Patterns

 
When I was a floor trader people would ask me how do you make sense of what is going on with all that yelling and arm-waving? To the uninitiated it does look turbulent, but to those who are in the middle it is understandable and orderly. It took me a while before it became "normal". Your broker at this time may be telling you that such-an-such stock is a great "value" because it has come down so far. Don't believe this Wall Street myth. It will only cost you money. Cash is your best position right now....
 

Selection Vs Direction

 
As I have said many times before in this column it really doesn't make any difference what you buy - stocks, funds or indexes - it takes smarts to know when to sell. Direction of the general market is more important than selection of any equity. Everyone from the multimillion dollar analyst on Wall Street to your broker to your barber thought he was a financial genius from 1982 to 2000. Anyone using the stock page from the Wall Street Journal as a target could have picked a winner even if his aim was terrible....
 

Emotional Maturity

 
If you are going to be a winner in the stock market you must have emotional maturity. I did not say you had to be smart or know how to pick stocks and mutual funds. Once someone buys a stock or mutual fund he immediately seems to have a love affair with it. It can become a fatal attraction that can lead to disaster. All brokers and financial planners are taught to buy and hold no matter what happens to the price of an equity. They get married to it and hope that it will treat them well while they are together....
 

The Bottom?

 
Every day I hear someone on CNBC proclaim that "this is the bottom" and you should get in there and buy all those "bargains". "The valuations of the DOW stocks are a steal." The low of DOW 8,000 immediately after September 11 was "the low" and the market did rally to about 10,700. That's 2,700 points. A smart trader could have made a fortune in six months. Oops! Then there was a Brody to DOW 7500. That's more than 3,000 points. That, for sure, is "the bottom". I heard them say so on TV and radio....
 

Valuation

 
Every day I hear from the "experts" on CNBC-TV and the radio gurus that the way to buy stocks is find value. One man's Rembrandt is another man's connect-the-dots and fill in the spaces. Valuation is like beauty. It is in the mind of the beholder. If valuation is the key to buying stocks then there should be some kind of a formula to determine what is undervalued and over-valued. In every industry there are formulas for standards of performance. For cars we want to know the zero to 60 miles per hour in how many seconds....
 

Financial Crime

 
Congress recently passed another new law that is supposed to outlaw financial crime. Corporate officers will be sent to jail for "cooking the books" as it is called. Among other things it is taking the stockholders money and paying themselves huge bonuses for nonperformance. These guys are even worse than mutual fund managers who do the same thing - get paid big salaries yet continue to lose your money. I can remember many years ago (I've got a few years on me) when they started building very fancy prisons with nice cells and tennis courts and nothing but a tiny fence around them....
 

Eternal Sunshine

 
There is a current movie entitled "Eternal Sunshine of the Spotless Mind". It is about a man who has had a painful love affair and will do anything to rid his mind of those pain thoughts of a former love. He sees an advertisement that offers just such a service. It seems his former lover has the exact thoughts and she goes through the same treatment. Guess what? They meet again, do not recognize each other, and fall in love again. Does any of this sound familiar? May I gently remind you of what happened to your stock portfolio in 2000 to 2003?...
 

What is a Mutual Fund?

 
Ever wondered what is a mutual fund? A mutual fund is a pool of money run by a professional or group of professionals called the "investment adviser." A mutual fund is a company that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, other securities or assets, or some combination of these investments. The combined holdings the mutual fund owns are known as its portfolio. Each share represents an investor's proportionate ownership of the fund's holdings and the income those holdings generate....
 

You Wont Like This

 
Why? Because I am going to shatter your conventional wisdom as I have many times in previous columns about the lies that Wall Street continues to tell you. This time we are going to go deeper into the economy to unearth the truth about lies the politicians are telling you. Let's understand from the beginning that few politicians understand basic economics. Just because they work in Washington does not make them experts about the laws that have been passed or those they vote upon. Politicians do not create jobs or wealth....
 

How Commodity Trading Differs from Stock Trading

 
There are major differences between trading stocks and trading futures. While stories of fortunes made or lost overnight on the futures markets are largely untrue, the futures trader, if using a sound trading system, can usually make more money on the futures market and make it much faster. However, if that trading system is not sound the trader can have greater losses. This is because futures contracts are highly leveraged. Margins (the deposit required) on futures contracts are much less than for stocks, as low as 3% on some futures contracts compared with up to 50% for stocks....
 

Struggling Stocks, Booming Commodities

 
04/28/2005 NASDAQ dropped -12.5% year to date in 2005. S&P500 index suffered -5.7% this year. US stock market has been terrible over past few months. Not only general market is down, oil stocks recently had a significant correction as well. It is easy to be nervous because of the short term setback. However, to succeed with long term oriented value investing, we can not be distracted by the volatile short term market movement. It is time to step back and look at the big picture of the current stock market and review investment strategy to profit in this kind of tough environment....
 
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