Stock Market vs. Las Vegas

Over the years I have realized there are a lot of commonalities between investing in the stock market and gambling in Vegas.  I believe there are a select group in both games that actually understand probabilities and how companies work that can do reasonably do well.  But for the rest of us who aren’t willing to spend the time and money that it takes to get to that level, well it’s all just gambling.  I decided to put together a list of common terms from both worlds that seem to match up pretty well.

 

Aggregate Limit – Total payout liability of a casino during any one game.

Growth Cap-with indexed life, in years where the underlying index increases, the policy cash value is increased up to a certain limit usually called the growth cap.  Awesome, When the market actually does go up I can only receive so much.

 

Aggregate Winnings – Cumulative or total winnings.

A chief executive officer of a Standard & Poor’s 500 company was paid, on average, $10.9 million in total compensation in 2008, according to final data from The Corporate Library.

 

All-in (Also known as “Going All-In”) – In card room poker, to call with (to bet) all your chips. If another player bets more chips than you have in a No Limit game, you can go All-in and stake your total stack against an equal amount of your opponent’s stack.

401k contribution- Max out…get the match.

 

Arm – A term used in the game of craps to denote a player who is so skilled at throwing the dice that they are able to alter the conventional odds of the game. Such a player is said to be ‘an arm’. Whether or not such individuals actually exist or are simply the product of game legend is debatable. However, it is worth noting that the casino craps dealers are very adamant about the dice being thrown against the far wall of the table to ensure a completely random outcome.

Daytrader- your neighbor who claims he is up 100% every week, but can’t contribute to your kids soccer team because time are tough??

 

Automat Club – Also known as Videomat Casino, Arcade Casino, Slot Hall, is a gambling hall that offers automatic games that do not require a casino operator. Examples: slot/video machines, electronic touch-bet roulette, electronic Derby horse racing, etc.

Day Trading Software-when my screen turns GREEN time to buy, When it turns RED time to sell.  Sounds like a game I played as a kid but never actually lost money when I kept going on a red light. 

 

Baccarat -Table game using 6 or 8 decks of cards which does not require skill.

 Asset allocation- involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash.  That seemed to be a great strategy (negative returns) for the last decade. 

 

Bankroll - Also known as ‘roll’ or ‘wad’ (colloquial). It pertains to the total money that either the player or the casino has on hand to back their wagering activities. A player’s bankroll can be classified as existing on several different levels. At the highest level it pertains to all money specifically set aside to support all gambling activities.

Majority of most peoples assets- Most Americans biggest asset next to their house is their qualified plans(invested in the market).

 

Barred – Same as Banned. Not allowed to enter the casino premises permanently.

Bernard Lawrence “Bernie” Madoff- Plus some of your neighbors that you thought to be honest..

 

Beginners Luck – In gambling, new players often are on a winning streak when they start gambling. Also known as the “Honeymoon Period”.

1990′s Investors-bummer for those who started in the last ten years.

 

Betting Limits – In a table game, the minimum and maximum amounts of money that a player can wager on one bet. You cannot wager less than the minimum or more than the maximum amount posted. Some casinos, in special cases, may extend the maximum limit at a table on request by the player.

401k Max Contributions-If you are over 50 they let you try to catch-up.  Great you will be able to lose even more money!

 

Blind Bet – In poker, a bet posted without the player sees any of his/her cards.

Mutual Fund Purchase-You could close your eyes and get the same outcome.  After you lose 50% you can open them to let the tears flow.

 

Break-Even Point – The break-even point is the point at which if you played forever, the bets you made would approximately equal the payoffs you would receive.

Retirement Age-Hopefully you break even by then.  But if not, I would call Dave Ramsey and tell him that his strategy didn’t work and you want him to hire you and make sure you demand a signing bonus!

 

Brick - A card that appears not to help a player’s poker hand. A ‘blank’ in 7-card stud poker.

Broker – is the person who earns commission by being a third-party link between buyers and sellers.  Maybe we could call them “Brick Brokers”

 

Call - In Poker, to call is to match the current bet.

Match-It’s a 100% return!  I don’t think the market cares whether it loses your money or the match. 

