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Boiler Room 7/17/00

Aug 23

Posted by admin in Investing, Stocks Mutual Funds

On Friday or Saturday evening my wife gets a movie from Block Buster and after dinner we sit, hold hands and watch. This week she brought back one that I think every investor or anyone contemplating investing in the market should see. It is called \”Boiler Room\”.

How many times have you been called out of the blue by some no-name broker who wants to make you rich provided you buy shares in this great new issue or some stock that is just about to \”take off\”.

Usually they start off with do I remember he called me 6 months ago and recommended so-and-so issue that is currently in the news because it has gone up 100 or 200%. He did not make that call and if he had I am sure I would not remember it. Also the name of his firm is one I never heard of, but it sounds very legitimate and he might even say they are affiliated with Chase Manhattan Bank or some other big bank. They might have their checking account with that institution, but otherwise they have no connection with them. Now he has another recommendation that is going to do even better that that one. Yes, and pigs can fly!

If you haven\’t done so yet don\’t let him go any further. Hang up. Oh, I know you can\’t because your mother taught you it is rude to hang up on people. Please, this time DON\’T listen to your mother. He will try to get you into a conversation by asking simple questions that must be answered with a \”Yes\”. Stop listening. If you can\’t bring yourself to hang up then put the phone down and walk away. In 10 minutes he will be gone to call another sucker.

There really are boiler rooms out there selling worthless securities and everything they do is 100% within the law and 100% immoral. How do I know this? I used to own a brokerage firm and I received monthly reports from the regulatory agencies outlining charges against these shady dealers. Fortunately, I did not have those problems as I would not allow hype to open accounts.

The things being told on the phone are usually too good to be true and that is a fact. Do yourself a favor and rent that movie. Not all brokerage firms are like this, but remember my basic rule.

NEVER SEND MONEY TO A VOICE ON THE PHONE.

Al Thomas\’ book, \”If It Doesn\’t Go Up, Don\’t Buy
It!\” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he\’s the man that Wall Street
does not want you to know.

Copyright 2005

Writen By : Al Thomas

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Is The Bear In The Cage?

Aug 23

Posted by admin in Investing, Stocks Mutual Funds

For the last few weeks we have seen the stock market averages going higher and higher each week yet the economic news is still very bad. Is this bear market coming to an end? Will the stock prices and mutual funds go back up to where they were?

It seems all the talking heads on TV and the talk radio guys are telling you that now is the time to buy because the market will be much higher next year. \”You can\’t afford to not be in the market\” is the cry. They have lots of reasons that sound good, but almost none of them will hold water upon close analysis.

The one thing that I hear is that the market is now \”fairly valued\”. Now the S

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Mutual Fund Ball And Chain

Aug 23

Posted by admin in Investing, Stocks Mutual Funds

The broker told me not to sell because the mutual fund I owned had a 2% redemption fee and they would penalize me if I did.

I got to thinking about it and did some simple math to see what that would cost me if I sold. Several months ago I bought $5,000 of the fund. Fortunately, it was a no-load so I was not charged any commission. It seems that the brokerage house has instituted this fee for the sole purpose of dissuading me from ever selling it.

Now I could sell it for $5,500 and make a nice $500 profit in the last 3 months. Their charge of 2% would be $110. In other words they were charging me 22% of my profit which you can easily figure as $110/$500. That\’s a long way from 2%. What a rip. My net was now $390.

More and more brokerage companies and mutual funds are adding redemption fees. No-load mutual funds are adding the fees even when you have an account with the fund family. Why? The fund managers are paid their 6-figure salaries not on how much profit they make for you but on the amount of money they have under management. He can generate big money for himself while you lose.

The whole idea of the mutual fund was to have a professional manager make money for you yet last year more than 95% of stock mutual funds lost money. It is pretty obvious you don\’t need this guy to mangle your cash.

In the future before you purchase any fund ask the broker of there is any kind of redemption fee. If there is then find another fund and/or another broker. Discount brokers are the best because their brokers are not allowed to give you advice. You will find that advice from a broker is a eulogy for your money.

