Posts Tagged ‘Article’

Are You Dumb Enough To Be Rich?

08/21/2009

So you got your MBA from Harvard, saved $20k from your last job and have 5000 friends on MySpace. But are you dumb enough to be rich? That’s what analysts of correlations between brains and bucks have concluded. You don’t have to be smart be become wealthy, and as a matter of fact, brains may even stifle your potential.

You see, wealth requires high-performance and rapid-execution. You can’t get stuck on details when there is someone far more qualified for that job.

As an entrepreneur, you must take on the task of creating everything from scratch and that requires leadership and more strategic long-term big-picture thinking. Leave all the nitty-gritty systematizing and organizing to management and for heaven’s sake – get a professional designer to do your website.

Wealth requires Four distinct elements: Motivation, Skill, Knowledge and Focus. Let’s define each one.

Motivation: The Desire To Be

From when that great idea pops into your head, until you start to do something about it, you’re in the motivation stage. An optimistic point of view that convinces you that you have the next multi-million dollar idea. The problem is that in order to turn great ideas into profitable business, you’ll need more than just a desire to create a great product or service.

Skill: Expertise vs. Scalability

The problem with Professions (besides for requiring an immense amount of both time and capital) is that they require a technical expertise that is designated to the person who is skilled. How many surgeries can a surgeon perform a day? Each one requires his physical presence, full attention and time occupation. McDonald’s on the other hand spews out millions of Big Macs each day with a work-force of teenage students. Scalability is the ability to run at full capacity whether its for 1 or 100, offering the same product or service, with the same results, every time without fail.

In business, the hierarchy works like so: Shareholders elect Executives who hire Directors, who find Managers, to teach Supervisors how to oversee Operators.

If the machines run on they’re own, all you need is a tech-savvy operator to make sure everything runs smoothly. But while technicians may be very smart, learning the service manual backwards and forwards, knowing where every nut and bold belongs – no one ever became wealthy on minimum wage.

Knowledge: Chris Langan vs Henry Ford

In the war of brains vs. bucks, you’d think Chris Langan had it all. You may have heard of Chris, as he was featured in Malcolm Gladwell’s best-seller “Outliers”. However, even though Chris boasts an IQ estimated at 210 (Einstein was 160, and Darwin a mere 120) he nevertheless makes an honest living working in bars. No mansions, no rolls-royce, no big shareholder meetings. Genius in other words has failed. (For those familiar with the collapse of LTCM this would not be the first time.

Enter Henry Ford. Someone once walked into Ford’s office and presented him with a complex math problem they knew he couldn’t solve since Ford lacked schooling. “I do not know the answer”, he replied “but I can definitely find someone who does”. He may have not had an IQ anywhere near 200, yet he practically invented the assembly line concept and industrialized the automobile. They said the Model-T was impossible. Langan would agree. Ford would laugh them out of the room.

It’s not that wealthy people aren’t intelligent. It’s just that they focus not on academic genius, but on practical intelligence. Focusing not on predetermined rules, but on what works and what doesn’t. For them business is not science, but art.

