Lemming Friday

[TaoJones]

Originally Posted by Therapy

Yep.
Not to scared to follow a good lead.
Problem is that most people will not tell you.
I don't know why unless it is because they are embarrassed at their poor performance even though most all "professional" investors are poor at it.

The problem, of course, is how would you know if any specific financial advice you're given over the internet by a virtual stranger is worth following?

I think a person can only find the best investment/s for his/her circumstances by first acquiring the necessary education in the realities of money and investing. This will establish a BS filter configured to one's unique situation.

Your suspicion that many (most?) "professional investors" are not really very good at it is, IMO, correct. They are "in the investing business," but they're really just salesmen, working for a commission.

The old saying (about teachers) that "Those who can, do . . . Those who can't, teach" applies to most professionals in the investing biz. That is, "Those who can make money investing, do . . . Those who can't, sell investments."

TaoJones

[maxingout]

Originally Posted by TaoJones

The old saying (about teachers) that "Those who can, do . . . Those who can't, teach" applies to most professionals in the investing biz. That is, "Those who can make money investing, do . . . Those who can't, sell investments."

TaoJones

You hit the nail on the head. Buying investments from a salesman doesn't make sense.

[Therapy]

Originally Posted by TaoJones

The problem, of course, is how would you know if any specific financial advice you're given over the internet by a virtual stranger is worth following?

I think a person can only find the best investment/s for his/her circumstances by first acquiring the necessary education in the realities of money and investing. This will establish a BS filter configured to one's unique situation.

Your suspicion that many (most?) "professional investors" are not really very good at it is, IMO, correct. They are "in the investing business," but they're really just salesmen, working for a commission.

The old saying (about teachers) that "Those who can, do . . . Those who can't, teach" applies to most professionals in the investing biz. That is, "Those who can make money investing, do . . . Those who can't, sell investments."

TaoJones

I always had trouble with that "unique situation" and "what is your risk aversion" stuff.
Show me your picks and I will look at the charts.
Some guy just bought millions of shares of a rail car manufacturer.......what about that?
I like the old saying though.

[delmarrey]

I consider investors like Gyspy fortune tellers. If they are so good at it, then why aren't they living the life of leasure.

Have a Gyspy choose your lotto ticket or the horse/dog at a race. "Good Luck" as the chinese say.

[Therapy]

Originally Posted by delmarrey

I consider investors like Gyspy fortune tellers. If they are so good at it, then why aren't they living the life of leasure.

Have a Gyspy choose your lotto ticket or the horse/dog at a race. "Good Luck" as the chinese say.

I guess I will go back to work.
Night.

[TaoJones]

Originally Posted by Therapy

I always had trouble with that "unique situation" and "what is your risk aversion" stuff.
Show me your picks and I will look at the charts.
Some guy just bought millions of shares of a rail car manufacturer.......what about that?
I like the old saying though.

Well, obviously, every person's situation is unique, so the best approach for one person won't be a perfect fit for another. If "one size fits all" could be applied to investing, no one would succeed.

The question about risk aversion is really just another way of asking "Are you the master of your domain?" In other words, are you emotionally prepared to accept the consequences of both losing, and winning, trades? The management of one's emotions is the highest barrier to successful investing, followed closely by intelligent money management.

Stock picking is, in my experience, pretty tedious. But those who excel at it (think Warren Buffet, and his business partner, Charlie Munger) do exceptionally well. They are, in essence, "value investors." That is, they're looking for solid companies whose current price is mismatched to the company's realities.

Those situations do arise from time to time, but Buffet and Munger will have spotted the opportunity long before you or I or anyone else will. And if you read that Buffet is quoted as saying "There's nothing worth buying right now," believe it!

If one lacks that particular talent, however, the next best thing is to learn to recognize a trend, and invest accordingly. Another old adage - "The trend is your friend" - is the key to successful investing for most people. And it works equally well in both rising and falling markets.

That said, after one spots a trend, emotional management and money management are critical. A person can be on the right side of a trend and still get wiped out if his/her management skills are lacking. And don't make the classic mistake of investing in something just because its price has dropped after, perhaps, years of climbing.