Redemption fees are like a ball and chain on your ability to make money. Any professional trader (and I was a floor trader for 17 years) will tell you that a small loss is OK, but never allow yourself to have a large loss. Excess fees are put on by brokerage companies and funds to keep you from selling out of a losing position. The broker does not make any money if your cash sits in a money market account so he will do everything legally possible to keep you from selling.

Buy and Hold might be OK for long-term bull markets, but during the current long-term bear market you should be able to sell without adding injury to insult. Redemption fees are a method to intimidate the investor from selling out a losing position. Don\’t buy anything that comes with a ball and chain.

Al Thomas\’ book, \”If It Doesn\’t Go Up, Don\’t Buy
It!\” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he\’s the man that Wall Street
does not want you to know.

Copyright 2005

Writen By : Al Thomas

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Bargain Basement – Finding Stocks That Go Up

Aug 23

Posted by admin in Investing, Stocks Mutual Funds

Have you been listening to the talking heads on CNBC-TV? Or those talk radio stock experts? Getting all those good recommendations on what to buy now. Now?

Those guys keep telling me the market is oversold. It can\’t go any lower. (But it does.) I bet your broker has some hot tips for you too. Advice from a broker is a eulogy for your money. I don\’t think he has told you about the one position you should have in your account right now. It\’s a nasty four letter word to him – CASH. In a money market fund it will make you about 5%, maybe 6% and that is better than the bloodletting going on in the market.

There is an old saying – \”When in doubt, get out\”. And right now everything is in doubt. The \”experts\” are confused as one says \’recession\’, another says \’hard landing\’, another \’soft landing\’, \’buy\’, and no one says \’sell\’. That last word is a \’no-no\’ on Wall Street. Less than 3% of all brokerage recommendations are sells. They are afraid they will offend the company and won\’t be able to talk to the CEO any more. Hey, what about us customers out here? We are the ones who are paying the bills.

Garrett van Wagoner of the Van Wagoner family of funds said he follows 5,200 Nasdaq stocks and that more than 1,000 of them have lost 90% of their value and 200 have dropped over 99% in value. Yes, he says there are some great values out there, but he doesn\’t say which ones or when to buy. I\’d like to ask him if he was smart enough to sell some of those puppies before they hit bottom.

The stock market mavens think they are market makers, but they are more like weather meteorologists who predict but cannot manipulate the weather. When the weatherman is wrong you get wet. When the stock experts are wrong you get soaked.

As I have said in past columns there is no hope that Nasdaq will go back to the 5000 level for many, many years. Ten years would be my closest guess. There are too many stocks being held by investors who are waiting for a rally up so they can get out \”even\”. This kind of thinking keeps you poor. Your money is tied up in a stock that will never perform when it could be some place else making you a profit. There is always some dummy out there who will buy your garbage.

We are having a bargain basement sale now in the stock market. Most of it is something no one wants. Ever been to a garage sale? Can their junk be your treasure? There will be plenty of time to buy, but now is not the time to go shopping.

Al Thomas\’ book, \”If It Doesn\’t Go Up, Don\’t Buy
It!\” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he\’s the man that Wall Street
does not want you to know.

Copyright 2005

Writen By : Al Thomas

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401K-itis

Aug 23

Posted by admin in Investing, Stocks Mutual Funds

Are you one of those many people who dread reading their 401K statements? You have been watching it decline for about 2 years and are wondering if will ever stop. Just about everyone says the market will come back. Brokers say you are in for the long haul so don\’t worry. Any account that drops to a 50% loss has to go up 100% to get \”even\” and that is a very difficult phenomenon. If you have an 80% loss as has already occurred in the Nasdaq you would need a 400% rally to get \”even\”. At 90% you have to see a 900% rise to that mythical \”even\”.

Buy and Hold has been preached so long and so loudly that everyone believes it. As Adolph Hitler said when you tell a lie tell a big one. Wall Street has been screaming this one down the throats of investors for so long it has become conventional wisdom. Look at your 401K today and compare it to 2 years ago and tell me you believe in Buy and Hold. Common sense will not allow it.

