focus, Path, Bullseye

But we can’t solve the world’s problems in one article, so we have to try to focus more on individuals. Why are people dissatisfied with their jobs or lives? When you are searching for a job, how do you go about it? If you’re like most people you will open up a paper to the want ads or put up a profile on “Monster” or “Careerbuilder” or “The Ladders.” And after posting a profile you look for jobs that match your qualifications.

But what are your qualifications, or more importantly why do you have those particular qualifications? Possibly because of a decision you made at 16 or 17 to go to trade school or technical school or the armed forces, or college or some combination of environmental factors. But you were 16 or 17 when you started this journey and you didn’t really know what you wanted out of life or what you were passionate about. (Maybe you did, but if you did you were the exception, not the rule.)

So we get cornered into job choice by decision made while young, or by experiences gained in jobs we may not have really wanted. You found a job in the paper that you could do, so you applied and got it, now ten years later that path has molded what you do, what you can do and, to an extent, who you are.

But it’s not too late to change, you just have to decide that you are ready and then take a weekend or a two week hiatus or whatever and think “What am I passionate about, what would I really like to do” and then figure out how to make a living out of that thing, and suddenly, maybe for the first time in years, you are in alignment with what you are meant to do.

Is it easy, is it simple? No, but if we all start getting more satisfied with what we are doing, maybe that will make the big picture for the world a bit easier as well. It certainly is easier to get along when everyone at the table is happy in their own lives, and what we do is a huge factor in who we are.

Are you ready to make a change?

In order to make progress in your life you have to commit to making change. If you don’t make changes tomorrow is going to be very similar to yesterday, with the exception of you being a day older. Do you really want to improve your situation? A quick way to do that is by visiting The 10 Minute Transformation
Is ten minutes too much time to spend to live better?

I think one of the most important things to think about as you move into the new year is how you take care of your financial obligations and how you handle your cash flow. Cash flow is an important concept and one that some people seem to have trouble grasping.

All of your income and all of your spending needs to be accounted for, and this was brought to mind yesterday when my youngest daughter got her W-2. She looked at it and said, “where did all that money go?” and I said, “you know, that’s a good question” because it’s one that most people don’t have a clue about.

I’ve heard it suggested that for a month you don’t use any cash. All your transactions should be done with your debit card. ALL your transactions. No cash withdrawal whatsoever. I know that could be tough, and maybe there are a couple things that you absolutely have to use cash for – a store or restaurant that doesn’t take cards, or something of that nature. Then take cash out, have a receipt printed and write down exactly what it was for.

At the end of the month, your eyes may open up a bit. Cash tends to spend easily and mysteriously, but the card leaves a very conspicuous trail. You’ll soon learn what your habits are and where that hard earned money really goes. Divide up your spending into piles. Only you can determine what all the piles are called, but you can start with mortgage/rent, car payments, insurance, food, credit card bills, entertainment.

Only when you know what you spend and how you spend can you take control of what you are doing. Use that month as a very important learning experience and build off what you have learned. Some folks can greatly reduce expenses simply by tracking what and where the money trail tells.

Don’t underestimate your impact in this world. The slightest thing you do can change the course of many many lives.

Example:

About ten years ago I was working with a guy named Todd. Todd and I got along really well and had many interesting conversations, some deep, some shallow, most I don’t even remember. One conversation we had was about fitness. I wanted to get in better shape, and I was uneducated on how to go about it.

Todd recommended a book, Body for Life, by Bill Phillips. It’s a book for entry level fitness folks. If you know almost nothing, it’s great. If you think you know a thing or two, you may be educated a bit. Some things in it may not be totally accurate, but it can and does give you diet guidelines, workout schedules and inspirational stories.

I read it and entered the “Body for Life Challenge” 1999. So did Deb. We made progress on our physical and mental selves and met an entire new online community, the Yahoo Body for Life group. That group got us involved in Wishlifts, which are weight lifting events to raise money for the Make a Wish Foundation. At one of those lifts we met Bob Doyle (from the movie The Secret – before the movie was even thought of) and we organized an event where he presented his Create Your Own Reality workshop. That was his first experience in that direction. His first workshop.

