I have been living temporarily with an older lady who is afflicted with dementia. She forgets a lot and repeats herself a lot. A lot! She lives in her own little fantasy world.
But for me, it’s easy to live with someone who lives in her own little world, who forgets and who repeats herself over and over. After all, I’ve been in the investment business since 1975.
David Rosenberg of Gluskin Sheff observed that the S&P 500 index is currently at 1,109 and reminds us that it first hit 1,109 on April 1, 1998.
During the whole 12 years and five months since April 1998, our friends in the financial planning business have been telling us the market goes up on average about 9% a year and we should buy high-quality stocks and hold them for the long term. When the stock market went up, they were happy; their buy-and-hold slogan could be repeated like a meditation mantra. And the followers of these dollar-store gurus were lulled into a mindless paradise, dreaming of financial security. No worries: soon we’ll all be rich like Warren Buffet. And when the market went down, they repeated the same mantra. Eventually, they were right: the market did bounce back up.
But they seem to have forgotten the part about the market going up 9% a year. All those planned projections of financial well-being based on a 9% return seem to have disappeared like a sweet dream in the morning.
Human nature is an amazing thing. In my investment book Beyond the Bull, I discuss the ways in which investors can be their own worst enemy. Our minds naturally try to avoid pain. It’s a painful experience when US stock market investors realize that they have had no growth for 12 years. Our minds seek to avoid these painful messages. Sometimes it’s less painful to slip into a state of voluntary Alzheimer’s and forget about investing ― to repeat the ‘buy and hold for the long term’ slogan over and over. And to fantasize about a recovering economy.
I am enjoying the opportunity to teach my mother. Medical professionals say Alzheimer’s patients can’t learn, that they are, in fact, un-learning what they once knew. And, to a certain extent, the professionals are right. But I have been successful in teaching her how to breathe in a certain way. My years in the martial arts have taught me that deep, controlled breathing relaxes the body and eases muscular tension. Breathing in that way relaxes the body and helps us avoid physical pain. My mother has been able to learn to use my breathing technique to help ease her headaches. I wish I could teach the voluntary Alzheimer’s investors some techniques to ease their financial headaches.
American stock market investors need to learn about selling their stocks. Buy and sell ― not just buy. It’s a little like breathing. We buy stocks at certain times (breathe in) and sell them at other times (breathe out). Holding your stocks when they are going down is like holding your breath. If you do it long enough, you will not like the results.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Friday, September 17, 2010
Tuesday, September 14, 2010
Rebirth of a Philosophy of Life
My father died last month.
His generation was quite different from ours. He was born in the 1920s, was an impressionable teenager in the late 1930s, and fought in a war in the 1940s. His generation experienced the ups and downs of life much more intensely than our generation. In his day, the economy heated up for short periods and cooled off for long periods. The attitude of his contemporaries was: we will survive. We baby boomers experienced long periods of economic prosperity interrupted once in a while by short, inconvenient cool-downs. Our attitude: we want it all. The dark side of my father’s generation was the fear they’d lose it all. The dark side of ours is entitlement: we think we deserve it all.
My father crossed over in his 88th year, leaving his soul mate behind. My mother was his dependent. She, as did the other women of her generation, relied on her man to provide for her; her job was to keep the home. Women of her generation accepted their roles as mothers and keepers of the hearth. (She had her brief career when he was off trying to win a war.) My mother is deep into her adventure with Alzheimer’s now. Now she truly is dependent. But my father continues to provide for her, even after his death. He has left me to look after her and he has left her some money. The combination of a steady job at the steel mill and the lessons he learned in the 1930s allowed them to save a sufficient amount of money. He had learned that you never risk your capital and you live a frugal life.
His son was of a different generation; he learned different lessons. His teenage years were the 1960s. What economic lessons did the 1960s teach? Nothing compared to the 1930s. What survival lessons did the 1970s teach? Nothing compared to the 1940s. The baby-boom generation was raised in a time when my father’s dreams were all coming true. Our generation was the dream-come-true generation. My father’s son, and all the other so-called baby boomers, learned that dreams can and do come true. And his son, unfettered by threats to his survival or the fear of losing everything, set out to make his dreams come true.
My father’s dream was to have a steady job, own his own home, and retire to financial security. His dreams came true. Initially, baby boomers had similar dreams, but expected them to come true. And why would we be content with just one home? Surely we could assemble a few rental properties too. And what about our RRSPs? Why settle for financial security when we can have prosperity? That famous financial-planning book of the 1990s was called The Wealthy Barber, not The Financially Secure Barber.
The boomers were raised by the Depression generation. Boomer values were once the same as my father’s values. But all that changed in the 1990s. As boomers’ attitudes shifted in those years from security to wealth, they ploughed billions into the stock market. Billions and billions! It was a change of social mood. It was a generational shift. It was the abandonment of my father’s “we will survive” attitude and the embracing of the “we want it all” approach. And it was the final chapter in the story of the Golden Age of the American Stock Market.
In my book Beyond the Bull, I discuss the mechanics of the stock market. It is important to understand the details of exactly what makes the stock market go up and down. In the 1990s, it was baby boomers buying billions and billions of dollars of mutual funds that made the stock markets of the world rise in unison. Money moved from seeking security to seeking growth. The actual flow of money into the stock markets is what made the market go up. And that change of attitude was complete at the end of the 20th century as the stock market ripened into the dot-com high-tech craze. The inevitable “correction” occurred in 2001/2002, when the blue-chip stock market averages dropped in half. Then the swan song finale occurred when the market surged into the oil-and-gold resource craze of 2005 to 2008. The “inevitable correction” knocked the stock market in half in 2008.
Will there be another stock market craze that will take the stock market up yet again? Where will the money come from? What fuel will fire the big bull market that the wealthy barber needs to break even?