 

Camouflage – Anything a skilled gambler does to conceal their activities from the casino. Camouflage can include mixing in playing and betting behavior that mimics typical gamblers, or using disguises, appearing to be drunk, or any number of other possible ploys intended to throw the casino’s scrutiny off.

Financial Planner-They make you think that you are getting a non-bias recommendation and forget to mention they get paid commissions on the products they sell to you.  The most common ploy to make you think they know what they are talking about is to make sure you know they are an M.B.A. by telling you in non-direct ways like having it on there wall and sometimes even putting it all over their marketing material and business cards.

 

Caribbean Stud Poker – Also called ‘Casino Stud Poker’, A casino table game based on the standard 5-card stud poker game played on a Blackjack-type table. Some casinos also offer a progressive jackpot paid to high ranking hands. This table game is played with one deck of cards.

Offshore Investing-either on could be fun if you went to the Caribbean!

 

Casino Rate – A reduced hotel-room rate (price) that the casinos offer to good customers.

I wish-Why don’t mutual fund companies set me up in a hotel every time I lose money? 

 

Chase – Having lost money on a bet, ‘chasing’ is having another bet simply to try and get back the loss.

 Dollar Cost Averaging -is a timing strategy of investing equal dollar amounts regularly and periodically over specific time periods (such as $100 monthly) in a particular investment or portfolio. .

 

Coat-tail – Bet the same numbers as someone who is winning at the moment.

Hot Stock-Just turn on the T.V. and you can find a tip. 

 

Cold – A player on a losing streak, or a slot machine that is not paying out.

Investor-let’s see I think 10 years would be considered a losing streak and that darn stock market machine. 

 

Cracking The Nut – Making enough money on a gambling venture to cover all expenses plus a reasonable net profit.

Not You-I wonder how many actually have done this in the last decade?

 

Craps – Casino dice table-game.

Craps- What you say when you have to admit to yourself that the stock market hasn’t worked.

That is the end of my list.  I hope you enjoyed it and would love to hear some of your comparisons.

Do I walk away?

Should I walk from my mortgage is a very common question right now.  People are wondering about the moral ethics behind walking away from a loan.  I have my thoughts about it.  I found this article on His blog.  He has a very interesting take on this situation.

This article is written by a guy named Mike Shedlock.

Businesses Advised To Walk Away

Before exploring legal advice being given to banks about walking away, let’s review one more time the Moral Obligations Of Walking Away.

In a nutshell I made a case that “business is business” and yes, I encourage people to walk away now if they are going to be forced to do it later anyway. I also encourage people to walk away if they are hugely underwater on their homes.

Banks knowingly and willingly gave homeowners a free PUT option when they financed homes at zero percent down. It’s just a business decision. Businesses break contracts all the time.

In the “moral Obligations” post I also claimed there would be a national referendum on walking away. A few days later an ABC Poll showed that US citizens decided that walking away from Iraq was the single most important thing we could do economically for the country.

The masses have finally caught on and that is one reason why I declared Obama: The Next President Of The United States.

Walking Away Retail Style

In Does The Shopping Center Economic Model Work? we took a look at trends in retail. Consider what Rob Plaza, Senior Equity Analyst for retail stocks at Zacks Investment Research said two days ago:

“Some companies are closing stores to increase profitability, some are doing it just to stay alive. A lot of retailers already had their plans for 2008 laid out, had already invested in signed leases, ground-breakings, pre-opening, etc, so they couldn’t just stop those new stores on a dime. Looking back on that, they’re going to wish they had just walked away and paid whatever it would have cost them to stop the process. ….. For the next decade, retailers are not going to have to open a brand new store because there’s going to be so many empty ones that need to be filled.”

The interesting thing from the morality standpoint is that some stores are walking away, not to stay in business but to increase profitability. Others wished they walked away right during construction to say costs. Are such decisions morality issues or business decisions?

Wilson’s Leather Walks Away From 160 Stores

“Sandi”, one of my readers, sent me a note this morning that Wilsons Leather will close up to 160 mall locations.

Wilsons The Leather Experts Inc. will close the majority of its 260 mall locations and cut more than 1,000 jobs, the clothing retailer said Friday.

