Perry Glasser

Archive for the ‘Wall Street’ Category

CONSPIRACY THEORY

In Business, Economics, Economy, Finance, Political Economy, Politics, Wall Street on February 12, 2016 at 1:09 pm
Janet Yellen

Wizard-in-Chief

Dollar$, always eager to explain the inexplicable world of Finance, that realm in which Wall Street Wizards and Corporate Buccaneers run rampant in their never-ending struggle to own, pervert, master, and control Political Weasels, has developed a theory.

 

Why should Plain Money Talk  be any different from every other blog?

 FACTS

2015 saw:

  • unemployment drop to new lows,
  • minimum wage adjusted up,
  • auto sales rise to recent highs,
  • home sales rise to recent highs with no speculative bubble,
  • the cost of gasoline and heating oil sink to new lows,
  • the United States become an oil exporter.

The Fed is so concerned at all this good news that Janet Yellen has begun to tighte credit, a tactic employed to throttle growth and forestall inflation. Yes, the Wizard-in-Chief, Janet Yellen, is worried things are too good.

Some apologist is sure to point out that the second largest economy in the world, China, is hurting. Dollar$ will give that point of view some quick attention.

CHINA

China’s weakening economy should mean the cost of living in the US will drop, meaning you and I will have more money in our pockets to pay off debt or buy more stuff, everything from furniture to T-shirts at Wal-Mart. The US – China trade balance is heavily weighted toward China—the US imports far more goods from China than China imports from the US. If those good become less expensive, the American consumer benefits. This does NOT harm American business.  Maintaining profit margins at lower prices is easy to do. The cost of commodities the world over is dropping because of the slowdown in Chinese demand. Commodities are the stuff that comes out of the ground from tin to lumber and to gold, the stuff from which everything else is made. Everything should be getting cheaper. Every time Wizards predict that Apple will stop selling iPhones in Shanghai, Apple sells another few million units, but at a lesser price. With inexpensive gasoline, Citizens will be driving  to Disneyworld this year, and they will be able to afford the Mouse’s uptick in prices.

This phenomenon confounds the Wizards., who have learned that bad predictions are clickbait, and clicks drive revenues. No one watches CNN until the shit hits the fan and the shelter under the table grows crowded and cramped.

In the face of positive economic news, the US stock market should be soaring. Instead, the Dow-Jones average has stepped off a cliff in 2016, shedding 2,000 points in 8 weeks, more than a trillion dollars worth of value has been erased from the books.

THE CONSPIRACY

Cui bono?

For the past 30 years,  at every presidential election, commentators complained of the choice between Tweedledee and Tweedledum. But this year, it ain’t so.

weasel candidates in days of yore.

US Presidential Candidates Since 1964

 

This year, on the one hand, we have a wealthy, self-funded foul-mouthed injudicious narcissist celebrity never elected to anything anywhere who is much favored by people who have felt disenfranchised for a generation. On the other hand, we have a New York Jew now from Vermont who has never accepted a dime from Buccaneers or Wizards. An older man, his followers are youth because he demands payback from the banks and companies who were too big to fail and in the past 20 years have sucked the economy dry, indenturing students with education debt. On the third hand, we have a woman who is indebted to the old politics, and on the fourth hand, we have a clown car of interchangeable Republicans who lacking economic issues promise to disallow what your neighbors do in their bedrooms while coyly ignoring that for those promises to be fulfilled they will have to rollback several Supreme Court decisions by what by any account has been a conservative court.

Dollar$ sees the common threat. The two leading candidates are not in thrall to Wizard or Buccaneers. Should either get elected, the summer house in the Hamptons, the private jet, and the 10-room Manhattan  condo are all in jeopardy.

How to dissuade Citizens from voting for either?

Scare the piss out of them. Scare the piss out of them by manipulating stock prices downward. It’s only temporary, and it’s not as tricky as it sounds.

  • Claim good news is bad.
  • Threaten us with defunded pensions, evaporating college savings, and the elimination of savings toward the American Dream, a house.
  • Imply that unless Citizens vote the status quo and allow rapacious policies to continue, grass will grow on Main Street as economic activity collapses.

The stock markets should be soaring, but never forget that 90 percent of all trading is electronic and that computer algorithms engage in a global battle to take advantage of a quarter point’s worth of arbitrage. There is no longer any such thing as investor sentiment. As they now say in Wizard country, My algorithm can beat up your algorithm!

Fear is the most potent means of keeping the harridans out of the White House. Without the creation of synthetic Terror, Weasel Business As Usual will come to a halt.

O the horror!

 

PARANOIA STRIKE DEEP

In Business, Economics, Economy, EDUCATION, Finance, Political Economy, Politics, Wall Street on January 27, 2016 at 5:20 pm

WIZARD OF FINANCE

Suppose the financial community is conspiring to collapse the stock market.  I mean, just suppose.

Heavens to Murgatroyd! Why would they do that???

Glad you asked.

Since the only reason financial Wizards do anything is for more profit, Dollar$ in a fever of dread will outline the conspiracy scenario for you.

Dollar$ notes that Republicans Weasels, who represent monied interests, have no issue on which to run for the America presidency. They can manufacture some issues, but the American economy have just enjoyed:

  • plummeting energy costs
  • record automobile sales
  • the lowest unemployment in a decade
  • a rising minimum wage
  • rising home sales
  • a strong dollar
  • and the completion of a tax year that allowed investors to book profits with a Dow-Jones Industrial Average at an all time high.

