July 28, 2009

Mission: Wealth Impossible

The WallStreet Journal has a front page article today (07/28/09) stating that the high gasoline prices (remember $4/gallon?) during the “laissez faire” Bush Administration’s term was in fact not due to supply/demand issues – but rather the speculation and trading of futures by investment firms and traders (i.e. Goldman Sachs, JPMorgan, etc.). This is a classic example of American Greed. When prices of commodities such as corn, wheat, oil, gas, etc. all substantially increase simultaneously – this puts an extremely heavy burden on the middle-class and poor citizens who may or may not have money to afford the increase in prices. (I know $4/gallon was a pain even to my pocket!) But guess who profits when the prices go up? Traders! Who suffers? You!

The wealthy get wealthier and the rich get richer….it seems as if their mission is to make wealth impossible for the middle and poor class. But these traders and high net worth individuals operate in a zero-sum game, where someone must lose in order for someone to win – so as the top 10% wins…the bottom 90% loses.

So we need to change this to scene to “Mission: Wealth Ispossible” and also work towards being wealthy and rich – GO FOR THE GOLD! Become a successful entrepreneur and constantly work towards increasing your monthly cashflow/income – don’t get stuck in a career, unless you’re a highly paid CEO (Ex-GM CEO Rick Wagoner got a $8.6 million dollar payout for his failures). Otherwise you’ll waste your life working for the next 50 years just to watch your retirement savings disappear through increased taxes, inflation, and debt. And if these three horsemen don’t get you – you always have the possibility of a fourth in the form of a “Bernard Madoff” coming to steal from you while the SEC looks away….(how could they have missed $50billion?)


July 23, 2009

How to get a little more money - by working smarter!

Banks make their profits off of the deposits made to them from individuals and other businesses, then they loan those deposits out at a higher rate – and keep the difference in profit for themselves. For instance, an individual deposits $5,000 in an online bank retailer and receives 4% in interest from the bank in a savings account. That $5,000 deposited doesn’t stay in some safe until the individual withdraws, but rather the bank loans the $5,000 out at maybe 10%...and the bank keeps the 6% profit it made off of that money. Well, I decided to play by the same rules of the bank but with my brokerage firm – I can get approved for loans from my brokerage at 6.5% APR (in order to get a good rate like this you need good credit and collateral, i.e. my investment portfolio) and I used this loan to buy stocks that pays me dividends at 12% APR. And I KEEP the difference!
In other words,
1. I borrow money from my brokererage at a low rate of 6.5%
2. I loan this money to a company at a higher rate of 12% in which I receive stocks and dividends
3. Then I pay my brokerage their 6.5%
4. I keep the remaining 5.5% profit.

And if the price of my stock goes up - then I keep all capital gains.

So without using any money of my own – I create a profit for me playing by the rules of the bank, which is to make a profit for yourself without using any money of your own. Just take a look at the scenario between Goldman Sachs and taxpayer money!

July 21, 2009

Sometimes Great things take a while to build...

Despite the recent downturn in the economy and all of the pessimism that still lingers around today - I am rushing to take advantage and acquire as many stocks, bonds, and commodities that I could given their low cost. My goal is to increase my cash flows as much as possible while the market is down - and then realize the capital gains and the increase in dividends I would receive once the economy is back up on its feet and the price of my investments appreciates.

However, as I am rushing - eventually I began to run out of my own cash and decided to begin using margin through my broker to continue investing. There are so many undervalued companies in the stock market that I wanted as many as I could possibly get - and my cash flows/dividends were steadily increasing - but too slowly for me. So once I maxed out my margin, I began asking Congress (my wife) to give me approval to look for low interest rates on personal loans from banks to continue investing. This is where the brakes came in....

My wife - who is a bit more conservative than I am - put on the brakes and basically told me that I would eventually over-stretch myself and our family if I continued. Even though the market is undervalued - there is only so much I'd be able to accomplish without all the cards tumbling back down. Making $400-$1000 a month on dividends would be great and an additional income - but sometimes great things take a while to build!

So, of course she was right - Egypt, Rome, America, and other great civilizations did not come to be overnight. It took a while for these great powers to be established and build their wealth. Looking back at the subprime mess - where potential homeowners, investors, and flippers, were accepting mortgages that they could not afford just so that they could jump in to the real estate market or "strike while the iron is hot." Unfortunately, as we soon realized - their cards came tumbling down as the entire U.S. economy also did.

July 16, 2009

United States of Private Equity

The rules of attaining wealth and success are constantly changing in our world, and in order acquire wealth we must continuously adapt to the new rules of the game of wealth. I've been listening to the testimony of Former Treasury Secretary Henry Paulson before Congress about whether he pressured Bank of America to accept the deal with Merrill Lynch. What I found interesting is learning that Mr. Paulson, a former employee of Goldman Sachs of 26years, deemed his former employer and his friends "too big to fail" - and now we see that Goldman posts record profits amidst a recession and at the demise of their competitors such as Lehman Bros., Wachovia, etc....

And another example of why we are the U.S.P.E - Warren Buffet had a $5 billion stake in Goldman, while the US taxpayer bailout fund contributed $10 billion to Goldman Sachs, yet Warren Buffet received $1 billion return on his investment while we the taxpayers received only $500 million???? How do we invest twice as much as Warren Buffet - yet our return is less than his?