Wilsons will keep 100 stores open, revamping them under a “Studio” concept focused on fashion accessories for women. All stores should be remodeled by August.

About 938 store-related jobs and 64 positions at the company’s corporate headquarters, overseas offices and distribution center in Brooklyn Park, Minn., will be cut.

Clearly Wilson’s Leather had contractual agreements on all those leases. Is there a morality issue here when they just walk away like that?

Banks advised to walk away from big deals

Today, the Financial Times is reporting Banks advised to walk away from big deals.

Leading banks are being advised that it would be cheaper to walk away from big buy-out deals than incur further losses on their funding commitments, increasing the chances that more high-profile private equity transactions will collapse.

This advice from lawyers contrasts with the conventional wisdom that banks would risk serious damage to their reputations if they were to drop out of deals.

But legal advisers argue that the break-up fees banks would owe in such cases would be far lower than the write-downs they would have to make on their loans, given the current cataclysmic conditions in the capital markets.

“It is the tipping point argument,” said a senior partner at one of the biggest private equity firms, who asked not to be named. “The banks have so many issues with their balance sheets that they are considering a new policy.”

Oh! The Morality!

Note the irony. Numerous programs are being put into place in an attempt by banks and mortgage holders to encourage home owners to stay debt slaves forever, while lawyers are advising banks to walk away from contracts and pay the penalty of loss of reputation.

Exactly how does this differ from homeowners choosing to walk away from their obligations with a price of “loss in reputation” otherwise known as a black mark on their credit score?

Here’s the answer: There is no difference, and that is precisely why all these programs to keep homeowners in their homes when it is a bad economic decision for them to stay, will fail.

“It is the tipping point argument,” said a senior partner at one of the biggest private equity firms, who asked not to be named said Mish, who was willing to be named. “The banks Consumers have so many issues with their balance sheets that they are considering a new policy.”

If it’s in your best interest to walk, and you are willing to pay the penalty price, then walk.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Suze Orman or Crazy Joe?

Have you ever seen the cartoon Shark Tales?  There is a deranged hermit crab that normally lives in a dumpster.  He all of the sudden decided to become Oscars financial advisor.  Oscar is an underachieving worker in the Whalewash of Reef City. He wants to be rich, but his schemes always fail and he owes five thousand clams to Sykes (a loan shark).  My favorite line in the movie was at the end when everyone was coming clean from there little lies…Crazy Joe: remorsefully said “And I’m not a real financial advisor!”

I get this question from people all of the time.  “What do you think about Suze Orman’s advice?”  I have many answers.  Here is an interview that was done back in 2007 with Her.  It was an article that I mentioned to people to check out.  So I’ll just post it here so it’s easier to find.  I will throw in a few of my comments on the content.

The New York Times

February 25, 2007

Questions for Suze Orman

She’s So Money

Interview By DEBORAH SOLOMON

Q: As one of the most widely read financial gurus of our time, why would you write a book like “Women and Money,” which is based on the regressive premise that women are birdbrains when it comes to managing money? I would think women are better at saving than men. No, they save and then they give it to their best friends, who need it. They give it to their children, who need it. They give it all away once they’ve saved it.

Isn’t that admirable? That depends on what it leaves them with. It’s not admirable when it leaves them with nothing. I want to change women from savers to investors. Why then is most of Her money in the form of a saver? I do think eventually they should all have Roth I.R.A.’s. You don’t want an I.R.A. You want a Roth I.R.A., if you qualify.  Why should all women have a Roth IRA?  That is a blanket statement that many financial advisors make.  Where is the proof?

I know. I read the book. Did you like it?

I found it a little basic. I can’t believe you thought it was simplistic. You are in denial. For instance, do you have a will and a living revocable trust in place?

No. Oh, my God! Actuarially speaking, your husband will die before you. That’s actuarially speaking. Your husband, let’s say, has just died. You now are by yourself. You have a stroke. You’re totally incapacitated. It’s reality. It happens. Who is going to be able to write your bills for you and take care of the money you have?

