Monthly Archives: February 2013

10 ways to over-complicate investing and lose money while doing it! Or, Why my five year old can pick stocks better than you.

New 199

The number one rule in stocks is: Buy low, sell high.

Listen, stocks are scary, because you are investing money and you may lose some of it. But, you go to Vol*dMart to buy groceries every other week, and your probably spending a lot more on those goods than you are on stocks. Why is it so hard to buy stocks?

There are a lot of psychological reasons why buying stocks is hard:

1) You want the perfect stock! The more choices there are out there, the worse you’ll believe your final choice is (seriously, watch this. It will blow your mind); so you hesitate and lose all initiative.

2) You want to buy it at the perfect time! There is no way to know when the perfect time to buy was, until it is in the historical record. Just buy when a stock is really low, and hold the sucker till your 59. I.e., It’s like, you go into Target and see a winter jacket on sale for 33% of it’s previous price, but its June. Since you needed a jacket the previous winter, and had been planning on buying one anyway. You buy it, and next winter you have a good coat. 

3) You don’t know what your doing: I get this, but really, it’s no more complicated than buying a cart full of groceries. It’s way simpler than buying a car, because, heck, if you don’t like it, you just sell it right back and the price is pretty much the same!

4) You worry about the company going out of business. OK, read up on the company, a little.  But don’t over think this. If 5 professionals say, “Hey this company rocks!” It’s probably not going anywhere.

5) You see a company on MSNBC/FOX Business/CNN Business etc., in trouble, and you shy away from it — but those are the only bargains you see. Well, you don’t get $0.15 off a dented can of soup cause it’s pretty! And it’s still the same soup! 

6) You want to buy the next Google, Amazon or Microsoft, with penny stocks, but don’t know which one to buy. Here is the truth, all of them are extremely risky, and 99% of them are garbage. Do you have time to look into these companies? I don’t, and this is one of the two mutual funds I own (small cap and medical insurance). Let the pros figure this out.

7) Your friends/coworkers/relatives/bus boy know more about stocks than you, and you know you can’t compete, and so you don’t. Well, that solves your problem of having to compete with them! But there is a simpler method: Don’t judge your portfolio/decisions/life by other people. Judge it by itself: is it getting better? Just ignore other people. There will always be people smarter, richer, and better at anything/everything than you. But, there will always be someone better than them too.

8) Too many numbers, graphs and ways of looking at this crap! Seriously, there is. Ignore most of that it (look at market cap, dividend, P/E ratio, price and some ratings — done!). Again, if the professionals are saying buy, it is probably OK to just go and buy it. I know there are a lot of serious investors out there who will need some knappy wipes after reading that last sentence, but just because She/He doesn’t know if a company is good or not, doesn’t have any bearing on whether the company’s good! Other people can be right! And another thing these “super knowledgeable” investors seem to forget: It’s pretty easy to buy and sell stuff. If you buy it low, and it goes even lower, you can just wait (or even buy more!). If it goes up, great! Whats the big risk? I don’t understand it …

9) Stocks aren’t safe! Look, if I had bought 10 share of the S&P 500 when I graduated high school in 1993, it would have cost me $4630 at its highest point – at it’s lowest point in the past 10 years, it would have been worth $6830. That is still a profit of $2200. If I had kept it until this very moment, it would be worth: >$15,000, and that is after TWO horrible stock market crashes and the biggest depression since 1930! Lets see your savings account do that!

10) Investing needs to be super-sophisticated. Well, hate to tell you buddy, but you’ve been lied to your entire life. The best diet? Eat less.  The best pickup line? “Hello, I find you attractive. Would you like to have coffee sometime?” Best solution to a mathematical/scientific conundrum? The simplest explanation  The best way to make money in stocks? Buy something.

**

Take home message: Buy stocks of companies you know. Don’t think a lot about it. Really, that’s it.

Don’t watch the market news, don’t dither, don’t read the WSJ. Don’t log-in and look at your account all the time. Just buy a solid company, and play with your kids. Simple.

