If you haven't heard, there's an economic crisis afoot. It's the worst in seven, eighteen, twenty-five or forty-four years, depending on what panicked commentator is making the relevant pronouncement. But what they're not saying, or rather, what I'm not hearing, is that this "disaster" is entirely man-made and as such can be un-made by men. Those "men" being I, you and us.
I do some investing in the stock market. How I make money is by timing my trades so that I buy at a low price and sell at a higher price, accounting for the commission I pay along. For instance, I'm actively trading in a stock that had a high price a year ago of about $10. Today, its market price is between $1.00 and $1.70. The price has only a little to do with what the stock is worth, mind you. That some poor sucker (and that might be your 401K fund manager if you're not a self-directed investor) paid ten bucks for the stock at some point is too bad, but not my problem. Every time I buy 3000 shares at $1.10 and sell at $1.30, which has happened every day for the past few, I make $600. Did you get that? If I had more money to leverage, I could quit my job - tomorrow - which would give me more time to make more trades on smaller moves and make even more green.
Yes, I have some "blue chips" - higher priced stocks in companies that have more financial "strength," but that strength is illusory. One stock I recommended to friends dropped in lock-step with the market. Of course, that makes sense. The idea is to trade on small moves,more frequently, which means one has to be acutely aware of what's going on in the world of business since that directly affects what happens to one's money.
Too much work, you say? Is it too much work to make sure you don't leave your wallet on the counter at McDonalds' after picking up your Big Mac and fries? Of course not. Same principle applies. And, just like holding on to your wallet, there's no magic to it, none at all.
"But my 401K is worth one-fifth of what it was last year!" That's right, it is and it's up to you to fix it. You can decide what investments your 401K represents and if you can't, CHANGE YOUR BROKER because that's your money! There are a bunch of funds that short the indexes, that means that they count on the market, or certain sectors of the market, going down and they have made sh*tpiles in the last few months. They are betting on failure and winning. Personally, I like to bet on volatility, an element that is in plentiful supply.
One of my favorite benchmark stocks, Heinz (ticker HNZ,) is probably one of the most stable stocks you can own. Brokers that try to get new clients may offer a stock like HNZ because they know it's safe and it shows the potential mark, er, client, that their money is safe with that broker. After a half-dollar move, the broker will call and get the new client to sell the stock and try to get the client to move his cash to an issue that the broker's firm is trying to move, perhaps because they've IPO'ed it or underwritten it or because they have a big institutional client with millions of shares of the stock who wants to make some money by forcing a move up. "It's going to move up," says the broker who's forbidden to trade on insider info, so, how the hell can he guarantee that? Ask him. "The news points to it." Any seasoned trader will tell you to never trade on news of any kind because it's already too late. "The fundamentals are sound." So are Heinz's, so why move? "They're about to break out. There's a (new drug about to get FDA approval; a new way to mine oil from the foreheads of teenage boys; a laser-operated bread slicing machine that just about to be patented - pick one as they're all silly since whatever the company does it first has to make the profit before its valuation will increase on the books.)" So, I might ask, what we have here is a pump-and-dump, meaning you're pumping up the sale of this stock and when the price point it met for your insidiously manipulative large client, they'll be dumping the stock and interest will evaporate, meaning, what, that I'll be wiped out, basically. Right? Click.
Brokers are salespeople. If they don't buy or sell stock for you, they don't make money. I trade on-line, so I take the responsibility for making my investment decisions. This means that last week, I made $3800 - and I lost $1800, so I netted two grand. And I know what mistakes I made and I won't be repeating them. My principal is intact, that is, my cash is safe and my profit is safe. The information is all out there, all you have to do is use a little common sense and do some studying. People have to eat, use fuel and buy stuff. It's like a gigantic food chain and the individual investor has the power, if you will, to figure it out. Heck, if blue-haired old ladies running an investment club in Ohio can grow $12K into a million, so can you.
What else can you do, as a charter member of this horrible crisis, do? Be more frugal. Be like Warren Buffet, who, though he is a billionaire many times over, still brown-bags it, lives in the same house he bought in 1950 and drives a 13-year-old car (just like me, I might add.) Don't routinely buy your morning coffee at two bucks a cup - brew it at home and take it with you in a reusable car-cup, at about 30 cents a cup. That's 200 times $1.70, or $340. Take your lunch to work - $2.50 versus $6.00 (or more) and save $700 a year. You see, I've built in some lee-way to account for those days when you just want to treat yourself - go for it! Get basic cable instead of the Full Golden Passport Mega Deluxe package and save another $550 a year. So far, we're up to $1590 - sounds like a rent or mortgage payment to me. WAIT for clothing sales and really, do you need 40 tops? Really? Do you think anyone cares? If you insist on designer fashion, great, so do I, but I shop at Marshall's and routinely find $100 Polo button-downs for $20. A cheap price for a quality product that will last me a long time and look cool. Ladies - go to the nail salon every OTHER week and do you own nails every other week. You'll save at least $650 a year. Go to WalMart (though I hate them, really, I do) and buy there what's not on sale elsewhere. Shop at three supermarkets if you can and get the bargains from each as supermarkets rarely run sales on the same items at the same time. Buy generic items if you can - notice, I didn't say "when appropriate." Generic ibuprofen is no less effective than the name brand and costs half. ShopRite peas are just as pea-ey as that big green guy's. Clip coupons - there are tons of coupon-clipping websites and blog, some of which run competitions to see who can fill their grocery basket for the least amount of money. At one site, the leader had bought $200 worth of groceries for $38. They printed the receipt.
Again, it's your money.
Next, don't believe everything you hear. Both media and finance wonks love turmoil. China launched a 580 billion dollar stimulus package and the markets went DOWN on Monday. WTF? Why? Because for Wall Street or Bond Street or Tokyo, it is never enough. Never. The government could have hand-crafted golden sailboats for the billionaire bankers that got bailed out and there still would have been moaning about the quality of the toilet paper in the pave diamond coated head (that's bathroom in nautical-speak.) The whole idea is more in the business of speculation. More movement, more money, more news, more, more, more. It translates to activity, which translates to opportunity, which means money. And that's what they make - money. In fact, J.P. Morgan, the original dude, not the bank, was once asked if he knew what was going to happen in the market that day and he said, "It will fluctuate." He also said, "The wise man bridges the gap by laying out the path by means of which he can get from where he is to where he wants to go." Well, duh! Plainly said, JP!
So, that's a little of what you can do. I guess we should just sit back and wait for things to get better, right? Wrong! Now's the time to apply as much pressure as possible to your representatives in Washington to make some changes and yes, folks, that will mean new taxes. Oh, listen, it's your choice . . . pay some more green out of your measly check and get this country back into the running or spend your retirement living in a cardboard shanty town. This isn't my idea, by the way, but that of our (hopefully illustrious) new leader, Mr. Obama. In the last week alone, he's met with top money guys (and they really like him, it seems) called on the current congress to consider a significant stimulus package (he's right there - anything small will only get saved and not spent, thus doing nothing except creating new debt for the good ol' US of A) and Monday called on W to move his ass on helping the car companies, pronto. You, too can apply pressure and you do have the time, please, stop bulsh*tting me.
It's in our hands, folks. It always was and it always will be. If you think it has nothing to do with you, then the mind-control experts on Wall Street have indeed won. It's been time to take back America for, oh, I don't know, probably about 25 years or so. So get off your Internet-surfin', ultimate-fighting-championship-watchin', pork-rind-eatin' butt and lend a hand. If you don't, someone will, at the most opportune time for him, simply bite it off. Ouchies!