Do we have to decide this right now? Girlfriend, you don’t have a healthy relationship with yourself or your money. You put yourself on sale. You have shame, and you have blame. You view money differently because you are a woman.  What does that even mean?

Is this what feminism has bestowed upon women? The right to berate other women? Women don’t understand money. They will go into debt to pay for this and that.

Are you married? I’m in a relationship with life.  HUH??? My life is just out there. I’m on the road every day. I love my life.

Meaning what? Do you live with anyone? K.T. is my life partner. K.T. stands for Kathy Travis. We’re going on seven years. I have never been with a man in my whole life. I’m still a 55-year-old virgin.

Would you like to get married to K.T.? Yes. Absolutely. Both of us have millions of dollars in our name. It’s killing me that upon my death, K.T. is going to lose 50 percent of everything I have to estate taxes. Or vice versa.  Good Planning!

How much are you worth these days? One journalist estimated my liquid net worth at $25 million. That’s pretty close. My houses are worth another $7 million.  I wonder what it is today?

What are your qualifications for giving financial advice, which you do in your books, your column in Oprah’s magazine and your CNBC television show? For seven years after college, I was a waitress at the Buttercup Bakery in Berkeley, and from there I got a job at Merrill Lynch as an account executive, from where I went to vice president of investments for Prudential-Bache Securities. I started my own firm in 1987.  AND?

Do you enjoy spending money? Oh, yes. My greatest pleasure is still flying private. I spend between $300,000 to $500,000, depending on my year, on flying private.  Nothing against spending money but this ist he person giving you advice.  Most people taking her advice are not even close to being in the same position as her.

What do you do with the rest of your money? Save it and build it in municipal bonds. I buy zero-coupon municipal bonds, and all the bonds I buy are triple-A-rated and insured so that even if the city goes under, I get my money. Sounds like the same advice she gives right? I take a little lower interest rate to make sure my bonds are 100 percent safe and sound.  I understand that she tells everyone else to stick it in mutual funds.

Do you play the stock market at all? I have a million dollars in the stock market, because if I lose a million dollars, I don’t personally care.  This makes me laugh.  She doesn’t even live what she teaches.  She talks about it like its gambling, yet she tells us to plan our futures on it getting a 12% return?

We need to really beware of who we take our advice from.  Let’s stop basing it on emotions and hype and start looking at the facts.

Why are we so selfish?

Here is a letter written to the young members of congress.  I think we need to start thinking of future generations and how all of this government spending will effect them.  There are a lot of short-term fixes that will for sure cause some major long-term problems.  Please read this and tell others to get educated on the government and how it spends more than it brings in.

http://www.concordcoalition.org/files/uploaded-pdfs/YES_letter_to_Congress_2_09.pdf

The Truth About Life Insurance By Dave Ramsey.

Here is an article I ran across when I was searching the term “Life Insurance” on google.  Dave Ramsey is considered to be a financial guru by a lot of people.  He seems to focus on getting out of debt.  He has a plan called “The Total Money Makeover.”  I have decided to add my comments to this article in the color RED.  This is not to talk bad about the author.  I am referring to Ideas and to Traditional thinking.

Here it is.  Enjoy!

The Truth About Life Insurance

Myth: Cash value life insurance, like whole life, will help me retire wealthy.  What is “wealthy”?
Truth: Cash value life insurance is one of the worst financial products available.  This is a very strong statement that I have never had anyone prove to me with facts that it has any validity.  This is what I call a Sound-Byte (something is said so many times we just decide it’s true).  Is he saying that losing half of my mutual funds in one year is better then a Guaranteed growth, liquidity and preservation of principle in a whole life policy?