And tell your self this: If you were explaining to your child about a company and you said, “You know, ___, where we have shopped your entire life, and where mommy and daddy shopped with their grandma and grandpa? The one that’s on every corner in America? Yes, that one. Do you think it will be there tomorrow?” My 5 year old could pull the trigger on that one!

Advertisements

Cited for walking without insurance.

Untitled

Since the advent of the car, there have been accidents — and ways to make money out of them. One of the legal ways, though some would argue more immoral ones, is insurance. And it’s easy: you promise to pay someone if their car gets damaged in a crash, and all you have to do to make money is take in more than you give out.

But, from the insurance company’s point of view, people that have accidents are losses. In order to make money, the insurance company needs people who are not getting into accidents. 

So, in the early days, insurance companies looked around and noticed that most of the people they were insuring were either a) rich or b) those at the greatest risk for accidents. In order to compensate for the at risk, the insurance companies had to raise the premiums … and they could only do that so long until people just went somewhere else, or dropped their coverage’s altogether. What they needed was a bunch of people that were not risky to purchase insurance — in other words, get people that didn’t need insurance.

Then, as if by a miracle from Heaven, laws began being passed in certain states requiring minimum insurance for any driver and/or automobile.  All of a sudden, insurance companies had plenty of low risk customers (who were forced to purchase the insurance!), and the people that owned stocks in those companies received dividends because the company had “extra” money and didn’t have any thing left to pay for. Hooray!

Now, is it ethical to force people that don’t need insurance to purchase it? Americans don’t like to be forced to do anything … so, on a personal level, I find this repellent. Is it necessary? Probably, because, we can’t know before an accident, who will actually be in an accident. Sure, statistics can tell us percentages or likelihood  but this can not be applied to an individual. So, while it sucks being forced to pay for something you haven’t ever needed, you can never tell if you ever will  need it. And, heck, if you do need it, it’s sure nice to have.

So, it may be ugly, but it’s not, as suggested earlier, immoral — at least on the surface.

So, what the hell am I babbling about car insurance for, you may be asking yourself. Well, lets look at the “system” of insurance: Receive money, payout money. Keep the profit margin by two mechanisms: Raising prices above losses and spreading the risk. If this is done properly, you will always make more than you lose. Always. There is no gamble.

This may seem attractive to you, as an investment. However, if you purchase stocks in auto insurances now, you will be paying a lot to get a little: i.e., because the insurance companies make money, and people appreciate that, people will pay more for it because of competition. Thus the price raises, but the dividends stay the same. This is called the price/earnings ratio, or P/E ratio. Insurance companies have high P/E ratios. The bottom line is, you will get very little bang for your buck out of an auto insurance company.

So, again, you are asking, what the hell am I talking about, then?

In 2014, the federal government is going to require all people to own body insurance on all human body’s driven by citizens in these United States.

Just like those proto-auto insurance companies, this will be the clarion call for healthcare insurance profits, because when people are forced to  have health insurance, the healthy will have to buy it too. Not only will insurance companies have more customers, those customers will pull down the level of risk!

Sure, insurance rates will fall, because of competition, but this will not be at the expense of profits. The insurance rates will only fall after dividends are distributed (who do you think owns insurance stocks? Why, insurance company employees, of course!)

And here is the crux: Prices on health insurance companies are not up, they are down. This means the P/E ratio is low for this sector. StockGuilt feels confident enough to purchase a mutual fund of health insurances (because we won’t be able to keep up with emerging companies, new competition, policy developments, etc.).

Don’t make me tell you, “I told you so” in ten years, ’cause I will. Look into this, OK?

street-art-healthcare-by-alec-melrose-ave

NOTE: StockGuilt is a blog about interesting stocks, and our views. We are not stock brokers, investment councilors, planners or legal advisers. In fact, at least one of us is an idiot. The rest are just folks who think about investments. This is what we think, and what we will do/did. In no way are we telling your what to buy or sell … Do your own homework.