Now that the record-breaking year is over, it is time to hammer stocks and terrify Citizens. Citizens  who believe the economy and the stock market are the same thing are sadly vulnerable. If the Wizards and Buccaneers can delude enough Citizens into believing the United States is in trouble, they might not vote for a Democrat!!!

screwed1

Citizen

There is no rational reason to think the US economy is troubled. Nor is there something called “market sentiment,” that outmoded fiction contradicted by the fact that 90 percent of all market volume is done by computers at the speed of light. Market perturbations are in fact a contest among algorithms.

Nor is the charade fooling the Fed—which refused to raise interest rates again today. Grass will not be growing in the streets of every American village any time soon. There is not coming financial collapse.

We are not even in the midst of a contraction.

What we’ve got is a bunch of rapacious bastards willing to endure paper losses for a half year in hopes of assuring future revenues and the continuation of the financial environment that enriches very few by squeezing the rest of us.

Call me paranoid.

My Debt, Your Debt, Greek Debt

In Economics, Political Economy, Politics, Wall Street on July 17, 2015 at 6:40 pm

Wearily, Dollar$ emerges from semi-retirement with the vague idea of dispelling some of the more blatantly moronic opinions surrounding the current Greek debt crisis.

There are all manner of weasels infesting the world, not those cute critters, but the kind who live for re-election. As a refresher, Dollar$ asks readers to remind themselves on the sole priority that exists in democratic weaseldom–say anything, no matter how vague or false because relinquishing power is too horrible to think of.

Fat Eddie on the left.

Fat Eddie on the left.

This may be why it takes all of 48 hours for Alexis Tsipras, Greek’s Weasel-in-Chief, to reverse himself on what to do about Greek debt. You let citizens vote, you rouse the rabble, and then you renegotiate with the European Wizards on Wizard terms and screw your citizens.

GRIM TRUTHS
Economics is called the grim science for a reason.

One of the more grim truths of Economics is that when you get a loan, you gotta pay the money back.  Dollar$ learned this lesson from his old buddy, Fat Eddie, who spent many of his days on a park bench in the sun lending money at interest to longshoreman on the Brooklyn docks. Occasionally, for free, he’d share wisdom with callow youth.

I had a hot horse at Aqueduct. I wanted $100. The animal was going to go off at 20-1.

“I can pay you back tonight.”

“No kid. I like you. I appreciate your enthusiasm, and I even agree the horse looks good. But have you considered how you will get me my money and 5 points interest if the horse loses?”

“The horse is a lock.”

“What if he comes up lame? The jockey falls off? Or the horse has a heart attack?  Steps in a gopher hole? It’s a horse, for crissakes.”

“You can have my bicycle as security.”

“What am I gonna do with a freaking bicycle? Get outta here. Do something wholesome. Play blackjack in the park. Roll dice in an alley. Roll a drunk in an alley. Something wholesome. Are the poolrooms closed? Just get outta here.”

So as he slapped the back of my head, I learned my lesson from from Fat Eddie. No one wants to do business with a dead-beat.

It is bad for business.

DEBT
There are two kinds of debt, consumer and capital. Idiots crying for Greece and its screwed population do not know the difference, possibly because they are long-term debtors who have never experienced anything other than being a consumer.

  • Consumer Debt is money borrowed to purchase goods that will be consumed.  Nothing amazing there, right? You consume, bread, gasoline, shoes, and sealing wax. Once it is consumed, it is gone. If you do not have a source of income, you will eventually find paying back consumer debt impossible. Credit card companies will call you at odd hours. Your bills will be handed over to collectors. The road to a happy life requires that you NEVER assume consumer debt you cannot pay back by the end of a month. Credit cards issued by banks charge rates that make would Fat Eddie blush. The only exception is if you are temporarily embarrassed and the kid needs eyeglasses or new shoes. The key is the word temporarily. If your situation is not temporary, you really need either public assistance or a new job. We live in America. If you have to go bankrupt because you cannot pay back, the court will protect you from shylocks and collection agencies. You get a fresh start. No one is happy, and you will not be able to borrow dime #1 for several year, but you can get out of a jam. We no longer populate debtor’s prisons.
  • Capital Debt is money borrowed to make more money. You might hear it called “leverage.” If you are a going concern–a business or have a decent job–CAPITAL DEBT IS A GOOD THING! Why not pay 4 percent on the expectation you will make 8%? Sure, there is risk, but it is the kind of risk even Fat Eddie can respect. Your house mortgage is an asset  that will likely increase in value, Your car enables you to work beyond walking distance from where you live. Your education is a definite asset that will pay off many times what it costs to borrow–provided you do not borrow $150,000 to become a basket-weaver. A bank may be persuaded to loan you  the capital you need to start a business if the bank thinks the business can generate enough profit to sustain you, your employees, and still pay off the interest. If the bank thinks all this is true, the bank will throw money at you.

GREECE

Since 2001, Greece has borrowed money for capital investment, a step required for admission to the European Union and all the expected blessings of a single European currency.

Alas–Greek weasels confused Capital and Consumer debt. Instead of making its citizens more productive, a stratagem that would allow the debt to be paid off, duly elected weasels enforced a low retirement age. Since collecting taxes is nowhere popular, Greek weasel leadership looked the other way as tax evasion became a way of life for the people of Greece. The repeated bailouts were a vain hope by Europe that Greece would understand it was not a teenager with Daddy’s credit card, but a going concern responsible to its citizens and the international community.

Like Fat Eddie, the lenders want their money back. What is German going to do with a frigging bicycle? There are no assets waiting to be confiscated. This is a sovereign nation, for crissakes. No one is showing up to repo the Parthenon.