The boomer dream of buying the stock market and holding it until you become wealthy is over.
I invite you to share my father’s dream instead. Learn what he learned about frugality in the 1930s. Learn what he learned about survival in the 1940s. His dream was to have a steady income and a modest life ― and not to take inordinate financial risk. Frank Alfred Norquay (1922 – 2010): may you rest in peace and may your dream be reborn in this generation.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
His generation was quite different from ours. He was born in the 1920s, was an impressionable teenager in the late 1930s, and fought in a war in the 1940s. His generation experienced the ups and downs of life much more intensely than our generation. In his day, the economy heated up for short periods and cooled off for long periods. The attitude of his contemporaries was: we will survive. We baby boomers experienced long periods of economic prosperity interrupted once in a while by short, inconvenient cool-downs. Our attitude: we want it all. The dark side of my father’s generation was the fear they’d lose it all. The dark side of ours is entitlement: we think we deserve it all.
My father crossed over in his 88th year, leaving his soul mate behind. My mother was his dependent. She, as did the other women of her generation, relied on her man to provide for her; her job was to keep the home. Women of her generation accepted their roles as mothers and keepers of the hearth. (She had her brief career when he was off trying to win a war.) My mother is deep into her adventure with Alzheimer’s now. Now she truly is dependent. But my father continues to provide for her, even after his death. He has left me to look after her and he has left her some money. The combination of a steady job at the steel mill and the lessons he learned in the 1930s allowed them to save a sufficient amount of money. He had learned that you never risk your capital and you live a frugal life.
His son was of a different generation; he learned different lessons. His teenage years were the 1960s. What economic lessons did the 1960s teach? Nothing compared to the 1930s. What survival lessons did the 1970s teach? Nothing compared to the 1940s. The baby-boom generation was raised in a time when my father’s dreams were all coming true. Our generation was the dream-come-true generation. My father’s son, and all the other so-called baby boomers, learned that dreams can and do come true. And his son, unfettered by threats to his survival or the fear of losing everything, set out to make his dreams come true.
My father’s dream was to have a steady job, own his own home, and retire to financial security. His dreams came true. Initially, baby boomers had similar dreams, but expected them to come true. And why would we be content with just one home? Surely we could assemble a few rental properties too. And what about our RRSPs? Why settle for financial security when we can have prosperity? That famous financial-planning book of the 1990s was called The Wealthy Barber, not The Financially Secure Barber.
The boomers were raised by the Depression generation. Boomer values were once the same as my father’s values. But all that changed in the 1990s. As boomers’ attitudes shifted in those years from security to wealth, they ploughed billions into the stock market. Billions and billions! It was a change of social mood. It was a generational shift. It was the abandonment of my father’s “we will survive” attitude and the embracing of the “we want it all” approach. And it was the final chapter in the story of the Golden Age of the American Stock Market.
In my book Beyond the Bull, I discuss the mechanics of the stock market. It is important to understand the details of exactly what makes the stock market go up and down. In the 1990s, it was baby boomers buying billions and billions of dollars of mutual funds that made the stock markets of the world rise in unison. Money moved from seeking security to seeking growth. The actual flow of money into the stock markets is what made the market go up. And that change of attitude was complete at the end of the 20th century as the stock market ripened into the dot-com high-tech craze. The inevitable “correction” occurred in 2001/2002, when the blue-chip stock market averages dropped in half. Then the swan song finale occurred when the market surged into the oil-and-gold resource craze of 2005 to 2008. The “inevitable correction” knocked the stock market in half in 2008.
Will there be another stock market craze that will take the stock market up yet again? Where will the money come from? What fuel will fire the big bull market that the wealthy barber needs to break even?
The boomer dream of buying the stock market and holding it until you become wealthy is over.
I invite you to share my father’s dream instead. Learn what he learned about frugality in the 1930s. Learn what he learned about survival in the 1940s. His dream was to have a steady income and a modest life ― and not to take inordinate financial risk. Frank Alfred Norquay (1922 – 2010): may you rest in peace and may your dream be reborn in this generation.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Thursday, August 12, 2010
Shooting Star Month
Each summer we get a special treat. In mid-August, the earth’s orbit passes near the asteroid belt, resulting in the season of shooting stars. We see far more shooting stars in August than any other month. Shooting stars are really meteors that enter the earth’s atmosphere and burst into flames. All we have to do to see this annual show is gaze at the night sky in mid August: the odds are we will eventually see one. If we stay long enough, we will see several. It’s a seasonal thing, tied to the orbit of our earth around the sun.
But, in order to see it, we have to look up. And most of us spend our busy lives attending to our earthly affairs; we rarely have time to gaze upward at the night sky.
I wonder who first discovered Shooting Star Month. Ancient literature has many references to the heavens. The Greeks seemed to have particular wisdom in this area: was Shooting Star Month discovered by an ancient Greek who spent a lot time looking up? In order to notice the August shooting star phenomenon, he would have had to look up all year long. Only then could he notice the increase in shooting star activity in August. And he would have to verify his work by looking up over several years. Discovering nature’s patterns is difficult work.
But, once some noble hard working Greek discovered the phenomenon, it becomes easy for the rest of us to participate in his genius and enjoy August’s shooting star show. All we have to do is read about it somewhere, wait for mid August and look up at night. The hard work had been done long ago.
In my investment book, Beyond the Bull, I discuss the phenomenon of using other people’s knowledge for our own financial benefit. Is there a financial pattern that someone may have observed long ago, that we might be able to use for our own well-being. Is there a Shooting Star Month in the financial world?