If it works out for you, and you feel generous, well, we’ll probably get in trouble if we take your money, so …  We like Ronald McDonald houseUnicefSalvation Army and SafeNest

Apple: Think differently.

steve-jobs

Steve Jobs (1955-2012) was considered a genius by many, and almost supernatural by some. Others loathed him and his products. But no matter what you thought of him, he was a hell of a business man.

He brought us MP3 players that actually worked; he brought us slates (the old Science Fiction term for a tablet device. Hey! We’re living in the future!); he brought a style and a sense of cool to every product he touched. He started Pixar in his spare time, and deserves at least half of each Oscar they won, and he was gone before they got bought by Disney and made Cars 2.

Basically, this guy was Midas.

iPod touch —> *Gold*.

And now, Apple stock is down. Way down. Take a look at this link, and note the years leading up to 2012. The blue line is Apple, and it is shooting up into near Earth orbit. The red line is the Dow Jones Index (basically all the US companies combined) for context. We can see that the economy was slowing everything down, and then, POW!, Apple explodes, as the rest of the world begins dusting itself off. Then Mr. Jobs passes away, and POP!, Apple starts to deflate and the sky-diver in that weather balloon from Red Bull jumps ship. 

But, lets remember something: This is Steve Jobs we are talking about here. No matter who is running the company, this was Steve’s baby. The company did just fine the year before, when his illness was a secret. Suddenly, the products don’t sell? Take a look at three different quarters for 2011-13, for Apple’s sales/profits for yourself (hint, look at the gross earnings for Q1 for each of the last three years).

I think Steve Jobs has given us one last gift. His passing has created a drop in Wall Street’s confidence in Apple, but his vision remains. Now, we all get a second chance to believe in him.

I don’t know about you, but, I’ll hate myself if I didn’t buy when I had a chance — again!

NOTE: StockGuilt is a blog about interesting stocks, and our views. We are not stock brokers, investment councilors, planners or legal advisers. In fact, at least one of us is an idiot. The rest are just folks who think about investments. This is what we think, and what we will do/did. In no way are we telling your what to buy or sell … Do your own homework.

If it works out for you, and you feel generous, well, we’ll probably get in trouble if we take your money, so …  We like Ronald McDonald houseUnicefSalvation Army and SafeNest

I thought, “I wonder what evil costs today?”

Image

I have a problem with feeling powerless. The problem is not feeling powerless, although that sucks eggs too, but my reaction to it. I get obsessed with it — how I should do something about it, how others have taken advantage of me and this is just another in a long line of jack-boots stepping on my face. See? I get weird. I start snapping at people — coworkers, wife, kids. One thing that always gets me spitting steam like a boiled cartoon cowboy is Microsoft — the ultimate baddy. I remember one time, as a lowly college student, struggling with finances, I was required to purchase Microsoft Office (student ed.) because my professor Would Not  Open Non-Microsoft Text-files. Despite my having made the effort to save it in a Microsoft compatible format. Soon after that, my computer crashed. Guess what? It was too late to download the Office suite I had bought from Microsoft just 3 months earlier. So, I had to buy it again, and a new Microsoft OS! I spent $900 on the computer, and another $1000 on Microsoft products, just to be able to turn in my assignments for school. Then, for a statistics class, I realized I needed Microsoft Access. And guess what?

Over the years I have spent a lot of time and energy simply pondering Microsoft’s aura of evil. Obsessing, really. Oh, every time I had an interaction with a Microsoft product, like, every other second, I would start to simmer again. How I hated the feeling of being abused and used like some sort of worm hosting a wasp larva — they want me alive, so I could earn more money for them. Over and over … every few years, paying for an upgrade to a system I had just learned how to use, only to start at the beginning again.

One day, I was stewing, and  I looked up Microsoft’s stock, thinking, “I wonder what evil costs?”

It was quite reasonable, actually. And they had begun paying dividends … hmm. Then something magical happened. I said to myself, “What if I could get all of my money back from Microsoft? All of it!”

