Saturday, December 27, 2008

How To Build Any List

The Ponzi Scheme of “Unfunded Liabilities”

There is no bigger Ponzi scheme than those operated by the Federal government – Social Security and Medicare. Both programs are nothing but an inverted pyramid with money from new contributions going to pay withdrawals. The only difference is that Charles Ponzi and Bernie Madoff didn’t force people to give them money.

However, the eventual result will be the same, just on a much larger scale. As the withdrawals inevitably swamp the new contributions, both programs will end in disaster and disgrace.
And for that matter, what is the difference from Madoff’s scheme and that of the big banks who have finally had to admit that their own financial statements were bogus and many of their “assets” worthless.

If nothing else, I hope that people are finally waking up to the fact that in a fiat money system, the entire economy is based on a Ponzi scheme of ever-expanding debt.

Friday, December 26, 2008

Your Ultimate Investment Success

By Andrew M. Gordon

Why do you buy a particular stock?

Check the choice you most agree with...

___ The stock has bottomed.
___ The stock is dirt-cheap.
___ The stock is offering a huge dividend.
___ A majority of analysts have rated it a "buy."
___ It offers an attractive return in the long term.

Buying into a company because it has bottomed is a non-sequitur. You can't really know when it has bottomed. Even if it has dropped 95 percent, you could see it drop another 50 percent.

Buying a cheap company just because its price is low is tempting... but not smart. Many companies are cheap for a reason. Some aren't. The former you should ignore. The latter are much better investment opportunities. (More on that in a few seconds.)

Huge dividends lure many investors. But understand that some dividends are high because investors are fleeing the stock... lowering the share price... and thus raising the dividend yield. Before you buy, you have to ask yourself why so many other investors are selling the stock. It's only a matter of time before many such companies reduce their dividend rates.

Highly rated companies are safe bets, right? Two things you need to know. First, many analysts engage in ratings inflation. If the company doesn't stink to high heaven, it gets a "buy" rating from Wall Street. Second, if all (or most) of the analysts are rating the company high, there's no room for them to upgrade it - and news of a ratings upgrade brings in new investors in droves. I prefer analysts to be lukewarm (at best) about a company. If the company is any good, ratings will rise, bringing in new investors who will drive up the price.

The only reason to buy into a company is if you think it will give you good returns in the long term compared to other investments. Such companies may go down some in the short term - but they have demonstrated an ability to grow profits, manage their cash prudently, are in pretty good sectors, and are reasonably priced. Getting a great price on companies like these is not necessary, although in this market it's not hard to find them at 40-60 percent off. All the better.

Tuesday, December 16, 2008

Home Values

"We will never see these prices again in our lifetime, when you adjust for inflation," says Peter Schiff, president of investment firm Euro Pacific Capital of Darien, Conn. "These were lifetime peaks."

The boom in home prices — fueled by heavily leveraged loans built on low or even no down payments — made it easy to forget that housing values had been remarkably stable for a half-century after World War II, rising at roughly the same pace as income and inflation. Prices soared in most of the country — especially in Arizona, California, Florida and Nevada and metro areas of Washington, D.C., and New York — during a brief period of easy lending, especially from 2002 to 2006. That era's over.

So far, home values nationally have tumbled an average of 19% from their peak. As bad as that is, prices would need to fall as least 17% more to reach their traditional relationship to household income, according to a USA TODAY analysis of home prices since 1950. In that scenario, a $300,000 house in 2006 could be worth about $200,000 when real estate prices hit bottom.

Thursday, December 11, 2008

Economy and Markets Often Go Separate Ways

By Andrew M. Gordon

It's official. We're in a recession. So it's a good time to explore how the stock market does when the gross domestic product (GDP) goes down.

Since we've had negative S&P 500 growth in every quarter of our current recession - which began a year ago this month - it may seem that a falling economy is always accompanied by a falling stock market. But this is not true.

The most recent examples of this not happening are the fourth quarter of 1990 and the first quarter of 1991. GDP dropped 3 percent and 2 percent respectively, but the S&P grew.

In the post-WWII period, there have been 36 quarters when the GDP has shrunk. During those periods, the S&P actually gained 1.03 percent.

One reason for this is that the markets tend to rebound 3-5 months before a recession ends. That very last quarter of a recession usually shows significant market growth. And the next-to-last quarter also often shows positive growth.

This recession will continue well into next year (at the very least). But that, by itself, doesn't automatically mean the markets will continue to contract.

If there are signs of economic recovery in housing or retail or auto markets, for example, the S&P could very well rally. Unfortunately, I expect the economic news to continue to be bad. And as long as it is, it'll be hard, if not impossible, for the markets to turn back up.

There's no need to rush back into the market at this point, especially when you can get 6-8 percent interest on investment-grade bonds at very little risk. If you like tax-advantaged bonds, municipal bonds are also offering attractive interest rates.

Monday, December 8, 2008

Proof of Funds Letters!

As a Platinum Member of HSA, you are entitled to
use our Investor’s Private Funds.

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This is the part that stops most investors dead in their tracks…until now.

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It’s time to think big…really BIG!

Larry Potter
Home Seller Assist

Friday, December 5, 2008

When Will It Be Safe to Go Back in the Water?

By Rick Pendergraft

One question keeps coming up when I talk to my friends and family these days: "How will I know when it is safe to get back into the market?" There is one indicator that I am watching closely right now that I think will provide the answer: the mutual fund inflows and outflows.

Since late July, only one week has seen money flowing into equity mutual funds. All other weeks have seen outflows. The institutional money may be what everyone keeps an eye on, but individual investors control more money than most people think. Through retirement plans, more and more individuals have been invested in mutual funds, and right now these people are fleeing the market in droves.

My advice is to watch those mutual fund numbers. Once you see the outflows slow down, it will be safe to start buying stocks again. I wouldn't wait for the inflows to start ramping up, though. When it comes to timing the market, the herd is usually late to the party.

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Tuesday, December 2, 2008

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