It turns out there are many examples of such occurrences in the money world. The most relevant right now is known as secular alternation. Secular alternation refers to the tendency of the stock market to alternate between long term secular bull markets and long term secular bear markets. This financial gem is the key to planning our investment futures. Here are examples of how secular alternation has worked for the past 100 years or so:
1. In the late 1800s, there was a rail road boom in North America. This rail road boom gave rise to a stock market boom that ended in 1906 when that secular bull market ended.
2. 1906 to 1921: this secular bear market included World War 1 and hyper-inflation in Germany. [15 years]
3. 1921 to 1929: the roaring 20s produced a short powerful secular bull market. [8 years]
4. 1929 to 1942: the US stock market experienced a secular bear market accompanied by a depression and a world war. [13 years]
5. 1942 to 1966. Secular bull market. [24 years]
6. 1966 to 1982. Secular bear. [16 years]
7. 1982 to 2000. Secular bull. [18 years]
8. 2000 to now. Secular bear. [10 years so far…]
During the secular bull markets, the stock markets went up a long way. Those who bought stocks and simply held them as long term investments did well during these times. The secular bear markets either took stocks down a long way or took them sideways for a long time. Simply buying stocks and holding them resulted in either severe or minor losses. In the long term secular bull markets, investing in equity mutual funds was profitable. In the secular bear markets, it was not. Secular alternation dictates which investment strategies make sense at any given time.
What makes sense in a Secular Bull Market? Ordinary stock market investors can buy reasonable stocks and hold them for extended periods. In a rising market, that strategy works. “Buy and Hold for the Long Term.”
What makes sense in a Secular Bear Market? Ordinary stock market investors have to buy reasonable stocks when they are depressed in price and sell them when they are reasonably priced. “Buy Low, Sell High.”
What makes sense today? We have been in a secular bear market for ten years. If stock market investors have been buying low and selling high, they have had great opportunities to earn solid investment returns. If investors had been holding stocks for the whole ten years, they have been disappointed. They feel like the sky gazer who looks for shooting stars in January.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
But, in order to see it, we have to look up. And most of us spend our busy lives attending to our earthly affairs; we rarely have time to gaze upward at the night sky.
I wonder who first discovered Shooting Star Month. Ancient literature has many references to the heavens. The Greeks seemed to have particular wisdom in this area: was Shooting Star Month discovered by an ancient Greek who spent a lot time looking up? In order to notice the August shooting star phenomenon, he would have had to look up all year long. Only then could he notice the increase in shooting star activity in August. And he would have to verify his work by looking up over several years. Discovering nature’s patterns is difficult work.
But, once some noble hard working Greek discovered the phenomenon, it becomes easy for the rest of us to participate in his genius and enjoy August’s shooting star show. All we have to do is read about it somewhere, wait for mid August and look up at night. The hard work had been done long ago.
In my investment book, Beyond the Bull, I discuss the phenomenon of using other people’s knowledge for our own financial benefit. Is there a financial pattern that someone may have observed long ago, that we might be able to use for our own well-being. Is there a Shooting Star Month in the financial world?
It turns out there are many examples of such occurrences in the money world. The most relevant right now is known as secular alternation. Secular alternation refers to the tendency of the stock market to alternate between long term secular bull markets and long term secular bear markets. This financial gem is the key to planning our investment futures. Here are examples of how secular alternation has worked for the past 100 years or so:
1. In the late 1800s, there was a rail road boom in North America. This rail road boom gave rise to a stock market boom that ended in 1906 when that secular bull market ended.
2. 1906 to 1921: this secular bear market included World War 1 and hyper-inflation in Germany. [15 years]
3. 1921 to 1929: the roaring 20s produced a short powerful secular bull market. [8 years]
4. 1929 to 1942: the US stock market experienced a secular bear market accompanied by a depression and a world war. [13 years]
5. 1942 to 1966. Secular bull market. [24 years]
6. 1966 to 1982. Secular bear. [16 years]
7. 1982 to 2000. Secular bull. [18 years]
8. 2000 to now. Secular bear. [10 years so far…]
During the secular bull markets, the stock markets went up a long way. Those who bought stocks and simply held them as long term investments did well during these times. The secular bear markets either took stocks down a long way or took them sideways for a long time. Simply buying stocks and holding them resulted in either severe or minor losses. In the long term secular bull markets, investing in equity mutual funds was profitable. In the secular bear markets, it was not. Secular alternation dictates which investment strategies make sense at any given time.
What makes sense in a Secular Bull Market? Ordinary stock market investors can buy reasonable stocks and hold them for extended periods. In a rising market, that strategy works. “Buy and Hold for the Long Term.”
What makes sense in a Secular Bear Market? Ordinary stock market investors have to buy reasonable stocks when they are depressed in price and sell them when they are reasonably priced. “Buy Low, Sell High.”
What makes sense today? We have been in a secular bear market for ten years. If stock market investors have been buying low and selling high, they have had great opportunities to earn solid investment returns. If investors had been holding stocks for the whole ten years, they have been disappointed. They feel like the sky gazer who looks for shooting stars in January.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Friday, August 6, 2010
Cold War: yellow alert.
Do you remember Barry McGuire’s 1965 hit, Eve of Destruction? “If the button is pushed, there’s no runnin’ away… Can’t you see the fears that I’m feeling today?” His protest song reflected the wide-spread belief that we lived in a time of danger.
In the 1950s, The Saturday Evening Post featured articles like: Will A-bombs Fall? – and College Communists. The underlying sentiment was the same as McGuire’s protest song: we live in a time of danger and we need to stay alert and protect ourselves.
That sentiment was a big part of life in the 1950s and 60s: two generations had been involved in world wars. The widely recognized baby boomers had parents and grandparents who were directly involved in massive world wars. War had become part of their personal psyche. Danger was part of their up-bringing. For them, world politics involved constant vigilance: in order to protect ourselves, we need to see danger way earlier and respond way earlier. They lived their lives on yellow alert.