So, I bought the stock, and I had a feeling of peace. And I began to stop dwelling on how Microsoft tries to screw me and everyone I know; I began to live a life without “Microsoft Hate” eating away at my soul. I had never realized just how awful it had made me feel, all those years, brooding, loathing, hating.

So, here is a list of 6 companies I have bought stock in, because I just don’t have time to hate them anymore:

1) Microsoft

2) Wal*Mart

3) My insurance companies (Auto and Medical).

4) My cable company.

5) Facebook.

6) My Bank.

Now, understand, I didn’t even really look at the numbers on these companies. They are not going anywhere, and that’s the point. My investment is monetary  sure, but mostly it is about retribution. These companies have taken something from me, and I am going to get it back. And I know when it’s time to buy more, when I start thinking how much one of these companies pisses me off.

Microsoft, by the way, has put out a nice operating system this year, much to my surprise. I actually like it. And, you know what? I am close to getting all of my money back from them, and it makes me so fucking happy.

I wish the government would privatize the DMV, so I could buy the hell out of it …

You wanta buy a Hog and ride off into the sunset?

Image

Moral dilemma time … Do you save for your children’s college or do you buy a all American-made, kick-ass Harley? Do you come home to a mess every night  kiss your bedraggled spouse and cook fish-sticks, or do you pound tequila with Jax Teller?

What if I told you, you could do both? And cheaper than you thought: at $26,000 – $36,000 a motorcycle, buying a Harley Davidson motorcycle doesn’t seem like a path to financial freedom; but buying a share of this company, NYSE: HOG, (that’s got to be the best ticker symbol ever!) at around $52/share (click the link above for a real time quote), this just may be your ticket to ride!

A poor economy has slowed sales of this Motorcycle powerhouse, but sales will never disappear. Recent talk of increasing dividends, coupled with a depressed market price may give you a great buy-in price on this chrome-plated beauty. This is a stock that will only rise (think blue collar folks recovering from the depression(s)), and it has a serious moat around it -There are no other American companies that pose any competition – and if we know anything about our outlaw biker brothers and sisters, its that only American will do. At least, if they want to hang with the cool kids.

So, what’s the problem here? This is a StockGuilt portfolio “buy”, at this point, and we’ll do just that when the funds roll in … but it was a bit of an ethical conundrum.

I mean, lets just look at the list of negatives here: Does this support oil companies (see StockGuilt manifesto)? Currently there are 0 motorcycles companies that utilize alternative fuel sources, and there is no research (as far as we can tell) that there ever will be. Also, biker gangs do a lot of bad things! They ride Harley’s! Also, just by it’s existance, and it’s enthusiastic following, we know that Harley’s are only around because of simple racism. I mean, seriously, there are more than 10 other countries that make motorcycles that have better reliability and performance than any Harley Davidson cruisers — hell, even hard core bikers laugh about how unreliable and poorly operating Harleys are. They leak so much oil, that there is a term for it: marking their territory.

Ok. So, why do we think this is alright to own? Motorcycles may be gas-burning, but they are the origional high-MPG vehicles. Ranging from 33-48 MPG, for a beefy hog. So, no. They don’t support the oil industry as much as that 4-Runner you have in your driveway. What about the drugs, violence, prostitution, etc? OK, lets just say that 100% of full-time bikers were doing drug deals, which they aren’t  but even if they were, the motorcycle has nothing to do with the business. I mean, do we want to boycott Wilson Suede and Leather too? (well, maybe, depends if your a PETA person or not). Regardless, StockGuilt has no qualms about owning a stock associated with good and bad people, cause every type of people are good and bad. Just cause they prefer choppers to clippers doesn’t make them evil.

But this racism thing, well we can’t shake that. A lot of people that ride Harleys are racists. Does supporting H&D mean supporting racism? Perhaps. We here at StockGuilt don’t think so. It’s an American product, made in America for Americans, but that doesn’t mean that it is bad. It represents America, home of the free, and people like to be reminded of that. Some of the free a dirty bigots, true … but most of the free, well, they love their families, want to retire well off and ride off into a sunset.