Sadly, over 70% of the life insurance policies sold today are cash value policies. Another interesting statistic is that less than 1% of all term policies industry wide actually pay out. Why?  People are outliving them and letting them lapse. A cash value policy is an insurance product that packages insurance and savings together. Do not invest money in life insurance; the returns are HORRIBLE.  There are a few people who would probably disagree such as a guy named Walt Disney.  A few others might also disagree… James Cash Penny… Doris Christopher… Ray Kroc.  All of these ultra successful people all borrowed against their whole life policies to either start their huge companies or to keep them going during hard times.  The growth inside of a whole life policy is not limited the Internal rate of return.  Because it is easily accessible and doesn’t go backwards…You get to determine your return. Your insurance person will show you wonderful projections, but none of these policies perform as projected.   If we are talking about perfomance and projections…we should then talk about the fact that This guru projects out peoples mutual fund at 12% (“ANSWER: No, don’t do that. Certificate of deposits are not a secure investment. They average about 4% and that’s also the inflation rate. By the time you pay taxes, you’ll lose money. Get away from your broker if they are giving you information like this. Invest in good growth stock mutual funds that average about 12 percent. Put it in growth, growth and income, balanced and international.”)????  By the way in a whole life policy there is a guarantee column next to the projected column on the ledger.

Example of Cash Value

If a 30-year-old man has $100 per month to spend on life insurance and shops the top 5 cash value companies, he will find he can purchase an average of $125,000 in insurance for his family.  The pitch is to get a policy that will build up savings for retirement, which is what a cash value policy does. However, if this same guy purchases 20-year-level term insurance with coverage of $125,000, the cost will be only $7 per month, not $100.

WOW! If he goes with the cash value option, the other $93 per month should be in savings, right? Well, not really; you see, there are expenses.

Expenses? How much?

All of the $93 per month disappears in commissions and expenses for the first 3 years.  Depends on how the policy was built. After that, the return will average 2.6% per year for whole life, 4.2% for universal life, and 7.4% for the new-and-improved variable life policy that includes mutual funds, according to Consumer Federation of America, Kiplinger’s Personal Finance, and Fortune magazines.  The same mutual funds outside of the policy average 12%.  There it is again.

The Hidden Catch

Worse yet, with whole life and universal life, the savings you finally build up after being ripped off for years Wow strong words again.  It seems like to me that if I bought that term policy for 20 years and didn’t die then I lost the monthly premium plus what I could have earned on it in something else.  You will never re-coop that money.  That seems to be a huge rip off. don’t go to your family upon your death.  The only benefit paid to your family is the face value of the policy, the $125,000 in our example.  If you use this strategy you won’t get your face value either.  All you have is your mutual fund account and all the fees and taxes that go along with it.  I would bet that everyone who has used this strategy and died today would have a far larger tax free inheritance then what is left in their 401k and IRA…Oh and what about the taxes?

The truth is that you would be better off to get the $7 term policy and and put the extra $93 in a cookie jar! At least after 3 years you would have $3,000, and when you died your family would get your savings.  UMM?

A Better Plan

If you follow my Total Money Makeover plan, you will begin investing well. What does well mean? Then, when you are 57 years old and the kids are grown and gone, the house is paid for, and you have $700,000 in mutual funds, We will have that? you’ll become self-insured. That means when your 20-year term is up, you shouldn’t need No one needs life insurance.  It is a want. life insurance at all – because with no kids to feed, no house payment, and $700,000, your spouse will just have to suffer through if you die without insurance.

Don’t do cash value insurance! Buy term and invest the difference.  Once again I don’t see any proof of this statement.  When we are only given half of the story…we can’t make sound life decisions.  I am not a guru…just a person who wants to see all of these gurus that Americans trust and do what they say…give us full-disclosure on these major decisions.

People who read this also checked out:

• The Truth About Debt
• The Truth About Debt Consolidation
• The Truth About Debt Management
• The Truth About Credit Card Debt
• The Truth About Debt Help
• The Truth About Debt Reduction
• The Truth About Bankruptcy
• The Truth About Budgeting
• The Truth About Teens and Credit Cards
• The Truth About Money and Relationships
• The Truth About Debt and Relationships

This content is provided by DaveRamsey.com and may be used only in its entirety with all links included. Dave Ramsey is changing the face of America by helping people understand life insurance and get on the path to being debt free.

Ask The Expert. Umm?

Here is an article written by By Walter Updegrave, Money Magazine senior editor.  I want to point out some of the flaws in traditional thinking.  As I add my comments to this article I want to give my disclaimer…My comments are not aimed at the writer or the magazine.  I don’t know him.  My aim is at traditional thinking and ideologies.  The article will be in black and my comments will be in red.