But 60 or 70 years of relative peace have lulled their baby boomer children and grandchildren into complacency. Bobby McFerrin’s reggae song, Don’t Worry, Be Happy reflects their rosy optimistic state of un-alertness.
We see the same phenomenon in the financial world. The 1929 to 1932 collapse of the stock market and the 1930s depression impacted our parents and grandparents: they handled their investments with caution, constantly maintaining monetary yellow alert.
In my investment book, Beyond the Bull, I discuss the concept of yellow alert as it applies to investing. In my CD, The Five Levels of Investor Consciousness, I site modern day examples of a variety of financial disasters and how they destroyed investors wealth. My goal is to help people do their investing in the mindset of yellow alert.
But so far, it’s not working. It seems the impact of the 1982 to 2000 bull market has lulled investors into complacency. In the 1990s mutual funds boom we were told we could become rich like Warren Buffet by buying mutual funds and holding them for the long term. But when the bear market began in the year 2000, the rules changed. And now, ten years later, Warren Buffet is even richer, but investors in typical equity mutual funds are not. After ten years of poor performance, stock market investors should be getting back to the yellow alert attitude of the previous generation. But that’s not happening. Stock market investors are still complacent.
What will it take to wake people up?
That’s the problem. We know from studying the alertness of the population for 100 years that it takes a disaster to wake people up. Two world wars put our parents and grandparents on “international politics yellow alert.” A stock market crash and a depression put the same generations on “financial yellow alert.” Will it take another mega-war to alert this generation to the notion of international self defense? Will it take the another stock market crash to alert us to the notion of financial self defense? What will it take?
Here’s how it looks so far:
1. Yellow Alert International Politics Observation: A dictator in North Korea has openly threatened nuclear war. He is intentionally provoking a war with South Korea and with The West. Rosy Complacency Response: This dictator no longer has the unfailing support of The People’s Republic of China and is not going to start a war without it.
2. Yellow Alert Observation: The government of Iran is developing a program designed to give them nuclear weapons. The Iranian president is openly denying it, but Iran’s nuclear program just keeps rolling along. Rosy Complacency Response: When Iraq tried to do the same thing decades ago, the Israeli Air Force bombed the nuclear installation. No problem. If worse comes to worse and Iran doesn’t stop their nuclear program, the Israelis will stop it for us.
3. Yellow Alert Financial Observation: America’s biggest bank, insurance company, auto manufacturer, stock broker and mortgage company all had to be bailed out in the last two years. Certain sovereign states are unable to pay their debts and are being bailed out by the European Common Market. This indicates that the decline of corporate America may not be over. Rosy Complacency Response: the stock market climbs a wall of worry. The early stages of all long term bull markets are accompanied by unfavourable economic news (the so-called wall of worry).
4. Yellow Alert Observation: Americans are currently debating re-stimulating their economy because some are worried that a second wave of recession could start at any time. Such an occurrence could trigger another dramatic 2008-style sell-off in the stock market. Rosy Complacency Response: same as above - the stock market climbs a wall of worry. The early stages of all long term bull markets are accompanied by unfavourable economic news.
Advice for those who have achieved yellow alert status: reduce risk in your portfolios. For most people, this means investing less in the stock market and more in the bond market. Change your asset mix and become more safety oriented, less growth oriented.
Advice for those who are continuing with their original plan of buying and holding for the long term: listen more to your own instincts; less to your financial planner, mutual funds salesman or stock broker.
In the 1950s, The Saturday Evening Post featured articles like: Will A-bombs Fall? – and College Communists. The underlying sentiment was the same as McGuire’s protest song: we live in a time of danger and we need to stay alert and protect ourselves.
That sentiment was a big part of life in the 1950s and 60s: two generations had been involved in world wars. The widely recognized baby boomers had parents and grandparents who were directly involved in massive world wars. War had become part of their personal psyche. Danger was part of their up-bringing. For them, world politics involved constant vigilance: in order to protect ourselves, we need to see danger way earlier and respond way earlier. They lived their lives on yellow alert.
But 60 or 70 years of relative peace have lulled their baby boomer children and grandchildren into complacency. Bobby McFerrin’s reggae song, Don’t Worry, Be Happy reflects their rosy optimistic state of un-alertness.
We see the same phenomenon in the financial world. The 1929 to 1932 collapse of the stock market and the 1930s depression impacted our parents and grandparents: they handled their investments with caution, constantly maintaining monetary yellow alert.
In my investment book, Beyond the Bull, I discuss the concept of yellow alert as it applies to investing. In my CD, The Five Levels of Investor Consciousness, I site modern day examples of a variety of financial disasters and how they destroyed investors wealth. My goal is to help people do their investing in the mindset of yellow alert.
But so far, it’s not working. It seems the impact of the 1982 to 2000 bull market has lulled investors into complacency. In the 1990s mutual funds boom we were told we could become rich like Warren Buffet by buying mutual funds and holding them for the long term. But when the bear market began in the year 2000, the rules changed. And now, ten years later, Warren Buffet is even richer, but investors in typical equity mutual funds are not. After ten years of poor performance, stock market investors should be getting back to the yellow alert attitude of the previous generation. But that’s not happening. Stock market investors are still complacent.
What will it take to wake people up?
That’s the problem. We know from studying the alertness of the population for 100 years that it takes a disaster to wake people up. Two world wars put our parents and grandparents on “international politics yellow alert.” A stock market crash and a depression put the same generations on “financial yellow alert.” Will it take another mega-war to alert this generation to the notion of international self defense? Will it take the another stock market crash to alert us to the notion of financial self defense? What will it take?