Then I took Bob’s Six Figure Streams course a year later and we started down the path of having on-line internet careers.

The body for life also got Deb excited about fitness and she got certified as a trainer and eventually got a job at Body Zone, which introduced us to Jim and Toni Reece. Meeting them helped start the Get Inspired! Project.

All this from a brief conversation with a coworker on fitness.

We both have new careers and mindsets and have an expanded new group of friends.

Q What tiny thing have you said that has changed lives?

A: You have no idea, but think about that a bit. When you are in a poor mood or a good mood, that’s contagious. When you make a suggestion, someone may listen and follow through. Words are like knives. They can cut through flesh and change lives.

What's your Holiday?

It’s the end of the year and most people are busy with the holidays. Finishing up with Christmas, Chanukah, Kwanzaa, or what-have-you, or preparing for new year’s eve. But there is something else you should be thinking about. This year’s taxes. (I covered my ears in anticipation of the groans.) Now is the time to make those last minute donations and deposits to minimize the amount you are paying to the government.

Mind you, most of the tax deduction sort-of-things do not have to be taken care of in the next week, some can go into the new year, January and beyond. Check with your accountant or go on-line and research what needs to be done now and what can be put off for later. I know most people end up being a little short on cash due to the outlay of funds for holiday stuff, but reducing your gross income through deposits to accounts now can save you a bunch later.

If you don’t have an IRA now is the time to open one. Any banking institution and most of the on-line stock market firms will be happy to help you open an account. A traditional IRA will give you tax savings now; A Roth IRA will give you tax savings later. Either one will benefit you when you are ready to retire.

As always, if you have a matching funds feature in a 401K at your work, contributing the max that will be matched gives you an immediate 100% return on your money, and that will also help with your retirement funds.

The end of the year is also a good time to ‘balance the books’ and see how you are doing in the gains/loss/net worth battle. See how you are doing in the race to retirement and whether you have gained or lost since last year. If you’ve never done this before, you are establishing your base line for next year’s comparison.

If your net worth has increased, give yourself a pat on the back, if not, try to figure out where you may have stumbled and how you can avoid the same barriers in the coming year. Either way, analyzing your position can help you determine how you can improve next year’s performance.

I hope everyone had a great year and a happy holiday season, and Cheers to a fantastic New Year!

New York Stock Exchange Closed for Ten Days!

An Economic Crisis of Unexpected Proportions

Railroads still rolling

Crazy times erupted in the stock market as banks overextended credit and there was a panic as banks closed due to the panic involved. The over extension of credit was in the form of loans to cover operating expenses and planned expenditures in the railroad industry.

People from all walks of life are affected and the country is thrown into a depression that lasts for years.

The year of this tragedy? 1873.  Some people may have guessed that it would be 1929, but that was a whole other crisis brought on by a totally different circumstance.

But what does this tell us? Life and the market is cyclical. some fortunate souls in 1873 saw opportunity in the crisis and did not panic, just like people are doing currently. I just read a story in a financial magazine the other day of a twenty-something who hadn’t been involved in investing whatsoever, but saw the current downturn as the perfect time to take his savings and find undervalued companies and invest. His money has more than doubled in the past year. Yes, that’s an unusual case, and certainly isn’t the norm, but it does go to show that no matter what the times look like and no matter who you are, you can make money.

In times of great tragedy invest in companies that are giogn to profit from the downturn or the events of the day. Construction after the San Francisco Earthquake or the Chicago Fire was rampant and those in that business made fortunes, while others around them cried the blues.  (on that same note, blues musicians did alright, too)

Know that the New York Stock Exchange is not closed for an extended period today, but also know that good and bad times come and go like the tide. When asked for a phrase to help in every circumstance, “This too shall pass” is one to think on.