Focus: Thinking like a Laser

Ask anyone successful – Bill Gates, Warren Buffett, Peter Drucker, Michael Gerber – “What is the most important trait in business?”. They would answer: Focus. Or as Chet Holmes refers to it “pig-headed discipline”. I had many friends, who I was convinced, would be millionaires before they turned 30. They had diverse interests and skills across a broad spectrum, had storehouses of energy, could hold a complicated theological discussion with any philosopher, even take apart a fridge and put it back together again. Some were even running small businesses in their teens. To “execute” efficiently and effectively requires intense discipline and discipline requires laser-like concentration.

~~~

  • How to improve your motivation: Read into the lives of the successful. Examine how their thoughts compelled them to do anything from controlling their destiny to changing the world. Focus on gratitude, on everything positive in your life. Relay your dreams repetitively to yourself to confirm your subconscious beliefs. Genuinely desire to create value for the rest of the world.
  • How to improve your skills: Enhance your strengths, don’t fix your weaknesses. Learn to deal with people, organize and systematize. I recommend devouring the works of coaches such as Michael Gerber, Chet Holmes, Warren Bennis and Robert Kiyosaki. Get familiar with concepts of Cash Flow, Entrepreneurship, Scalability, Delegation, Optimization and Management.
  • How to improve your business IQ: See the article “5 Books Every Entrepreneur Must Read“.
  • How to improve your focus: Set goals and set out to achieve them. We often lose sight and therefor direction. It doesn’t come easy and it requires practice and conscious application. Make a list of all the things you want to accomplish over the next 12 months. Just this document alone will propel you to bigger and greater things!
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Links Fest and Summaries

07/14/2009
Why I’m Happy to Hold Wealth in Gold and Silver

“Gold has been in a great bull market for a decade and, though still in a corrective phase, has still risen solidly for months. It started the year at $880; at mid-year it is $926.70. That’s a rise of 5.3%, or 10.6% annualized. And if double-digit annualized returns are what gold is giving when it is “sleeping,” what will it do when it awakes? Silver started the year at $11.33. At mid-year, it was $13.54. Again, maybe many are not satisfied. But do the math and you get a 19.5% return. That’s nearly 40% annualized”.

Yes, that’s one of the wonderful things about buying low. No excitement, no competitive bidding wars.

Seven Secret Hiding Places for Your Cash (random, yes I know)

1. In the freezer wrapped in aluminum foil. 2. Sandwiched between the cardboard backing of a hard-to-reach picture frame. 3. Under a piano, entertainment center or anything weighing a couple hundred pounds or more. 4. Inside a used can of soup.
5. Buried in the “soil” of a fake plant. 6. In hollowed out pages of a book on your book shelf. 7. Inside a kid’s toy hidden in their closet.

Catching the Gold Bug

WSJ had an interesting yet still skeptical article on gold. Many points can be admired and many argued. I’d say their still half-way between complete denial and euphoria.

“More and more investors are acquiring physical gold, or bullion, in the form of small bars the size of iPhones or coins like American Eagles and South African Krugerrands. Individuals’ bullion purchases almost doubled last year, amid apocalyptic panic over the financial system, to 862 metric tons. “When you’re in uncharted economic waters, people buy gold.” The U.S. Mint, the federal agency that makes America’s coins, has had to step up its gold-coin production.”

Cheaper Airfares to Boost Demand

“Southwest Airlines, the largest discounter, led six other major U.S. carriers in offering one- way fares as low as $30 to generate demand when the peak U.S. travel season wanes in September. The sale is Southwest’s biggest nationwide reduction in 13 years. Delta, American, United, Continental, JetBlue and US Air joined Southwest in offering sale prices today and tomorrow for travel Sept. 9 through Nov. 18”.

Bloomberg: Britain Currency to Crumble

“Our public finances are easily the worst we’ve ever had in peacetime. The amount of borrowing the government will have to do as a result of the deficit is very worrying. In a worst-case scenario, there could be a run on the currency. Britain needs deep cuts in government spending right away. This kind of red ink implies both spending cuts and tax hikes that could make the 1980s look like a teddy bear’s picnic”.

Your Best Shot to Buy Cheap Gold This Year