It is a different set of rules at play folks - where the rich control the government...and we average citizens lose!

July 12, 2009

Lazy portfolios

Paul B. Farrell: Lazy Portfolios upend popular active funds - MarketWatch: "ROYO GRANDE, Calif. (MarketWatch) -- Guess what? Actively managed mutual funds are bad news, filching your hard-earned money."

Mutual funds have been robbing people blindly for years - the managers of these funds have been siphoning off the top at will in down and up markets. Invest in an index fund - it's always a better option. When you account for trading and commision fees, in addition to the rate of inflation, your real value of capital return is minimal. This includes 401k plans, 529 plans, etc. that average people regularly contribute to and simply hand over their money to "financial advisors" who are really just salesmen that convince you their corporation is a legit one and holds true the sound principles of financial responsibility for their customers. Reminds me of a few "sound" financial institutions - Wachovia, Merrill Lynch, Lehman Brothers - were these not "sound" financial institutions? Didn't these companies fail or get bought out by another institution? It's time to wake up.....

The super rich have been stealing from average Americans for years by using the government, financial institutions, and financial advisors as the vehicles to get access to our money. So why would I waste my time saving and investing my money in these organizations just for them to lose 30% of my 401k plan? Or to lose everything if I was suckered and invested in a former Nasdaq chairman's investment fund (Bernard Madoff was his name). There is a better way to obtain wealth and success without become a stooge of these institutions who have only but themselves in their best interest.

The best way is to invest and prepare for the future is by investing in cash flow, such as, owning businesses, owning commodities, investing in stocks that constantly pay good dividends, and investing in rental properties that will pay you rental income. This way your money keeps working to produce more money so that you will always receive income via your investments whether you're in a good or bad economy. And then you won't have to worry about stressing over saving enough....

Just a thought....

July 10, 2009

AIG greed

Report: AIG asks gov't to approve bonus payments - Yahoo! News: "Report: AIG asks gov't to approve bonus payments"

Just admit it AIG - your plan is to finish paying off the top execs and then liquidate the company! And why did the Senate fail to act on legislation that would've taxed these bonuses?? It pays to be rich...lol

Securities, futures regulators to police OTC derivatives - Yahoo! Finance

Securities, futures regulators to police OTC derivatives - Yahoo! Finance: "Securities, futures regulators to police OTC derivatives"

The government attempts to again increase regulation over hedge funds by expanding powers of the SEC after being defeated in 2006 through an appeal court that vacated hedge funds alike. Citing that hedge funds are the cause for the recent financial meltdown of the American economy and more regulation is needed to prevent another fiasco. We'll see if their second attempt prevails - I doubt it though because the hedge fund industry has millions of money in their troughs and can pay a pretty penny for lobbyists. And naturally, they won't take this new regulation attempt by the government lying down...

July 7, 2009

Adviser say US should plan 2nd stimulus

Adviser says U.S. should plan 2nd stimulus: report - MarketWatch: "Adviser says U.S. should plan 2nd stimulus: report"

I think the U.S. needs to allow enough time for the 1st stimulus to work its way through....there is no need for another stimulus. There is no quick fix to the situation - just leave the economy alone and in time it will fix itself. We have a floor in place, thanks to the first stimulus, so things aren't as bad as they could be...however, if we keep trying to rush things before we assess exactly the effects of the current stimulus has or will have on the economy, we could actually do more harm than good. For instance, we still have to cross the bridge of inflation caused by all of the spending being done by the government - I don't like the thought of increased taxes and my savings and 401k plan being eroded so quickly!

Get out the way government and politicians - just let the economy be. You've done your part, and you've done a great job...but now, let the private sector take it from here.

July 5, 2009

China won't press for new global currency at G8

China won't press for new global currency at G8 - Yahoo! Finance: "China won't press for new global currency at G8"

If you haven't figured out the obvious by now - this article proves it...China is stepping up. They have tremendous potential and are developing rapidly in terms of economic growth. Makes me wonder - if the US controls approx. 40% of the entire world's wealth and China's economy is a fraction of ours...how come they are able to buy so much of our debt? Or able to loan us so much money? Why is the US the world's largest debtor and China has become the world's largest creditor?

It looks as if the financial landscape is definitely changing...Robert Kiyosaki states that "the US is printing more money to solve the problem of printing more money." This is the same as the dog that tries to catch its own tail - it's not going to happen! The dog will just end up tired and frustrated (not to mention dizzy) from trying to achieve an impossible task. Yes - the stimulus has put a floor in place and things will probably not get as bad as they could have gotten, but as the economy attempts to recover we have inflation, or hyperinflation to worry about.

Every time the government prints money to pay debts and bailout decadent auto and banking companies, it devalues the dollar - which means your savings, 401k, 529, and any other plan evaporates into thin air. Why do you think so many retirees have to go back to work in their 70s?

July 2, 2009

Citigroup bonds a buy!

Citigroup bonds a 'buy': "Citigroup bonds a 'buy'"

Time to invest in this company? I suppose so - with the backing of the US government in place not only are the bonds looking good - but also the stock as well since its under $3...I can invest a couple of bucks into this company.