The knuckleheads who blame the banks for having seduced Greece into loans it cannot pay want to remember Fat Eddie. No one wants to lend money to a deadbeat. It’s bad for business.

What Greece needs is a weasel overhaul, not debt forgiveness.

IT’S BOOM TIMES IN AMERICA

In Business, Economics, Economy, EDUCATION, Finance, Personal Finance, Political Economy, Wall Street on December 23, 2014 at 8:58 pm

Dollar$ is back after an absence: the rarest thing is cyberspace is a blog with nothing to say. But it is time.

Many a financial prognosticator makes a living by predicting gloom and doom. People like a good scare. The problem is, this is no time to be terrified.

Things have never been better. There, I said it.

The oil price war going on between OPEC and the US is about market share. Oh, and be sure to understand it is a price war. Sweaty Wizards will call it a collapse in the market, but OPEC and the US are going toe to toe to own exports to China and Europe.

The beneficiary of this price war are Citizens. We are usually screwed, but we also put gasoline in our SUVs and warm our homes in winter.

It’s boom times in America. That’s no equivocation. It is fact.

Citizen

Citizen

Once again innovative technology befuddled Malthusian nitwits. We are not running out of natural resources before next week. Movies based on this mythology, notably the Mad Max series with Mel Gibson, were based on the popular notion that civilization would collapse for lack of energy resources. It had to be true. Didn’t Tina Turner sing about it?

Thomas Malthus, an early Wizard, in 1798 predicted the world would eventually starve because while population increased geometrically, food supplies could only increase arithmetically.

Ponder that as you sink your teeth onto your next pizza. Get it gluten-free, if you must, and but note no people driving are dune buggies across the desert and warring for women except in the wanker fantasies of adolescent boys.

Frack!

Frack is not a profanity left over from Battlestar Galactica.

Now it happens that fracking to withdraw oil from shale is a process more expensive than simple drilling, so if you were a Saudi Arabian sheikh and terrified that the US was about to once again become an oil exporter, you’d be hoping to squeeze those Allah-be-damned cowboys in North Dakota out of business. You’d drive the price down. You’d drive the price down by producing more oil than the world needs. You’d create a glut of dead dinosaur juice and put it on the open market at prices not seen in a decade.

You’d not-so-incidentally screw over Iraq and Iran, two places where fundamentalist loons pack their asses with C4 and wish they had atomic bombs for atomic bums. It’s not polite to say ill of those loons, but no one expects Saudi Arabia any time soon to invite fundamentalists into the holy cities of Mecca and Medina. Since Iran and Iraq have nothing to offer their populations, they feed them a steady diet of hatred for Israel, far less nourishing than building an economy, but also far easier. The chief exports of the region–other than petroleum–are pistachio nuts.

You accept a little civil unrest to stay in power, so instead of throwing the rascals out, the legions of unemployed fire automatic weapons into the air, lately killing each other in a contest to see who is crazier to keep 21st century mores away from people who have never experienced the Enlightenment, keep their women kept covered, and, because vagina’s are dangerous and mysterious, still ritually mutilate their daughters.

The OPEC strategy is to make fracking too expensive. Pump oil, pump more oil, keep pumping oil. The cost of a barrel of liquid dinosaur has dropped 40% in months!

Meanwhile, the US consumer will pocket about $500 per year not being spent on gasoline. They’ll spend that cash at restaurants, Disneyworld, at the movies, maybe buy that new refrigerator—all those products called consumer discretionaries. We will enjoy this for a while.  Cruise liners should be lowering prices; so should airlines. Buy stock—don’t be a dope. It’s boom times in  America.

Wizards, a timid lot for whom equivocation is a habit, at first believed the drop in oil was the harbinger of evil, the precursor of worldwide deflation. They advised the very rich, the kinds of people who throw billions at hedge funds, to sell. If everything was about to get cheaper, you’d want cash, too. World markets wobbled, but quickly recovered.

Wizards are still advising caution, but anyone attuned to Wizard-Speak will note how often the words, if, may, and perhaps show up in Wizard epistles. “Yes, we at Binkwater Investments are fairly sure that if the markets don’t go down, they may go up. Make your check payable to Binkwater! Subscribe to our newsletter!”

Deflation is indeed evil, but note, too, that Wizards hate the US Weasel in Chief. That sumbitch won’t deregulate! There’s money to be made, dammit, and just because we nearly bankrupted the world economy in 2007, that sumbitch won’t forgive and forget!  Wizards would choke before publically taking note that  the US economy is just grew 5% in a single quarter, faster than any time in the past eleven years, that employment is going up, and that consumers have all just gotten a bonus in the form of cheap oil. The stock market is at record highs.

It’s hard to find bad news for American investors.

True, the US economy is moving in the opposite direction of the rest of the world. China’s growth rate is slowing; Japan’s is still flat-lining, Europe may be in trouble.

In other words, the market for oil is adjusting to world economies that need lower prices while the only place in the world offering significant growth and low risk is the United States.

Call it American Exceptionalism.

FINANCE FOR THE CLUELESS: INVESTING –THE EIGHT DO’s

In Business, Economics, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Wall Street on April 23, 2014 at 12:17 pm

If you are unsure you should dip your trembling toe into investment waters, reread FINANCE FOR THE CLUELESS: INVESTING – THE DON’TS right here at Dollar$.