Do you want to be your own banker?

Buying an ‘infinite banking’ life insurance policy may not be the best way to build long-term wealth for retirement.

By Walter Updegrave, Money Magazine senior editor

December 30, 2008: 12:27 PM ET

NEW YORK (Money) — Question: An adviser has been telling me about a concept that he calls “infinite banking.” Apparently, it involves using a life insurance policy to become my own banker. It seems like a good idea, but something doesn’t seem quite right to me. Do I have cause for concern? – Matt, St. Louis, Missouri

Answer: This concept that your adviser is touting has nothing to do with banking, It has everything to do with banking…you are doing the same thing banks do which is turn your money over and over and capture interest on loans. at least not in the sense that any normal person thinks of it.  Is normal person thinking what has gotten everyone in the position they are in i.e. 401k’s down 50% and foreclosures out of control. And the only thing “infinite” about it, in my opinion,  Opinions are the problem with all the advice that has been given over the last 30 years.  Why don’t we find out the facts when making life decisions. is that it represents yet another in the seemingly infinite number of ways people can come up with to induce you to invest in life insurance.  I guess new ideas are out of the question since all of the traditional ones have done so well.

Now, I want to be clear. I have nothing against life insurance. Virtually everyone who has family members depending on him or her for their livelihood should have a life insurance policy,  No one needs life insurance…it’s a want. as it’s the only financial product that can replace income when a breadwinner dies.

I think the best way for the overwhelming majority of people to get the valuable protection life insurance affords is through a low-cost term insurance policy, Has anybody ever stopped to prove to you that it’s the best way to get protection? although in some circumstances other types of policies can also make sense.

The downside

What I do object to, however, is advisers employing mumbo-jumbo and financial sleight of hand to convince people that they should be plowing money into certain types of life insurance policies when they’re likely better off in more conventional investments or simply funding regular old retirement plans like 401(k)s and IRAs.  If funding a 401k instead is better then why don’t we just go to Vegas and put it all on red…at least you could have free drinks.  It seems like “mumbo-jumbo to tell someone to keep funneling money into a stock market that just lost 40-50% of it’s value and there is no end in sight.

When you strip away the gibberish surrounding pitches like infinite banking,  How about Dollar Cost Averaging, Diversification, Asset Allocation and Buy Term and Invest the Difference.  Everyone of these “pitches” have FAILED. it basically comes down to this: You should invest in cash-value life insurance because it pays dividends Remember to state Non-Guaranteed Dividends (which aren’t taxed as long as they remain within the policy) and you can borrow against the policy. Somehow, these dividends and the ability to borrow are supposed to make you a banker. Right.  If the homework would have been done before this statement it would have been found that those thing are not what makes you a banker.

At its core, this spiel is similar to other questionable life insurance sales tactics I’ve written about, such as the “7702 (a) Private Plan” pitch, which essentially couches life insurance policies as an IRS-approved retirement plan.  Do your homework on these policies.

I don’t know what, if any, specifics this adviser discussed with you. But what these sorts of sales presentations tend to gloss over are the high costs of investing via life insurance The truth is that as a long term strategy term insurance is the most expensive way to buy life insurance…If you don’t die during the specified time period then you have wasted all of those premiums plus what you could have done with them somewhere else and the fact that borrowing from a policy can have serious downsides.  If not managed correctly.  I would say it’s a lot cheaper then losing 40% of my retirement account.(See more on those drawbacks.)

To be honest, I don’t think this sort of proposal is worth a lot of serious consideration. Obviously there was not much serious effort put into research before writing this article. But if you’re sufficiently intrigued by it and the adviser has given you concrete figures and projections, you can always hire a financial planner on an hourly fee basis to do an independent analysis.  The same financial planner that told me to max out my 401k and fund my Roth IRA.  The same one who told me that Assett Allocation will keep my money going up even when the markets down.  The one who told me I would have enough to retire at a certain age and then 2008 happened. The same one that projected out my future using a 12% return because that was the average and the market will always be on an upward trend. The one who told me to save for my kids education in mutual funds. I would say that I don’t think I would spend any money on planning that has been proven not to work.