Here’s how it looks so far:
1. Yellow Alert International Politics Observation: A dictator in North Korea has openly threatened nuclear war. He is intentionally provoking a war with South Korea and with The West. Rosy Complacency Response: This dictator no longer has the unfailing support of The People’s Republic of China and is not going to start a war without it.
2. Yellow Alert Observation: The government of Iran is developing a program designed to give them nuclear weapons. The Iranian president is openly denying it, but Iran’s nuclear program just keeps rolling along. Rosy Complacency Response: When Iraq tried to do the same thing decades ago, the Israeli Air Force bombed the nuclear installation. No problem. If worse comes to worse and Iran doesn’t stop their nuclear program, the Israelis will stop it for us.
3. Yellow Alert Financial Observation: America’s biggest bank, insurance company, auto manufacturer, stock broker and mortgage company all had to be bailed out in the last two years. Certain sovereign states are unable to pay their debts and are being bailed out by the European Common Market. This indicates that the decline of corporate America may not be over. Rosy Complacency Response: the stock market climbs a wall of worry. The early stages of all long term bull markets are accompanied by unfavourable economic news (the so-called wall of worry).
4. Yellow Alert Observation: Americans are currently debating re-stimulating their economy because some are worried that a second wave of recession could start at any time. Such an occurrence could trigger another dramatic 2008-style sell-off in the stock market. Rosy Complacency Response: same as above - the stock market climbs a wall of worry. The early stages of all long term bull markets are accompanied by unfavourable economic news.
Advice for those who have achieved yellow alert status: reduce risk in your portfolios. For most people, this means investing less in the stock market and more in the bond market. Change your asset mix and become more safety oriented, less growth oriented.
Advice for those who are continuing with their original plan of buying and holding for the long term: listen more to your own instincts; less to your financial planner, mutual funds salesman or stock broker.
Friday, July 23, 2010
Conrad Black
Conrad Black is still a star. The media still love him. Newspapers and electronic media report everything that happens to him with great enthusiasm and in great detail. But let’s face it: Lord Black is a has-been. His days of power and influence are over. We don’t see sports reporters following the lives of Bobby Orr or Wayne Gretzky. We don’t see Parliamentary reporters telling us detailed stories of Brian Mulroney or Jean Chrétien. So why do editors and journalist still love to tell us about Conrad Black?
Perhaps it’s because he was once a media baron; he’s one of them. He’s a member of the club ― their club. Maybe that’s why they love to tell us every little thing about his Lordship’s up-and-down career. Maybe they actually do have a sincere affection for this man, even though he has been convicted of several serious criminal offenses. They are experts on Conrad Black. But I wonder what good their expertise can do. Just because they know him and love him and report all the details of his life, are we obliged to pay attention? Or would our time be better spent following the story of someone we love, someone who is interesting to us, someone who is a member of our club.
In Beyond the Bull, my book on investing, I discuss the importance of paying attention to the news. In the investment world, we need to pay attention to news that affects our investments ― and to ignore news that is irrelevant. Part of learning to become a better investor is learning what’s important for us and what’s important for someone else. The endless stories about Lord Black’s adventures in crime and their consequences seem to be important for someone else.
I wish investing were always this simple. But the financial world is a perverse place. Sometimes what seems important is useless and what seems useless is important. In a way, stock market news is a bit like Conrad Black news: interesting, but not important to investors.
The investment firm Gluskin Sheff released a study on the long-term profitability to Americans of certain investments over the past ten years. Of the asset classes they studied, the US stock market was the poorest performer at -2.3% (annual return for 10 years). The best performing asset class over the past ten years was gold at +33%. US government bonds rang in at +11%. You’d think that prudent investors would naturally have their investment in the better-performing bonds and gold, and not in the poorer-performing stock market.
Yet day after day, we see an endless stream of news about the stock market ― and hardly ever do we see news about gold or bonds. The financial media seems hooked on the under performing but glamorous stock market and uninterested in bonds and gold: the investments that are leading the pack. It’s like sports writers filling the dailies with Orr and Gretzky ― or Parliamentary writers following Mulroney and Chrétien . . . or Conrad, Lord Black. Interesting, but not important.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Perhaps it’s because he was once a media baron; he’s one of them. He’s a member of the club ― their club. Maybe that’s why they love to tell us every little thing about his Lordship’s up-and-down career. Maybe they actually do have a sincere affection for this man, even though he has been convicted of several serious criminal offenses. They are experts on Conrad Black. But I wonder what good their expertise can do. Just because they know him and love him and report all the details of his life, are we obliged to pay attention? Or would our time be better spent following the story of someone we love, someone who is interesting to us, someone who is a member of our club.
In Beyond the Bull, my book on investing, I discuss the importance of paying attention to the news. In the investment world, we need to pay attention to news that affects our investments ― and to ignore news that is irrelevant. Part of learning to become a better investor is learning what’s important for us and what’s important for someone else. The endless stories about Lord Black’s adventures in crime and their consequences seem to be important for someone else.
I wish investing were always this simple. But the financial world is a perverse place. Sometimes what seems important is useless and what seems useless is important. In a way, stock market news is a bit like Conrad Black news: interesting, but not important to investors.
The investment firm Gluskin Sheff released a study on the long-term profitability to Americans of certain investments over the past ten years. Of the asset classes they studied, the US stock market was the poorest performer at -2.3% (annual return for 10 years). The best performing asset class over the past ten years was gold at +33%. US government bonds rang in at +11%. You’d think that prudent investors would naturally have their investment in the better-performing bonds and gold, and not in the poorer-performing stock market.