 CAUTION TO THE HARDHEADED 

If you are persuaded that the game is rigged and that age hates youth, deliberately having made money management and life-planning a cruel losing joke, consider that the bad guys will someday kick the bucket.  When they do, will you be among ageing schmucks still claiming injustice or do you want to position yourself to take your place as a leader?

The choice is yours.

If you are a twenty-something ready to grow up, or a thirty-something ready to take your share of the American Dream, you have  come to the right place.

Dollar$ will not equivocate. Here is what you must do to GET RICH SLOWLY.

Should you discover you need to get rich quickly, Dollar$ urges you to bet on race horses. At any racetrack, you will breathe fresh air, find friendly company, free parking, and can probably purchase a half-decent meal. You will quickly go broke, of course, but during the 1:12 it takes for a decent thoroughbred to run 6 furlongs you can scream yourself silly and dream of riches. Quarter horse racing is even faster!

OPEN AN ACCOUNT

Choose a brokerage like Schwab or Ameritrade, any organization that fits your digital lifestyle. Investigate apps or web sites; choose the brokerage that seems most navigable to you for research, purchasing, and tracking your holdings. You will want more as you learn more, but you need to be comfortable with an interface.

The Internet has leveled the cost of doing business, about $7.95 for any online stock trade, so in terms of costs brokerage firms are interchangeable.  At issue for you is service and minimums.

Most brokerages require a minimum amount to open an account: as this is written, Schwab is asking for a measly $500—perfect for the Clueless.

FEATURES

  1. Options. If you can get approved for Options trading, get it.  You will not use this until you have considerable wealth, but it costs nothing to check a box.
  2.  Margin.  Again, check it off and leave it the hell alone until you know what the hell you are doing, and even then think very, very, carefully about borrowing money from your broker to make an asset purchase—which is what Margin trading is about. Remember, your broker is not your partner. Your gains are your gains alone (W00t W00t!), but your losses are your losses alone. If you owe a margin debt, you will owe what you owe no matter what happens.
Margin accounts may have uses, but can be dangerous.

Margin accounts may have uses, but can be dangerous.

You know Tony down at the docks? The guy who lends money to people with no collateral? He is happiest when you pay him, but he does not care if your team lost, the deal went south, or your honey made off with your boodle—he only wants his money and interest back. When he does not get it, he becomes surly. He makes you sell your car, cash in in your kid’s college fund, and if necessary persuade you to these measures by realigning your knee caps with a baseball bat he keeps handy for just that purpose.

Think of your Margin account as Tony. Don’t let anyone get medieval on you.

3. Check Writing. Take it.  Add a measure of liquidity to your assets. You can write an emergency check if you need to—which you should not, but shit happens.

4. Reinvest Dividends. Absolutely. Dividends are how companies share profits with shareholders. Dividends are not interest, but in effect, reinvesting dividends is how your account will draw compound interest.

“He who understands compound interest , earns it ... he who doesn't ... pays it.” Einstein

“He who understands compound interest , earns it … he who doesn’t … pays it.”
Einstein

 

THE EIGHT DO’S AND WHY

1. Buy stock in at least 3 companies traded on either the New York Stock exchange or the OTC (Over the Counter) markets. Be sure these companies are in very different economic sectors. In other words, do not buy 3 media companies, or 3 retail companies, or 3 technology companies, but perhaps buy 1 of each.

You require a measure of diversity. You can buy diversity in a mutual fund, of course, a basket of stocks managed by professionals, but then you pay fees for professional management. Dollar$ cautions the clueless, who by definition are starting small, that the fees will bleed you white. Why start your financial life with a tapeworm?

Diversity is insurance against misfortune. While one sector of the economy may take a hit from unexpected circumstances—such as a change in a government regulatory posture or a political event in a faraway country— the only circumstance that will affect all 3 of your sectors are changes in the overall economic picture, such as a change in interest rates.  For the investor who wants to GET RICH SLOWLY, those dips can be shrugged off because unlike you and me, companies that sell goods and services can within limits raise their prices to recoup what was lost. The price of lumber goes up, the furniture business takes a hit, but next year the price of furniture rises. It’s not as though people will start sitting on the floor.

What constitutes a sector is very subjective. Is Walt Disney a service company or a media company?  Different online research will yield different sector guides. Here is one website that will allow you to bore down to Market Cap leaders by sector.

The final arbiter of what is what is you, Binky, so give special considerations to companies that are conglomerates. General Electric, the oldest company in the Dow Jones Industrial Average, founded by Thomas Edison, makes washing machines, jet engines, and runs an insurance business.  What sector is that?

2. Buy stock in companies that are at least 20 years old.

Ten-year-old companies have a modest track record of survival; twenty-year-olds are even better.

Yes, Dollar$ is aware that young companies are set to grow quickly, but they frequently are headed by untried management and are closer to going broke. Most corporations live little more than a person’s lifetime though the exceptions are remarkablebecause they embrace a culture of change and innovation. 3M Corporation was founded in 1902 to make sandpaper; now they make Post-It notes and Scotch Tape.

Young companies will also gather imitators, which mean ever-increasing competition will drive revenues, but not costs, downward. Someone is bound to improve on the original idea.  If the good Lord in 1985 had whispered in your ear, “Computers,” you may have chuckled at the Divine Wisdom that loaded your portfolio with Kaypro, Atari, Commodore, and Wang. Like last winter’s snow, those companies are now gone.

Avoid the bleeding edge.