“A move down to support at $810 puts gold just above its 40-month EMA. It keeps the bull market intact, and it creates a wonderful risk/reward setup for buying the metal”.

Do bear in mind that we may never see $810 again. If we do it is sure to be a brief occasion. And even then, who’s to say there will be any precious metal available for purchase.

We’re in the Middle of a Crash

Nassim Nicholes Taleb, author of “The Black Swan” says “We’re in the middle of a crash, so if I’m going to forecast something, it is that it’s going to get worse, not better. The government needs to deleverage debt and not try stimulus packages that will inflate assets”.

Investors More Confident, Equity Holdings at 2009 High

“U.S. fund managers’ exposure to stocks rose to the highest level this year in June, encouraged by growing evidence the economy is coming out of its worst recession in decades, a Reuters poll showed on Tuesday. between June 16 and 29, firms held an average of 62.5 percent of their assets in equities. In 2008, exposure to equities peaked in March at 64.7 percent of assets – the same month that U.S. bank Bear Stearns collapsed”.

Note that such a development is extremely bearish. Unlike assets which work based on the supply of goods, stocks fair based on the supply of buyers. As buyers disappear, so do gains.

Jim Rogers Sells Dollars, Plans to Short Treasuries

“The government is printing lots of money and borrowing even more; that’s not the basis for a sound currency. The idea that anybody would lend money to the U.S. government for 30 years at 3 or 4 or 5 or 6 percent interest is mind-boggling to me.”

Stocks in Sri Lanka are the only equities Rogers said he would consider buying at the moment, adding that he plans to hold on to his holdings in China for many years to come.

The Cheapest Places to Live in the World for $500 a Month

Thailand, Cambodia, Philippines, Costa Rica, Belize.

Tim Ferriss Lifestyle Design

07/14/2009

Some interesting things you can try once you have your passive cash flow life under control. Find these and other blog posts at fourhourworkweek.com/blog.

12 Brands That May Not See 2011

06/24/2009

Here are 12 well-known brands that 247wallst.com doesn’t believe will make it past 2010. Included are one-liners of what these business have against them.

1. Budget rental cars (CAR): Debt problems, weak travel, competition.
2. Borders books (BGP): Declining sales, heavy losses, competitors, large debts.
3. Crocs footwear (CROX): Stock $72 to 2, financing issues, recession.
4. Saturn vehicles: GM bankruptcy will certainly shutter the brand, sales -59%.
5. Esquire Magazine : Hearst faceing problems will shut underperforming brands.
6. Old Navy: Gap a two-brand body, can’t sustain all 3, sales declines.
7. Architectural Digest Mag: Lost 47% of ads, financial problems.
8. Chrysler: Like GM, can’t maintain business as it restructures.
9. Eddie Bauer (EBHI): Declining sales, stock under $1, major debts, CCC- rating.
10. Palm (PALM): Life-threatening competition, dismal financial results, Sprint.
11. AIG: Sub-operating units distancing from “toxic” and dying AIG brand.
12. United Air Lines (UAUA): Stocks plummeting, faces merger and end of brand.

To read the full article click here.

07/04/2007
Oh the Sentiment of Man

I was reading through a rather bearish article explaining the coming credit bust and all that good stuff, mostly related to the Bear Sterns fiasco, when I see a rather bearish comment by a rather bearish analyst.

I always wonder how if so many analysts are predicting a bear market, how then can a decline occur. But after reading posts similar in mindset to the following it becomes quite clear that many analysts seem to forget what a bear market is and don’t make good of their senses and wind up losing regardless.

Dresdner Kleinwort’s global strategist, Albert Edwards in How to Survive a Bear Attack says, one should be monitoring the market, with the assistance of technical analysis, being that we are heading into what is the toughest quarter (third) for stocks.

His method for Alpha:

  1. Diversify your portfolio
  2. Seek safety in Government Bonds and Defensives
  3. watch to see if an ordinary market correction – where you buy on the dips – is turning into a full blown bear market where you should seel the rallies.
  4. Once you have incurred 20 per cent losses – sell everything, buy puts, buy vol. And rather than climb up a tree, hide under your desk till the bear market is over.
I would love to see this guys portfolio in a few months time. In my opinion he has created the best recipe for getting crushed by the market. Technical anlaysis never made anyone wealthy and this is because technical analysis tells you what the market did, not what it will do.