Yet day after day, we see an endless stream of news about the stock market ― and hardly ever do we see news about gold or bonds. The financial media seems hooked on the under performing but glamorous stock market and uninterested in bonds and gold: the investments that are leading the pack. It’s like sports writers filling the dailies with Orr and Gretzky ― or Parliamentary writers following Mulroney and Chrétien . . . or Conrad, Lord Black. Interesting, but not important.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Tuesday, July 20, 2010
The Zen of Real Estate
Some of the most hard working and well-paid realtors in Canada sincerely believe that real estate prices can only go up over the years. It’s the safest investment in Canada. Until only a few years ago, American realtors felt the same. They talk about bricks and mortar and say it’s “real.” They’ll say things like: “Land – they’re not making any more of it!” The inference is that land, bricks, and mortar are somehow “real” and stock market investments are not.
In the 1970s I was a real estate appraiser. Since I became a stock broker, I have met many real estate agents who smugly compared real estate investing to stock market investing. They always conclude that real estate is safer and more profitable. The vagaries of market psychology and economic turmoil can move stock prices up and down wildly. Canada’s biggest bluest chip company, The Royal Bank, for example, went from $60 a share in 2007 to $26 in 2009 and back over $62 in 2010. They claim that real estate is much more stable: you can bank on your real estate investment being there when you retire – whereas you don’t know what to expect from your stock market investments. And that’s because real estate is real and the stock market is not so real.
Half of that statement is true: “the stock market is not so real.” The only part of the stock market that’s real is your month-end statement of your portfolio’s value; that’s what you could have sold your portfolio for on that date. And if they printed another statement the next day, the value would be different. That’s the real part. All that opinion about what the market will do in the future, all that analysis, all that economic information – that’s just bull. That’s the part that’s not so real.
In my book, Beyond the Bull, I explain how investors should behave in the “not so real” world of the stock market. We can succeed in stock market investing because we understand it’s not real. We know it changes every day. We know about unforeseen events and we understand risk. That’s what stock market investing is all about. And that’s the Canadian realtors’ blind spot.
Japanese realtors can see what North American realtors cannot. In Japan they understand the concepts of Ken and Zen. In Japanese culture, Ken is the concrete world of atoms and molecules, logic, science, cause and effect. In real estate, the world of Ken refers to the bricks and mortar, lot size, location, the physical attributes of a property. Then there’s the world of Zen, the mysteries of your mind. The Zen of Real Estate refers to the trendy-ness of a neighbourhood; the kind of people who are moving in; the best way to generate a bidding war; the credit-worthiness of the buyers; the willingness of banks to mortgage a property; all those mysterious human forces that blend together to create the value of a home. In Canada, we understand The Ken of Real Estate; but we are babes in the woods in the world of Zen. The only Real Estate Zen Canadians ever think of is how much money we’re going to make and how high mortgage rates could go.
Our American cousins are much more sophisticated about the nebulous nature of Zen Real Estate. Their home prices have fallen in a steaming heap of sub prime mortgages and unconscious credit underwriting. They’ve seen home-owners dropping off the keys to their houses at the mortgage company and driving off. They’ve seen the dark side of Real Estate Zen.
The interesting part of the Zen-Ken Japanese approach to real estate is how they turn Zen into Ken.
Imagine that you bought a house for $250,000 in the year 2000. You put $100,000 down and took a mortgage of $150,000. And now someone tells you your house worth $350,000. The Ken of Real Estate is the actual house and land you bought. In addition, it’s the new roof you installed, the shrubs you planted and the new sink in the bathroom. It’s the real part of real estate. The Zen of your Real Estate is the $350,000 someone told you your house was worth. It’s the floating rate mortgage you put on it when you bought it and the secured line of credit you picked up 5 years ago. It’s the re-zoning application for those vacant lots on the next block. Our question is: “How can we turn mysterious imaginary Real Estate Zen into concrete Real Estate Ken?” Here’s one way: sell your house for $350,000 and redeploy your equity by buying two “fixer-upper” houses for $300,000 each, with $100,000 down and a $200,000 mortgage on each. Now you have two houses, one for your family and one for rent: Ken Real Estate. The real part of real estate.
But the part that most Canadian real estate fans do not really understand is: when you change the Ken of Real Estate, you change the Zen too. The Zen of Real Estate is inseparable from the Ken.
Imagine that you were able to do it again: you sold your two houses and reinvested and re-mortgaged again. Now you would have four properties in the concrete world of Ken Real Estate. And, of course, you have the accompanying Zen Real Estate risks – more mortgage debt and more rental vacancy risk. Let’s let our imaginations continue until your inevitable death. Now your heirs own those properties. You have physically left the Ken part of your world. You are 100% Zen now. But your Ken Real Estate still exists. AND the Zen of those houses still exists too: the mortgage risk, the trendy-ness of the neighbourhood, the willingness or ability of the banks to mortgage it. The Ken and the Zen of those houses still exits, even though you have personally moved into the world of Zen. (That’s the estate part of real estate.)
Because of Zen, real estate has more in common with the stock market than Canadian realtors would like to admit. Because of Zen, house prices don’t always go up. Because of Zen, real estate investors have to manage risk too.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
In the 1970s I was a real estate appraiser. Since I became a stock broker, I have met many real estate agents who smugly compared real estate investing to stock market investing. They always conclude that real estate is safer and more profitable. The vagaries of market psychology and economic turmoil can move stock prices up and down wildly. Canada’s biggest bluest chip company, The Royal Bank, for example, went from $60 a share in 2007 to $26 in 2009 and back over $62 in 2010. They claim that real estate is much more stable: you can bank on your real estate investment being there when you retire – whereas you don’t know what to expect from your stock market investments. And that’s because real estate is real and the stock market is not so real.