3. Buy stock in at least two companies that are multinationals.

DSC_0230Doing business in places where general economic growth is not dependent on the value of US currency is simply prudent. Dollar$ would never bet against the financial muscle of the United States, but Dollar$ is aware that infrastructure build-out in the 3rd world is inevitably followed by consumer demand for a higher standard of living. You do not have to buy stock in a Chinese company to participate in the Chinese economy; you do not need to need to buy stock in a Chilean company to participate in the Chilean economy.  Logos and trademarks Americans see every day are all over the world: UPS, Disney, Starbucks, Pizza Hut… the list is endless.

If you have qualms about such things and think they are imperialistic, ask the folks in Red Square how they like burgers at McDonald’s, or ask Chinese citizens if the prefer iPhones to ‘Droids.

4. Buy stock in companies that pay dividends or, even better, have a history of raising regularly dividends.

Many companies do not share their profits with shareholders via dividends because managers hoard cash for future business investment. While Dollar$ respects the managerial strategy, Dollar$ notes such companies do not suit a strategy to get rich slowly. The Clueless want an opportunity to have their dividends accrue ever more stock.

Better yet, companies that pay dividends suffer less in a downturn because their dividends offer investors a yield, a cushion against losses.

5. Buy and Hold—even if it means going white-knuckled.

On September 16, 2008 the general stock market as measured by the Dow Jones Industrial Average crashed 10 percent in a single day. The Buccaneers who ran major financial institutions were competing to take greater risks for greater profits than any responsible bank should, fudging on what “banking” meant. On Sept 12, 2008 the DJIA was at 11,421.99.  By November 21, it was down to 8046.42 a breathtaking loss of 29 percent in 6 weeks.

Iceland went broke, Lehman Brothers went out of business, and for the first time ever, US citizens heard the phrase, “Too big to fail.”

Anyone who sold to defend his or her assets for fear of total ruin took themselves out of the game. They may have felt safer, but by doing so, they gave up any chance of recovery.

As Dollar$ writes, the DJIA stands above 16,000—which means sellers in 2008 have missed 100 percent gains measured from then, only six years. By selling into a panic, they gave up every opportunity to gain back all they lost and more.

True, if you owned stock in Lehman Brothers you took it in the neck, but if you had a diversified portfolio, over all, you survived and may have even made money.

A wise man once said, “You can’t go broke on a small profit.”

6. Buy shares and add to your portfolio regularly.

Ideally, you may be able to invest with a check-off system from your salary, an arrangement that will allow even those of us lacking personal discipline to take advantage of the maxim: Pay Yourself First.

Regular investing will allow you to take advantage of “dollar-cost averaging.” When stocks are up, you’ll buy fewer shares: when stocks are down, you’ll buy more shares. On average your cost will be somewhere in between. Free yourself from trying to guess if today or tomorrow are better days to buy; let time be your friend.

If your companies thrive and move steadily upwards, your average cost will always be below their current price level.  Over the long haul, stocks historically have gained 7-9 percent annually. Never try to time the market—just be a steady buyer and Get Rich Slowly.

7. Buy Mid and Large Cap companies.

“Cap” refers to capitalization, the sum total of the value of all the shares issued by a company.  Every company issues a different number of shares, so a company floating a million shares priced at $100 per share is worth $100 million dollars, but a company with 5 million shares priced at $50 per share is worth $250 million.  That’s right, the company trading at the lower price is worth more.

Large Cap companies are slow as battleships, but not likely to sink quickly; Mid Cap companies are more nimble and want nothing more than to grow to be Large Cap. They will take more risk, but have a record for taking risks and winning because they really were once Small Caps.

There are plenty of Small Cap companies, and investing in them is a respectable strategy, but Dollar$ does not recommend that to the Clueless: one needs a larger portfolio to overcome the inevitable losses small companies encounter. While a few Small Caps will experience spectacular growth, more will fail or stay stagnant. On average, an investor might do well, but only if the investor has a sufficiently diverse portfolio, unavailable to the Clueless without professional management—which must be paid for.

8. Sell when the reasons you bought a company change or the fundamentals of the business change.

You selected  XYZ company for your portfolio for reasons. Maybe you personally liked the product or the service; maybe liked the company’s competitive position; maybe you liked the company’s record for paying dividends; maybe you read and were persuaded by  the company’s strategic plans; ideally, you liked some combination of all of those.

But if those any of those change, why are you still holding the company? Never fall in love with a stock; review your portfolio regularly, at least every 3 years. Save your loyalty for a lover.

NOW WHAT

Discovering companies that fit the Dollar$ profile from the universe of thousands of companies is, in fact, easy.  You chose your broker because it offered digital tools for Research. Try the “screening” or “filtering” system—pick an economic sector, indicate your requirements in terms of dividends, choose from Large Cap or Mid Cap, etc.

  • Read about the company’s businesses. If you do not understand what they do, go no further. Invest only in what you understand.
  • Invest only in companies that sell services or products you would buy whether you were a business or a consumer.
  • Buy shares in companies that are ranked first or second in their industries.  
  • Be disciplined. Avoid trendy and hot stock tips, whether from your Uncle Fred or a TV pundit who is obliged to scream “news” at an audience every evening. Near term, they may be right: let someone else make that money while you sleep soundly.
  • Invest and relax—let your money work while you sleep and pay no attention to daily, monthly, or even annual trends. You are going for the long haul, and the long haul is steadily upward and has been for hundreds of years.

PERSONAL FINANCE FOR THE CLUELESS: INVESTING, THE CAPITAL MARKETS

In Business, Economics, EDUCATION, Finance, FINANCE FOR THE CLUELESS, Personal Finance, Wall Street on March 26, 2014 at 12:27 pm

Dollar$ is well aware of the gazillion resources online where some union of Wizards and Buccaneers blow rhetorical fog that is an alleged explanation of stocks and bonds.