In early 2007, some otherwise intelligent people bought into financials (banks and brokerages, etc.) and homebuilders because their prices had fallen from recent (2006) highs. Those companies had become, these people reasoned, "cheap." Obviously, not a good call.

They failed to recognize a change in trend from up to down.

Many people, who are not "masters of their domains," sell rising investments too soon (so they don't lose their gains), and hold on to losers too long (because they're not emotionally prepared to acknowledge they were "wrong"). This is a formula for disaster, and is indicative of an "ego investment," as much as a financial investment.

Many people think that "timing" is the key to investment success. Again, if you have spotted a trend, but are trying to time your trades to take the greatest advantage of that trend, you will probably go broke - and never know why.

James Sinclair, a brilliant hard asset investor - Gold Bullion, Silver, Stock Options, Foreign Currency Trading, Crude Oil Prices - alluded to this timing issue recently when he opined that a person who tried to time the current volatility in the precious metals market, could most likely write about it after the fact and call his book How I Went Broke, Long, in a Bull Market.

Great wisdom in that sarcasm.

TaoJones

[Therapy]

Originally Posted by TaoJones

The question about risk aversion is really just another way of asking "Are you the master of your domain?" In other words, are you emotionally prepared to accept the consequences of both losing, and winning, trades? The management of one's emotions is the highest barrier to successful investing, followed closely by intelligent money management.


TaoJones

Yea.
I have found that the market is prone to too much emotion in it's reaction.
I use that sometimes.

[TaoJones]

Originally Posted by Therapy

Yea.
I have found that the market is prone to too much emotion in it's reaction.
I use that sometimes.

Just so we're clear - I wasn't referring to the market's emotions (whatever that might mean), I was referring to the emotional state of an individual investor.

"The Market" is, of course, merely a reflection of the sum of all investors' emotions, but an individual investor is powerless to manage that; his own emotions, however, are something over which he must have command. The two big emotional drivers of investors' actions, as you probably know, are Fear and Greed.

Unless a person has his fear and greed in check, he is almost assured of ultimate failure and loss of capital. Investing, more than anything, is an exercise in steely discipline and applied psychology.

TaoJones

[Therapy]

I understand.
I have both fear and greed.
I don't know how "checked" they are.

I do know that I was hoodwinked by a broker for 25+ years and made little.
Now I am on my own late in life and will blame only myself if results are poor.
I wish there was a way to make them pay.

[never monday]

Originally Posted by maxingout

According to CNN, shoppers just spent twenty-billion dollars today, the day after Thanksgiving.

I am calling this day "Lemming Friday".

Gas is over $3.00 per gallon. So, the $ is worth .98 Canadian
An epidemic of mortgage forclosures sweeps across the land. {b] Banks were willing to lend risky money, now their paying for it[/b]
The dollar is falling like a rock. Yep, just gotta deal with it or change the tax system
Credit cards are maxed-out. [/b] Again, banks made shaky loans [/b]
Forty-seven million people don't have health insurance. Most of these are teenagers or illegal aliens
A trillion dollars has gone down the tubes in Iraq. [I won't comment other than to say I don't thinks [/b]
The average cost of health insurance for a family of four is $12,000 per year in some locations. Move...join Kaiser, there are alternatives
Our jobs are being shipped overseas to China. [b] Yep, they sure are. because the American consumer what's cheaper junk.
And in spite of it all, we spent $20 billion today on consumer items. Good, how many jobs will the 20 billion keep on US soil for the next year?

my comments are in bold above. Mabey a little dose of John Prine is needed. Blow up your TV.

[Ex-Calif]

The question is not whether Americans spent $20 billion in a day. We do that all the time. For perspective with 300 million Americans that's about $67 bucks a head. I know my family of 3 can spend $200 in a day, no problemo!

What most people probably have an issue with is that what other people choose to purchase doesn't fit one's own idea of "value."

Don't get me wrong. The declining dollar, debt, war costs, yada, yada are all compounding a serious addiction to consuming that Americans have.

I suppose from my seat I feel a little different. I am a net exporter. My company generates huge income for the United States. Of course we generate huge income for a lot of other countries as well.

I am a net saver. I save 30-40% of my gross earnings.

So if I am a net earner for my country and a net saver of my wages then if I want to drop $200 bucks on some Chinese crap (which I won't) , that's my perogative.