Half of that statement is true: “the stock market is not so real.” The only part of the stock market that’s real is your month-end statement of your portfolio’s value; that’s what you could have sold your portfolio for on that date. And if they printed another statement the next day, the value would be different. That’s the real part. All that opinion about what the market will do in the future, all that analysis, all that economic information – that’s just bull. That’s the part that’s not so real.
In my book, Beyond the Bull, I explain how investors should behave in the “not so real” world of the stock market. We can succeed in stock market investing because we understand it’s not real. We know it changes every day. We know about unforeseen events and we understand risk. That’s what stock market investing is all about. And that’s the Canadian realtors’ blind spot.
Japanese realtors can see what North American realtors cannot. In Japan they understand the concepts of Ken and Zen. In Japanese culture, Ken is the concrete world of atoms and molecules, logic, science, cause and effect. In real estate, the world of Ken refers to the bricks and mortar, lot size, location, the physical attributes of a property. Then there’s the world of Zen, the mysteries of your mind. The Zen of Real Estate refers to the trendy-ness of a neighbourhood; the kind of people who are moving in; the best way to generate a bidding war; the credit-worthiness of the buyers; the willingness of banks to mortgage a property; all those mysterious human forces that blend together to create the value of a home. In Canada, we understand The Ken of Real Estate; but we are babes in the woods in the world of Zen. The only Real Estate Zen Canadians ever think of is how much money we’re going to make and how high mortgage rates could go.
Our American cousins are much more sophisticated about the nebulous nature of Zen Real Estate. Their home prices have fallen in a steaming heap of sub prime mortgages and unconscious credit underwriting. They’ve seen home-owners dropping off the keys to their houses at the mortgage company and driving off. They’ve seen the dark side of Real Estate Zen.
The interesting part of the Zen-Ken Japanese approach to real estate is how they turn Zen into Ken.
Imagine that you bought a house for $250,000 in the year 2000. You put $100,000 down and took a mortgage of $150,000. And now someone tells you your house worth $350,000. The Ken of Real Estate is the actual house and land you bought. In addition, it’s the new roof you installed, the shrubs you planted and the new sink in the bathroom. It’s the real part of real estate. The Zen of your Real Estate is the $350,000 someone told you your house was worth. It’s the floating rate mortgage you put on it when you bought it and the secured line of credit you picked up 5 years ago. It’s the re-zoning application for those vacant lots on the next block. Our question is: “How can we turn mysterious imaginary Real Estate Zen into concrete Real Estate Ken?” Here’s one way: sell your house for $350,000 and redeploy your equity by buying two “fixer-upper” houses for $300,000 each, with $100,000 down and a $200,000 mortgage on each. Now you have two houses, one for your family and one for rent: Ken Real Estate. The real part of real estate.
But the part that most Canadian real estate fans do not really understand is: when you change the Ken of Real Estate, you change the Zen too. The Zen of Real Estate is inseparable from the Ken.
Imagine that you were able to do it again: you sold your two houses and reinvested and re-mortgaged again. Now you would have four properties in the concrete world of Ken Real Estate. And, of course, you have the accompanying Zen Real Estate risks – more mortgage debt and more rental vacancy risk. Let’s let our imaginations continue until your inevitable death. Now your heirs own those properties. You have physically left the Ken part of your world. You are 100% Zen now. But your Ken Real Estate still exists. AND the Zen of those houses still exists too: the mortgage risk, the trendy-ness of the neighbourhood, the willingness or ability of the banks to mortgage it. The Ken and the Zen of those houses still exits, even though you have personally moved into the world of Zen. (That’s the estate part of real estate.)
Because of Zen, real estate has more in common with the stock market than Canadian realtors would like to admit. Because of Zen, house prices don’t always go up. Because of Zen, real estate investors have to manage risk too.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
Tuesday, July 13, 2010
Prophets of Doom, Prophets of Profits
July 7, 2010
The stock market can be confusing at times.
For example, eminent market timer and financial astrologer, Arch Crawford, has been writing about a catastrophic event that will occur at the end of this month. Before you balk at the notion of a financial astrologer, understand that Crawford is one of the few investment advisers who correctly predicted the 1987 stock market crash and has received the prestigious stock market Timer of the Year award on several occasions. He is warning of an historic tragic event at the end of July, beginning of August 2010.
On the other hand, we see our G8 economic leaders cautiously, optimistically telling us everything is OK… the 2008-9 banking crises are over and the economy is struggling ahead. The danger has passed.
Arch Crawford is using objective planetary alignment as the basis of his advice. But, other astrologers are observing the same data and coming to other conclusions. Because of his stellar track record, many of Crawford’s followers have sold all their stocks.
And, of course, the G8 economic leaders are using objective economic data to formulate their Don’t Worry, Be Happy hypothesis. And because of the prestige and authority accorded to theses elite officials, many business owners and managers are forging ahead with their investments.
What should we do?
In my investment book, Beyond the Bull, I warn investors not to be bamboozled by economic bullmanship. Don’t react to some salesman’s persuasive economic forecast. By its very nature, investment advice is biased. The giver of the advice is always trying to persuade you to do something. Arch Crawford is urging his subscribers to sell out of the stock market. The G8 leaders are telling us it’s OK to borrow and spend again. And because it’s persuasive, financial advice can never be totally objective. This truth is at the very core of what the stock market is: it’s about thousands of salesmen trying to persuade millions of customers to buy or sell something. Stock market advice is never objective data: it’s all persuasive.
This fact, once thoroughly understood, will make the difference between your long term success or failure as an investor.
Most investors like to stay informed about the financial world and formulate a plan based on the advice of those they trust. This is not a correct way for you to manage your financial affairs. It results in confusion and low long term financial returns.