Dollar$ submits that these explanations are deliberately arcane, part of the investment community’s strategy to hunt and bag the Clueless. After making what is simple appear complicated, up pops a talentless sales goon who for a small fee offers to manage your money.

 

WHERE WIZARD HIDE

WHERE WIZARDS LURK

Dollar$ seeks to dispel the fog.

When the Clueless understand what anyone can see, the Clueless are no longer clueless. No situation terrifies Buccaneers and Wizards more.

These are the same stalwarts that over a generation persuaded America that job training is a cost to be borne by the trainee and that education and job training are synonyms. An entire generation has accrued so much debt that they are indentured servants.

It is time to turn the table on the bastards.

Leap beyond the jargon of P/E ratios, large cap, small cap, technical analysis, book value and all the rest, grasp the basics, get started, refine your wisdom as you accrue wealth, seek financial and emotional independence.

A Fantasy

Suppose you are downloading 3 seasons of the Walking Dead because you are far too cool to watch broadcast TV at scheduled times, planning a long weekend of beer, pizza, a fluffy blanket, and a lover watching monsters eat brains. What could be more romantic?

Suddenly, as if in a vision, you imagine a way to supply the world with a new and better widget. Your lover shows up, you describe your plan, and your lover enthusiastically says, “We’ll need some money to get started, but eventually we will make wheelbarrows of dough.”

Hot damn!

Nothing comes easy, but after two years of running the business on a shoestring at 16 hours per day, you’ve proven the concept. You can make and deliver a quality widget for less. You need now to expand enough to get out of the basement. You want to hire some old-school experts in widgetry, and you need 10 employees. You are figuring with the profits that are forthcoming, eventually you will have 10,000 employees. The sky is the limit.

Scariest start-up ever

Scariest start-up ever

Do not laugh. This is how Amazon.com started, with Jeff Bezos sitting on the floor wrapping packages. This is how Facebook started, with Mark Zuckerberg gathering a cadre of code-writing geeks in a Harvard dorm. This is how Hewlett-Packard began—in a garage in Palo Alto. Maybe the scariest start-up in recent history was Fedex: on the first day in business in April 17, 1973, Fedex required 14 jets and 389 employees to deliver 186 packages to 25 cities. The idea was to compete with the US Post Office by charging MORE.

What lunatic would invest in that????

Ideas turn into goods and services that make our lives rich and our wallets fat. This is the miracle of America capitalism.

Capital Markets – Access the Money!

Participation in the public capital markets are the only way for Citizens to partake in that miracle.

Businesses go to the Bond Markets to borrow money. When a Citizen participates in the bond market, the Citizen becomes a lender. Lenders are guaranteed income determined by the face value of the bond, interest based on the rate of return, and an eventual return of principal at a predetermined date. Since part of the investor’s risk is the bankruptcy of the issuing organization, the rate of return (interest) is determined by how solid the issuing organization is.

Note that the investor does not participate in the growth of the issuing organization.

Note, too, that some organizations are not businesses promising interest based on future profits, but are municipalities promising interest payments based on future tax revenues.

Dollar$ hastens to point out that bonds are appropriate for investors with low risk tolerance—the aged and the nervous.

 

Citizen

Citizen

Dollar$ also points out that no investment is without risk. Ask Citizens who held bonds issued by the City of Detroit. Mostly, those bonds are held by large organizations such as labor union pensions funds, but when the fog lifts, those are Citizens. Instead of interest and eventual payment of principal, investors in Detroit’s bonds hope to get twenty cents on the dollar.

Businesses go to the Stock Market to sell shares in the company to willing investors who expect or hope that the good idea will make the value of the shares rise with the good fortune of the company. At some point, if the shares of stock are traded, the investor makes a gain or, if the value of shares goes down, incurs a loss.

For citizens to participate in the stock market requires only that the citizen have a broker, a clear idea of the advantages and disadvantages of different stock investment vehicles, and an investment strategy.

Dollar$ will be writing more soon.

FINANCE FOR THE CLUELESS: INVESTING #2 – BURN YOUR PILLOW CASE

In Economics, Economy, EDUCATION, FINANCE FOR THE CLUELESS, Personal Finance, Wall Street on March 19, 2014 at 12:30 pm

“OK, Dollar$, I have a few bucks in the bank, I have no significant consumer debt, and I have steady cash flow from a secure job. I have measured my risk tolerance in terms of my age and psychology, and I am persuaded that I want to get rich slowly to meet specific long term goals, such as buying a house, putting as yet unborn children through college, preparing for my own old age.”

Congratulations, Bunky! You are a grown-up! Its time to take your money out of a pillowcase.

photo-92-e1319326132194Tell your broke-ass friends who insist that the rich own the system and that they know they cannot get ahead that you have decided to join the Dark Side. Dollar$ adored Occupy Wall Street for its goals–who can argue with Justice? but Dollar$ sadly notes the “movement” lasted less than a year. So why not become one of those degenerate rich? While your friends bitch and moan, lusting for the next video game unit, having succumbed to the Consumer Culture that pollutes the mind by implanting false needs, you have decided to take control, take responsibility ad will rise above that.

You will never spend money frivolously or self-indulgently—that’s what children do—but you have goals, you have ambitions, and like it or not, all of us live in the sea of financial life.

You can choose to drown, float, or construct a ship to set sail.

Dollar$ wants you to set sail.