Perhaps we should all tend our own grass before looking over the neighbor's fence.

[Keegan]

I am not sure why it is any different for people to go out and spend money in malls on things that they enjoy buying for themselves and others than it is for all of us boat owners to spend substantial amounts on boats, dockage, boat parts, repairs, insurance, and on and on and on...



whatever makes you happy, and then you die

Keegan

[seafox]

I enjoy my boat but don't enjoy spending huge amounts on

enjoy buying for themselves and others than it is for all of us boat owners to spend substantial amounts on boats, dockage, boat parts, repairs, insurance, and on and on and on...

[Ex-Calif]

Originally Posted by TaoJones

Not really, Therapy. Not if the brilliant video that Rick commended to the members here on the Value of the Dollar thread is accurate - and I know of no reason to doubt it.

I highly recommend that those interested watch it, and think deeply about what the lecturer is saying. The trend her lecture illustrates is very unsettling.

TaoJones

PS: Congratulations, Rick (Vasco), on gaining your fifth star!

No offense to Rick and TJ but I sure wish I had that hour back. The lecture is a nice summary of what is happening but several of her conclusions are misleading IMO. She also selectively uses that government data, mixing populations and time frames at random. She also makes circular arguments - i.e. the 2007 dual earning family who has a wage earner lose a job, loses 52 paychecks and can't make the mortgage payment. The 1971 single earner family sends the wife out to work and life is good.

To be honest a week of internet surfing you could come up with the same lecture with no work. She also offers zero solutions. Nice way to make a paycheck.

summary - housing is way more expensive, health care is way more expensive, you need a college ed to stay middle class these days and that costs a bomb. We have to pay for a second car and we have to pay for day care.

Yup - Life is way tougher these days. Masybe we oughta git al dem thar wimmin' folk back in the kitchen...

[TaoJones]

Originally Posted by Ex-Calif

No offense to Rick and TJ but I sure wish I had that hour back. The lecture is a nice summary of what is happening but several of her conclusions are misleading IMO. She also selectively uses that government data, mixing populations and time frames at random. She also makes circular arguments - i.e. the 2007 dual earning family who has a wage earner lose a job, loses 52 paychecks and can't make the mortgage payment. The 1971 single earner family sends the wife out to work and life is good.

No offense taken by me, Dan. You're entitled to your opinion, and I'm glad you express it.

I am sorry to see that you have missed the lecturer's point entirely, though.

Consider: In 1971, the generic "family of four" (i.e. husband, wife, two kids) had been getting by on a single earner's 52 paychecks/year, had no childcare expenses, could manage with a single car, lived in the world's leading creditor nation and could actually save about 10% of their income.

When they could no longer afford to maintain their lifestyle on those 52 paychecks, however, they had a fallback option - the second adult in the family, almost always the wife, could enter (or re-enter) the workforce and the family then had 104 paychecks to make ends meet. Sure, there were additional expenses as a result (childcare, second car) but the 52 extra paychecks more than covered those expenses.

Fast forward to 2003: The generic family of four, with 104 paychecks/year finds itself in an entirely different situation. Although certain expenses have diminished as a percentage of their incomes (clothing, per car expenses, appliances), other expenses have soared (housing, total car expenses, health care, childcare, taxes). Where the 1971 family had been net savers living in the world's foremost creditor nation, the 2003 family of four now has a negative savings rate (meaning the family spends more than it earns) and lives in the world's foremost debtor nation.

If, at that point, one of the adults loses his/her job, and the 104 paychecks is cut in half to 52 paychecks, the family has no option to increase the family's income by sending the stay-at-home adult into the workforce to greatly increase the family's earning capacity, as had been the case in 1971. If the unemployed adult does manage to find another job, it is often at a smaller salary, and even if it exactly matches the pre-loss-of-job salary, the family has only gotten back to where it was previously, less the forever-lost wages during the period of unemployment.

The 1971 option of sending the family's second adult into the labor pool had already been taken - thus, the subsequent loss of half the family's income when they are already up against the wall is a devastating blow. One from which many family's never recover.

I would encourage you to "waste" another hour watching the lecture, Dan. There's more there than you apparently took in on first viewing.

TaoJones