Diversification
He obviously has no comfort in the companies he owns. “Diversification is for those who have no clue what they are doing”.

Buy Bonds
This seems to directly contradict his original mindset – if he ever had one. In a Credit Bust every financial asset suffers – and bonds are no exception. As we’ve seen in the past week the faith in bonds can and may erode fairly quickly with no prior warning to anyone.

Buy on Dips and Watch for Bears
These are the actions of a typical laggard investor who “buys when the price is low and sells when the price is high” having not the slightest clue what either one means. He is simply following a trend.

Sell at -20%
So once you’ve incurred a major loss on paper, go ahead and secure it. This goes contrary to the basics of successful stocks investing, never to even mention investments of any value whatsoever.

It makes no sense. If your issues are worthy why would they decline 20% and then be worthless enough to sell? And if they were worthless to begin with then why did you buy them?

Additionally. most Bears will sink a market by 20-45%. This being the case, the bear market may be over once you are getting ready to sell – the standard Despair Theory. The beginning of a correction is the time to sell and the ending is a time to buy.

Once a stock falls 20% there should seem to be more upside than downside. This is the game that market psychology plays on the minds of its players. They hold when they should be selling, and sell when they should be buying more.

But then again I wonder, who am I to question the logic of Wall Streets Finest?

06/27/2007
News Bits…

Subprime market needs more rules, consumer advocates say“. What the hell? Isn’t that like saying that skydivers need a stronger helmet?

From the charts I see of silver and gold it seems awfully dangerous to be leveraged right now, as a large and powerful move seems rather imminent with both metals trading at support levels.

Investors Notice:
Technical Analysis doesn’t matter and you should never be leveraged.

The Telegraph reports “Charles Dumas, the group’s global strategist, said the failed auction of assets seized from one of the Bear Stearns funds by Merrill Lynch had revealed the dark secret of the CDO debt market. The sale had to be called off after buyers took just $200 million of the $850 million mix”. Uhmm… ouch?

06/26/2007
News Bits

Where does the money from the rich go during a downturn? Buffet lets us know

Its official “Current slump in housing worst since 1989-92 downturn.” For those unsure of when the housing slump will end, try basic economics: When Inventory Unloads.

The fools have been served. With Blackstone (BX) selling below its IPO price have these speculators finally realized that what they were buying was really someone else’s worries.

06/19/2007

The Day You Became A Better Writer

Shorter emails are easier to read… enough said. Dilbert’s Rules for better writing:

1. Make your first sentence grab the reader.
2. Keep things simple.
3. Get rid of extra words.
4. Write short sentences.
5. Avoid putting multiple thoughts in one sentence.
6. Easier to imagine the object (the boy) before the action (the hitting).
7. And my own… try easier font.

Let’s try this…

06/14/2007
Random Bits…

The SEC now says investors need to have investible assets of at least $2.5 million, excluding equity in any homes or business, to be eligible to sign on a hedge fund’s dotted line. The above applies to just 1% of the American population.

Morgan Stanley is expecting a 15% sell-off in the stock market…

…and “Bond King” Bill Gross is now turning bearish on bonds (may explain recent sell-off)

and his reasoning… “Mortgage Default Rates Rise 90% in May

And why should the banks care… Bloomberg reports “Sales of CDOs (collateralized debt obligations) hit a record in the first quarter of this year – at $251 billion for the three months they’re running at more than $1 trillion per annum.

05/31/2007
Financial Ramblings

The economy is slowing but who cares… Money!!!

Now I know that all seems all good and fine but what many “investors” are basing their rational decisions on is none other than sentiment. And from sequences such as the NASADAQ Bubble/Collapse we all know how long that takes to change and drastically.

I’ve been doing quite some reading over the past few months and one of the things I how many companies segregate earnings. When a company does well they may want to keep that cash “under-the-rug” for a rainy day (pun intended). Similarly, a company may not want to post a loss, especially during a highly competitive earnings season, and they will go ahead push off that loss for a rainy day (what else do companies have to blame bad sales on other than bad weather and a stagnating economy). What you end up with is a nasty bunch of earnings disappointments preceded by some rather disappointing economic data (did someone say 1971?). We may experience this phenomenon once again in the near future.