NOTE: StockGuilt is a blog about interesting stocks, and our views. We are not stock brokers, investment councilors, planners or legal advisers. In fact, at least one of us is an idiot. The rest are just folks who think about investments. This is what we think, and what we will do/did. In no way are we telling your what to buy or sell … Do your own homework.

If it works out for you, and you feel generous, well, we’ll probably get in trouble if we take your money, so …  We like Ronald McDonald house, Unicef, Salvation Army and SafeNest

How to invest like a big-time, Cristal guzzling, yacht cruising, hairy-chested hedge-fund manager — on a teachers salary. AKA The StockGuilt manifesto.

Bubble

“I’ll take that one …”

The name of the game is: Beat the S&P. The S&P 500 is an index, a lump, of the largest 500 companies on the Dow-Jones market. And we have to beat them! Beat them?

How the heck can we beat the biggest companies in the world? Do we really have to beat them? Why?

Well the answers are, in order: You probably can’t, and no. Why? Why, is because that is the baseline everyone else is trying to pass. You may have heard this, or, if you are serious about investing in the stock market, you will hear about it: the S&P grows (or declines) in a given amount of time, and you compare your portfolio to it. If you are better than the S&P, you polish up your trumpets and sell seats to your carnival show. If you don’t, you just don’t mention it.

But, here is the truth: The line in the sand is arbitrary (why not every other company listed on the NYSE, numbers 103 till 2175?). Clearing the  hurdle is based on chance (i.e., luck) and really doesn’t mean anything. It is — (get ready for a swear word) — bullshit. 

Let me tell you right now, you may beat the S&P for one year. You may beat it for two. You may beat it for 10 years. You may throw heads on a quarter 14 times in a row. But it ain’t skill, its dumb luck.

So get the image of the swaggering, uber-intelligent, market savvy stock trader out of your mind. You aren’t her, just like you aren’t Beyonce or Jessica Flecher (Murder She Wrote reference … I lost a bet. ).

What we want to do is about as lucky and glamorous as making a brick out of mud. We take the ingredients,  use a system someone else taught us, slap it together, and build a house. We don’t really think too much, because we know we can’t outsmart the market. We just build bricks and make a strong foundation, and shore up walls, and build a future. It’s slow, boring, messy and unglamorous, but, fortunately, it’s pretty foolproof, and it makes more money, and is nearly as safe as your savings account or a CD (or even Bonds). Besides, we don’t have time for this crap. The reason we are doing this is for our families; it would be pretty dumb to ignore them while you are planning for their futures!

So, here are the basics, no messing around. Each of these will be expanded and explained in detail later, but for now, just make a checklist:

  • Buy individual stocks!
  • Keep fees down! 
  • Do your own financial planning!
  • Don’t move your money around, plan to buy and hold for at least 10 years.
  • Use an online brokerage … and if someone wants to give you $600 for putting your money in there, do it. 
  • Save as much as you can — remember, $1 today is $100 when you retire! Every penny counts. 

Now, the moment you’ve all been waiting for: How to invest like a super-smart, Ivy league educated, platinum TAG-Heuer watch wearing  mutual fund managing superstar! 

  • The secret is you simply buy the companies listed on their prospectus (a document they make for number’s geeks, that tells all the financial voodoo, wizardry and statistics; this document shows what their mutual fund is buying). Why pay them, when they are giving you their expertise for free? 

So, about that S&P. The funny thing is, the S&P does just fine. So fine, in fact, there are funds you can purchase (which we discourage, due to fees) that do nothing but mimic the S&P. You would do well to come close. Everything else is luck and should be cherished like gold found on the sidewalk. 

Now, send me $1000 every year until you retire, like a financial planner. Yeah, I didn’t think so. Still think people that invest have to be super-smart? You are now smarter than 90% of them.