First, you’ll need to build a ship.

Save or Invest?

If you meet the Dollar$ profile, it will be plain that simply saving will have you sink not far from the dock. You work hard, so should your money.

Money in the bank is not working hard; however, it is totally liquid. You need to have some there for ordinary bills and expenses.

Dollar$ Recommendation: a balance of at least 3 months for the young (under 40), and as much as 6 months for the not very young. The Book of Ecclesaistes tells us:

I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.

Or, as Dollar$ interprets The Good Book: Shit happens.

So DO Insure and save against the ay you will have bad luck. Everyone does. Do not let time and chance happenth on your watch.

Say you are minding your own business at a stop light when you get your leg crushed by a cement truck with failed brakes. If you have a disability policy or disability rider on your auto policy that kicks in after 6 months, it is a LOT less expensive than a policy that kicks in after 6 weeks. No sweat for you if you have some liquid assets in the bank, but a disaster if you are living check to check.

If you believe you are trapped, read Dollar$ on how to save more.

The Name of the Game is Averages

If someone offer you Magic Beans and a quick rich scheme, run. But the simple fact is that stocks show an average return of near 10 percent per year over the long term.  In this chart, the red lines are averages: notice, however, that some years are awful, and others are terrific.

Now you know what AVERAGE means.

avg-mkt-rtns-1926-2008-600x409

Some years are dogs; some are stellar.

Compare that average to current bank account returns, which as Dollar$ writes are less than 1 percent. Taking on some risk to average 10 percent seems mandatory instead of accepting a pittance.

Since you are following the Dollars motto, Get Rich Slowly, year-to-year gains and losses are of mildly passing interest. If losses of 10, 20 or even 40 percent trouble you—reset your gauge of Risk Tolerance.

The Marathon

We do not quit running after 2 miles because of a leg cramp. Shooting for an AVERAGE of 8 percent each year is realistic, possible, and will make you rich—slowly.

Think not?

This chart from JP Morgan shows three investors compounding their investments over time. One of them, Susan, starts at 25 and quits at 35.  She still winds up with a mere $850,000, enough dough to rent a tennis pro or two.

Growth over time

 

Dollar$ RecommendationWHAT ARE YOU WATING FOR????

Reassuring the Nervous

Suppose you are 25 years old and are able to invest $2,000 each year, maybe in an IRA, maybe in stocks–just keep it out of that pillowcase.  And after five years, you look with pride at your tidy pot of money. You are now 30, but just then the stock market crashes. They are leaping out of buildings on Wall Street. It’s as bad as the Great Depression—maybe worse.  The Depression lasted 12 years; it was 15 years of investor misery.  What happens to your Dollar$ plan?

Well you are all of 45 years old, a good 20 years from a youngish retirement.  If you’ve maintained investor discipline, you’ve accrued 15 years of investments at bargain basement prices. When the stock market recovers–and it will, since the United States is not going bankrupt any time soon– you may be lucky enough to enjoy a year like 2013, a whopping 32 percent gain in a single year.

All those cheap investments you made for 15 years are paying off! Buy cheap; sell dear! as log as you are dedicated to Get Rich Slowly, down markets are a buying opportunity, Bunky!

The sissie who bailed in 2008-09 go screwed. Those were bad years, and those investors with short term vision took it in the neck. They ran for the exits and took permanent losses because they took the short term view.

Now before someone tells Dollar$ that they were protecting themselves and, perhaps, were too close to retirement, Dollar$ will remind readers that being 65 these days is not old. Folks who are retired should prepare for at least 20 years more of life and so accept judicious risk. Any investor was over 70 in 2008 and had a significant pot of cash at risk….why? What are you? Invulnerable?

For the Dollar$ reader, the Clueless who are not H0peless, the lesson is plain:  Buy and hold, and do not let the vagaries of the markets year to year bother you.

Take a lesson from Monty Python.

Never bury what ain’t dead yet.

Convinced?

Watch for Finance for the Clueless: Investing #3 – Nuts and Bolts

BITCOIN IN WONDERLAND

In Business, Economics, EDUCATION, Finance, Personal Finance, Political Economy, Wall Street, Wall Street Journal on March 14, 2014 at 10:37 am

Curiouser and curiouser!’ cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English); ‘now I’m opening out like the largest telescope that ever was!

Bitcoin Speculator

Bitcoin Speculator

Just when Dollar$ though the Bitcoin story was dead and safely buried, someone nibbles a few crumbs of Bitcoin Cake and we are back in Wonderland.

Beware of strange substances that are labeled Eat Me.

The Wall Street Journal reports that a Silicon Valley startup called Xapo is trying to become “the Fort Knox of bitcoin.”

Start with how the Journal ought to employ fact-checkers. Xapo is headquartered in Hong Kong, safely away from pesky US regulatory agencies. Sure, they’ve got offices in California, but so does every other financial firm in the world.

Magic Beans

The bitcoin business proposition is like the story Jack and the Beanstalk. (When it comes to bitcoins, metaphors from fantasy and fairytales are unavoidable.) Give us your real cow, and we will give you magic beans! Overnight they will grow to the sky! When you get up there, you’ll meet a giant who wants to devour you! To survive the giant, you have to be a thief and run like Hell!

Bitcoin: Give us your real money! Bitcoin value will grow to the sky. All you need is the heart of a thief!

The Xapo Proposition

Xapo claims to have raised $20 million to construct physical vaults, “the company says are in mountainous regions.” The vaults are to be guarded 24/7. You’ll need an eye scan to enter. Once each day, employees will descend into the vaults to verify passcodes for daily transactions. Indeed, Xapo indicates it will require 24 hours to complete any transaction.