Of course I can Beat the Market!
A whole bunch of insider trading going on… (not to mention the recent story regarding Dow Jones Co.) Sounding at all familiar? Now all we need is another Enron (trust me there are plenty) and we have an exact replay.

05/24/2007

On China

Shanghai can’t find domestic help — the maids are out day-trading


Quote of the Day

“So, are you bold enough to hop on what could be the greatest investment mania ever?… Are you willing to pick up nickels in front of a freight train?”
– Steve Sjuggerud

05/20/2007

When American Business cum Financial Manipulation Just Gets Funny

We Try Harder – But What’s the Point?

By Michael Kinsley
The New York Times
Wednesday, May 16, 2007

In 1946 Warren E. Avis (who died last month at the age of 92) had an idea: rental cars should be available at airports. So he founded Avis Airlines Rent-a-Car.

In 1954, he sold the company to another businessman, Richard Robie. Two years later, in 1956, Robie sold Avis to an investment group led by a company called Amoskeag. In 1962, the investment banking firm Lazard Frères bought Avis. In 1965, Lazard sold Avis to the giant conglomerate ITT Corp.

Since 1946, Avis has been sold or reorganized 17 or 18 times, depending on how you count. Each time Avis changed hands or structure, there have been fees for bankers and fees for lawyers, bonuses for the top executives and theories about why this was exactly what the company needed.

In 1972 ITT spun off Avis as a publicly traded company. Then, in 1977, the company was bought by another giant conglomerate, Norton Simon. In 1983, a company called Esmark (formerly Swift & Co.) bought Norton Simon. In 1984, Esmark was bought by Beatrice Foods, and in 1986, Beatrice was bought by the leveraged buyout firm Kohlberg Kravis Roberts & Company.

Kohlberg Kravis Roberts immediately sold Avis to an investment group called Wesray. Wesray sold Avis’s fleet leasing business to a company called PHH Group. Then it spun off Avis’ foreign operations and took them public as a company called Avis Europe P.L.C. And then, in 1987, Wesray sold Avis to its employees under an employee stock ownership program. Wesray more than tripled its money in 14 months.

Two years after the stock ownership deal, the company sold General Motors a complicated security that effectively gave it a 26 percent stake in Avis. Apart from that, Avis’s employee ownership experiment lasted nine years, until 1996, when Avis sold itself to a company called HFS. Employees got an average of $26,000 each. Eighty or 90 current and former Avis executives got an average of $1.75 million each.

A year later, in 1997, HFS took Avis public. (The initial public offering raised just over $330 million. The banker Bear Stearns charged $15 million for its services.) In 1999, Avis bought PHH. Remember PHH? That was the company Avis sold its fleet leasing operation to in 1987. PHH was owned by Cendant, a company that had been formed in 1997 by the merger of HFS — right, the company that had spun off Avis in 1997 — and another company called CUC. HFS had retained 19 percent of the company’s stock when it took Avis public. With the stock portion of Avis’ purchase price for PHH, Cendant now owned 34 percent of Avis.

A couple of years later Cendant bought the roughly two-thirds of Avis that it didn’t already own and made Avis a wholly owned subsidiary.

In 2006 Cendant split itself into four independent companies, one of which was the Avis Budget Group. (Somewhere along the line, Cendant had also acquired Budget Rent a Car.) The Avis Budget Group became the parent company of Avis Budget Car Rental.

Modern capitalism has two parts: There’s business, and there’s finance. Business is renting you a car at the airport. Finance is something else. More and more of the news labeled “business” these days is actually about finance, and much of it is mystifying. Even if you can understand — just barely — how it works, you still wonder what the point is and why people who do it need to get paid so much. And you strongly suspect that the swirl of financial activity around Avis for the past six decades has had little or nothing to do with the business of renting cars.

Last September, a week after the Avis Budget Group began trading on the New York Stock Exchange, The Wall Street Journal reported that the new company was “ripe for the picking.” Carl Icahn, another wily financier from the 1980s, had acquired a $100 million stake in the company and would not comment about his intentions.