There are good investment advisers and there are bad ones. Even the best don’t get it right every time. It’s a percentage business: a certain percentage of the advice will work and a certain percentage will not work. Our problem as individual investors is knowing whose advice to follow and when to follow it.
Question: How can we obtain objective investment advice?
Answer: Look for it.
Most investors are not looking for investment information. Most are passively tuned in to the never-ending stories of profit and doom in the financial world. Most are simply being entertained by the financial press. If only we would exchange our love of financial news stories for a need for objective data; we would change our investment world. We would go from the world of salesman’s stories to the world of the financial survivor.
It’s like the difference between the mother who listens to all the breakfast cereal ads on kids’ television and buys a box of brightly colored candy-cereal and the health-conscious mother who studies nutrition and helps her children make their breakfast from scratch. It’s a different way of looking at your world. It takes work to live in a different world.
What world do you want to live in? A recently published study was released by the Canadian investment firm, Gluskin Sheff: it ranked the best and worst performing American investment assets over the past 10 years. Gold was the best performer at 33%. Bonds were 11%. The American stock market lost money over the past ten years; -2.3%. The higher the percentage of gold in your portfolio, the better your ten year performance. The higher the percentage of stocks, the worse ten year performance. The study also ranked investment real estate, corporate debentures and cash. Most of us would have wanted to own the top performers and not the bottom. Why didn’t we? Because we chose the entertaining world of the stock market. Because we have a trusting relationship with someone who also lives in the world of the stock market. We mimicked the mother who watched kids-TV and bought the candy-cereal.
Even if there is no catastrophic event this summer, we should follow Arch Crawford’s advice anyway. Maybe we should just sell our stocks and re-plan our approach to the investment paradigm. Maybe it’s time to look for another way to think about investing.
And to those readers who have good exposure to the bond market and to gold, congratulations: welcome to my world.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
The stock market can be confusing at times.
For example, eminent market timer and financial astrologer, Arch Crawford, has been writing about a catastrophic event that will occur at the end of this month. Before you balk at the notion of a financial astrologer, understand that Crawford is one of the few investment advisers who correctly predicted the 1987 stock market crash and has received the prestigious stock market Timer of the Year award on several occasions. He is warning of an historic tragic event at the end of July, beginning of August 2010.
On the other hand, we see our G8 economic leaders cautiously, optimistically telling us everything is OK… the 2008-9 banking crises are over and the economy is struggling ahead. The danger has passed.
Arch Crawford is using objective planetary alignment as the basis of his advice. But, other astrologers are observing the same data and coming to other conclusions. Because of his stellar track record, many of Crawford’s followers have sold all their stocks.
And, of course, the G8 economic leaders are using objective economic data to formulate their Don’t Worry, Be Happy hypothesis. And because of the prestige and authority accorded to theses elite officials, many business owners and managers are forging ahead with their investments.
What should we do?
In my investment book, Beyond the Bull, I warn investors not to be bamboozled by economic bullmanship. Don’t react to some salesman’s persuasive economic forecast. By its very nature, investment advice is biased. The giver of the advice is always trying to persuade you to do something. Arch Crawford is urging his subscribers to sell out of the stock market. The G8 leaders are telling us it’s OK to borrow and spend again. And because it’s persuasive, financial advice can never be totally objective. This truth is at the very core of what the stock market is: it’s about thousands of salesmen trying to persuade millions of customers to buy or sell something. Stock market advice is never objective data: it’s all persuasive.
This fact, once thoroughly understood, will make the difference between your long term success or failure as an investor.
Most investors like to stay informed about the financial world and formulate a plan based on the advice of those they trust. This is not a correct way for you to manage your financial affairs. It results in confusion and low long term financial returns.
There are good investment advisers and there are bad ones. Even the best don’t get it right every time. It’s a percentage business: a certain percentage of the advice will work and a certain percentage will not work. Our problem as individual investors is knowing whose advice to follow and when to follow it.
Question: How can we obtain objective investment advice?
Answer: Look for it.
Most investors are not looking for investment information. Most are passively tuned in to the never-ending stories of profit and doom in the financial world. Most are simply being entertained by the financial press. If only we would exchange our love of financial news stories for a need for objective data; we would change our investment world. We would go from the world of salesman’s stories to the world of the financial survivor.
It’s like the difference between the mother who listens to all the breakfast cereal ads on kids’ television and buys a box of brightly colored candy-cereal and the health-conscious mother who studies nutrition and helps her children make their breakfast from scratch. It’s a different way of looking at your world. It takes work to live in a different world.
What world do you want to live in? A recently published study was released by the Canadian investment firm, Gluskin Sheff: it ranked the best and worst performing American investment assets over the past 10 years. Gold was the best performer at 33%. Bonds were 11%. The American stock market lost money over the past ten years; -2.3%. The higher the percentage of gold in your portfolio, the better your ten year performance. The higher the percentage of stocks, the worse ten year performance. The study also ranked investment real estate, corporate debentures and cash. Most of us would have wanted to own the top performers and not the bottom. Why didn’t we? Because we chose the entertaining world of the stock market. Because we have a trusting relationship with someone who also lives in the world of the stock market. We mimicked the mother who watched kids-TV and bought the candy-cereal.
Even if there is no catastrophic event this summer, we should follow Arch Crawford’s advice anyway. Maybe we should just sell our stocks and re-plan our approach to the investment paradigm. Maybe it’s time to look for another way to think about investing.
And to those readers who have good exposure to the bond market and to gold, congratulations: welcome to my world.
To order your copy of Beyond the Bull and the Five Levels of Investor Consciousness CD, or to sign up for Ken’s free monthly webinar, visit www.gobeyondthebull.com (Bullmanship Code = SS32).
Contact Ken directly at ken@castlemoore.com.
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