There are no physical coins, of course. What will be down there will be computers Xapo promises will never be connected to the Internet.  The mountain locations are, naturally, top secret. They may, in fact, be in the back of your Mom’s lingerie drawer. What could be more secure?

Xapo has several competitors, testimony to the idea that a lot of people sell snakeoil.

Liquidity

The bottomless credulity of the cyber-community originates with vitamin deficiencies caused by a steady diet of cold pizza and Red Bull for breakfast, watching Goldfinger too many times, the conviction that one can get rich without ever getting out of a chair, and an unshakeable libertarian belief that the arms merchants, sex traffickers, and drug dealers MUST have an untraceable non-government issued currency for money laundering.

Bitcoin Banker

Bitcoin Banker

Criminals are famous for patience and trust. What 3rd World potentate on the lam requires liquidity? Money launderers of all sorts will  have no issue with a 24-hour waiting period.

Security

Xapo’s website reads, “The Xapo Vault offers fully insured storage for long term savings.” The Xapo website indicates that the insurer is “Meridian Insurance.”

Dollar$ best efforts to find Meridian came up with a few casualty and auto business insurers in the Silicon Valley area. There is no chance that any of them could sustain a few million in claims should Xapo somehow go under, never mind the billions in catastrophic losses made possible by the disappearance of an exchange like the late unmourned Mt. Gox. Could Xapo be arranging employee dental care with Meridian?

But Dollar$ wonders most what currency Meridian or any other insurer will use for indemnification. Will your stolen bitcoins be replaced by dollars, yen, or more bitcoins?

Criminals will stick with fiat currency or gold. Only the naïve and stupid will pursue their bitcoin dreams in Wonderland.

GAAP AND THE BUCCANEERS

In Business, Finance, Wall Street, Wall Street Journal on February 27, 2014 at 7:18 pm

buccaneerDollar$ readers know that Buccaneers are CEOs and other business leaders who freely roam the financial seas looting and plundering.
Like any good pirate, a CEO knows that rules are for other people.

According to today’s Wall Street Journal, “Last year, 542 companies said they determine compensation using financial measurements that differ from U.S. accounting standards.”

Why would anyone do that?

Bigger bonuses for top management, imbecile! Strip out operating costs and losses, and your company looks terrific–give yourself a few million of shareholder money!

PULL THOSE OARS. Aaaaargh!

Ah, to be  a Buccaneer on the high seas with a chest of ill-gotten booty!

General Accepted Accounting Principles (GAAP)???!!!!

WE DON’T NEED NO STINKIN’ RULES!

WHAT WE TALK ABOUT WHEN WE TALK ABOUT BITCOIN

In Business, Economics, Economy, EDUCATION, Finance, Wall Street on February 26, 2014 at 6:53 pm

dollar20sign1Dollar$ is unable to resist the didactic opportunity of this ongoing story, but is not sorry to hit the many points over and over again.

Citizens can recover from flu; financial ignorance will cripple a lifetime.

Dollar$ expressed doubt about the entire enterprise shortly before Mt.Gox went dark, but finds the idea that sex traffickers, arms merchants, dope dealers, and other folks who need untraceable transactions are losing money to hackers and thieves not terribly disturbing

As for speculators caught in the downdraft, what did you expect for an asset that went from $12 $1,000+?  You did not have to be born in 1600 to know it was Black Tulip Time in Cyberspace again.

Some fools never learn.

You know a news story has legs when major news outlets are paying attention, but Dollar$ notes for the record that by the time The New York Times, ABC-News, or the Wall Street Journal catch the scent of a story, it is already too late for a Citizen. That aroma they detect is the aroma of burnt arse. You’d be far better off monitoring blogs—and so we humbly offer Dollar$.

The Great Casino

Banks LOVE transactions, which means any time money changes hands, as long as they are involved. That means credit cards and checks, and for most of us that means 90 percent of what we spend.

With small fees, they will eventually will own the universe. If there are parallel worlds, they will own them, too.

Think not?

Round up some friends and invite them to play poker at that neat green felt table in your garage. I won’t tell the cops if you don’t.

Supply poker chips, artichoke dip, chill the beer, but DO NOT PLAY CARDS. (Gamble??? Have I taught you NOTHING?? Are you an idiot???)

Instead of playing in your friendly game, after every hand, no matter how large or small the pot, extract a mere 2% before the winner rakes in 98%.

After enough hands, at 2% per hand, you will have every dime in the room. You will also have the keys to the cars parked in the driveway, several deeds to houses, and most of what had been future college tuition for the children of your players.

Look. Yours is a a friendly game. Your players are losing really slowly.

By comparison, Roulette at a Las Vegas casino rakes more than 5 percent. 220px-Roulette_-_detailThe amount dropped depends only on how many times the wheel spins. In your garage, the amount a player wins or loses in a night depends how fast new hands of poker can be dealt. Sure, a player or two will win many hands, and they may even quit winners some nights, but as long as the wheel is in motion and the cards are fluttering across the table, the house will eventually take it all.

The rake for Visa and MasterCard, depending on the merchant, is  between 2.5 percent and 3 percent. Walmart pays less—lots of volume. Mom and Pops Pottery Place pays more. The reason you can get discounted gas for cash  is that currency keep a transaction out of the hands of the bank.

And now you know why the financial regulators are sitting on their hands as the BitCoin Bubble floats away.

It ain’t their action.