Lower life insurance costs

Ultimately, I think what you’ll find is that your best shot at building long-term wealth for retirement and your overall financial security is to keep your life insurance costs down by buying a term policy. That will free up more money that you can then contribute to tax-advantaged retirement accounts like 401(k)s and IRAs (preferably investing that money in low-cost investments like those on our Money 70 list of recommended mutual funds and ETFs).  Thats interesting that after  beating up a legit strategy that was not fairly looked into…There is a reccomendation to buy specific mutual funds HMM?  If you look hard enough you will find that there is always some financial motivation to peoples advice.

So the next time this or any other adviser starts telling you he’s going to let you in on some little-known and unique strategy that will put you on the road to riches, just remember: There is no magical path to financial success. There are, however, an infinite number of ways you can get hurt looking for one.  Or maybe we could start thinking for ourselves instead of others doing the thinking for us.

Who is David Walker?

Here is a 30 minute version of I.O.U.S.A.

Every American should watch this.  It is time to stop turning our heads to the problems we are heading for.

Demographic Changes or Buy The Right Stock?

In 3000 days, about two-thirds of the now-working population will be 60 years old or older.  We know this with certainty.  That only leaves one-third of the now-working population to pay for all of the government social programs like medicaid, medicare and social security.

Let’s ask a few questions about our future.

What about money flowing into the stock market?  If you take a look at the history of the market you would see that it is like a teeter-totter.  It goes up then down over and over.  From 1980 to 2000 there were only 4 negative years…Strange?  What could have caused that?  Maybe it could have been that 401ks were introduced in the early 80′s and the baby boomers were throwing a lot of money into them.  So what about the next 10 years?  There will be more money coming out of 401ks than going in due to retiring baby boomers.  So could the market go the opposite way in the future?

Haven’t we always been taught to start selling our stocks and going into cash as we get closer to retirement?  How might that then affect the stock market?

What about all the baby boomers selling their 5,000 square foot homes to down size into condos?  How could that affect the real estate market?

There are a lot of things we should consider about the future changes of our demographics.

We should get away from traditional thinking i.e. (Buy the right stock at the right time.)  We need to realize that the biggest impact of our financial futures will be the changing demographics on our country.

Here is an interesting news clip about the aging population…

http://cosmos.bcst.yahoo.com/up/player/popup/?rn=3906861&cl=10749765&ch=4226723&src=news

Mr. SEC, Can I Loan Money To My Brother?

I can’t believe it…oh wait YES I can.

Have you heard of these Peer-to-Peer lending websites?  You can go onto the sites and loan money to other individuals.  In return you will charge them interest on the loan.  You are able to choose to whom and how much you loan.  It is a great idea.  It allows the regular Joe to get involved in private lending.  On these sites you can loan just a portion of what the person is asking for so you don’t have to take on the full risk of that one loan.

Some people might say that sounds risky to lend like that and so they just keep funding their 401k and other stock market related accounts.  I guess what that means is the stock market is less risky then private lending ( According to who?).  Have you watched your stock portfolios pay you 15% interest year after year?  How about those 401ks?

The SEC is now stepping in to tell these companies they need to be registered as a security (surprise surprise).  Is it because they want to save the consumer from a massive pitfall?  One reason might be that it can cost these companies anywhere from $250,000 to $1 Million dollars to register.  Sounds like financial motivation to me.

Sometimes I wonder if people with financial motivation will always mess with good things that come around.  And I am referring to legit business models.

Here are a few of the sites that I am aware of.  I have 0 financial motivation to introduce these sites and am not responsible if you lose money.

http://www.prosper.com

http://www.lendingclub.com/home.action

Here is a good article on the subject.

http://www.nuwireinvestor.com/articles/p2p-loans-may-be-classified-as-securities-51813.aspx

Foreclosure…New Tax Consequences

New Publication From IRS on Foreclosures.

If you or anyone you know is facing foreclosure…Pass this on

Unfortunately foreclosure is very real to many people right now.

Click here to read…

http://www.irs.gov/pub/irs-pdf/p4681.pdf