The Journal warned, “If a buyout or acquisition deal doesn’t materialize for Avis, stock and bond investors will have to focus on the fundamentals of its car-rental business.”

Goodness! Anything but that!

05/01/2007
Yes, bells do ring at bottoms too!

Just as I was getting ready for some discreet action in the Japanese Real Estate market… comes Marketwatch and boldly spoils the party for the contrarians…

REAL ESTATE: JAPAN
Hot property for U.S. investors

EverBank is now offering CD accounts that will mimick returns of that given by the Tokyo Stock Exchange REIT (Real Estate Investment Trust) Index. “Real estate has been depressed in Japan dating from the 1990s until now,” notes New York financial planner Lewis J. Altfest. “For the first time, the index of property has turned up. In particular, Tokyo has done well. Other parts of the country have lagged Tokyo”.

There are many strings attached (i.e., no dividends, limited returns, alotted time). This one is just another of the many “Give-us-your-money-so-we-can-make-a-killing-with-it-ourselves” schemes.

But it still doesn’t make the coming profits any less substantiated or the fundamentals aligned with this market any less true. Just pointing out that bells ring all day, even at rock bottoms.

04/29/2007
Here are the headlines that stood out
Comments compliments of yours truly.

I’m not sure what many of you are making of the news (of course I may be coming more bearish ever since I went short the market) but what I see is a perfect storm brewing.

“Stop all the fretting: The U.S. consumer is not going to collapse anytime soon. Most likely, she never will”. They even counter with what should have been my line, “Those folks need to raise their window shades and look outside, because there is much to be optimistic about”.

Isn’t it interesting how when Hulbert sees high interest in gold its contrarily bad but when he sees optimistic views on stocks it remains good?

And besides for Americans trying to maintain their lavish lifestyles they are also led to believe they are getting richer. Now I understand.

Economy is crawling, stocks are resilient. Sound familiar?

Did anyone notice Uranium making its way onto Marketwatch… and the NYMEX?

Did you know that a study has been released in India claiming that silver is is not harmful to the human body and may be consumed?

So what will replace the unwarranted optimism in stocks? Well, this just might.

The man entrusted with Dick Cheney’s money says we are living in a worldwide bubble.

Buffett thinking about Tech Stocks?

As Bob Dylan once put it: “Freedom? Just around the corner from you. But with Truth so far off, what good will it do?”

Now, get ready for some technically sentimental analysis…

Yesterday, Friday, April 28th, marked exactly 100 years since the Panic of 1907, 75 years since the 1932 Low and the 20th Anniversary of the 1987 Crash. Its also been 10 years since the East Asian financial crisis.

Today marks 65 years since the 1942 low, on which the Dow bottomed out at 92.92 points. (Which for the record was 2.87 ounces of gold).

The Dow has now risen 19 of the last 21 trading days. This has happneded only once since 1928! The S&P 500 has also been up 18 of 20. It happened on both September 28th and 29th of 1954, again on July 8th and 11th of 1955 and it happened for 4 consecutive trading days, July 3, 5, 6, and 8 – in guess what year? 1929!

04/18/2007
Amid the sadness here are some stories you may or may not have seen…

Reuters – “One Million families with net worth over $5 Million”. Can I hear you say affluent?

However…

Marketwatch – “One million subprime borrowers face large payment resets this year, and another 800,000 will next year, FDIC has said“. But don’t worry. During the Great Depression over 75% of our nation had a job!

AP – “British Pound Breaks Through $2 for First Time in Nearly 15 Years”. Duh!

SilverSeek – So is the Silver Market manipulated? Ted Butler gives his two ounces.

Tomorrow will be a very important test for those looking at the general market. After the 3% correction we had in late February the Dow now stands just below its all-time highs. A break to the upside should calm many fears and may send the Dow over 13,000 (I’m hoping for this together with Peter Grandich as it may hand us a very nice shorting opportunity).

Gold is also racing up to its 25-year highs it broke in April last year. There is string resistance at $690 and then again at $710. A break above will most probably send gold all the way to $800, its all-time high, while a jerk downward would probably continue till the $600 support line.