Every broker has been taught that market timing doesn\’t work. Yes, they teach them that and they have been good students. The problem is they have had a bad teacher. Within the funds you now own the fund managers buy and SELL many times during the year because there is a time to sell. Selling is the key to successful stock market investing.

A friend mine came to me with his wife\’s 401K from United Airlines. It is composed of 8 Fidelity mutual funds. The employee can pick any one or more. Since the first of the year six of the eight are down from 3% to 27% (average 10.77%) and the other two were up an average of 3%. The two that are up are fixed income funds otherwise known as bond funds. If you have a 401K, IRA or SEP or almost any mutual funds the only place to preserve your capital during this secular bear market is in a bond fund – a no-load bond fund. Do NOT pay commission for these. And there are many of them.

For years Wall Street has condemned those of us who use market timing. Well, you can call me what you want, but I will have my money when the Buy and Holders are broke.

Stock mutual funds do not work in a long-term bear market. Mutual funds, as we have known them for the past 20 years, are dead. You now have only two choices within your retirement account for your money – a bond fund or a plain money market account. Don\’t cry that you will only make 5% on your money. Think about the 20% to 40% you will not lose. According to Lipper 99% of U.S. equity funds lost money in the second quarter. I have been telling investors for years – cash is a position.

Enronitis broke thousands of people because they would not (could not) sell as the stock broke down. Don\’t let 401K-itis break you.

Al Thomas\’ book, \”If It Doesn\’t Go Up, Don\’t Buy
It!\” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he\’s the man that Wall Street
does not want you to know.

Copyright 2005

Writen By : Al Thomas

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What Does It Take To Be A Stock Trader?

Aug 23

Posted by admin in Investing, Stocks Mutual Funds

It takes a total mental commitment to the task. It becomes a complete way of life. You cannot be a part timer. You cannot work at a regular job and trade stocks successfully.

When you decide to make your living this way you must be willing to work
365 days a year, 7 days each week, 24 hours every day with no time off. I
know.

How do I know? As an exchange member for 17 years and a floor trader
I can personally tell you there is no time off. Never. Almost every waking
moment is given to thinking about your current positions. Where should I
sell? Should I move my stop up a little more? There are 3 more trades I\’d
like to make, but I need to save some extra cash in case I need it for a
margin call. It is hard to pass up a trade that looks as good as XYZ, but I
have to maintain my trading discipline. And so much more.

These are just a few of the thoughts that run through your head. You
are constantly being torn by the natural enemies of fear and greed, yet you
must hold your equilibrium to try to make dispassionate decisions. The first
law of trading is to protect your capital so that any single trade will not have
you going home broke.

If you are working a regular job or you own a business you cannot be
a trader. One or the other or both of these pursuits will suffer. When I
owned my brokerage company I did not make one single trade for 8 years
because I understood the commitment necessary to be a successful trader.

Why am I telling you all this? Because I don\’t want you to lose your
money in the market as so many people do and I especially don\’t want you to
think you can be a day trader. You can still make money in the market and
beat 90% of the Wall Street experts. Here\’s how.

First you must learn that you CAN time the market even though your
broker and all those \”experts\” will tell you that you can\’t. There are
several good timing advisory services that you may subscribe to or you can
develop you own method.

Second, don\’t believe all that horsewash about research. That is
Wall Street smoke and mirrors. Don\’t try to pick individual stocks. Stick to
no-load mutual funds with a discount broker and buy only the best performing
funds during the past 6 and 12 months. When they quit being in the top 1%
sell them and find new ones that are going up.

There isn\’t enough space here to give you the details, but I want you to
realize that you can safely make plenty of money in the market without
devoting 365/7/24.

Al Thomas\’ book, \”If It Doesn\’t Go Up, Don\’t Buy
It!\” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he\’s the man that Wall Street
does not want you to know.

Copyright 2005

Writen By : Al Thomas

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Acapulco – The Stock Market Dives

Aug 23

Posted by admin in Investing, Stocks Mutual Funds

There is a famous cliff on the ocean in Acapulco where experienced divers jump into the sea. It is very dangerous because the water at the base of the cliff surges from a depth of 2 feet to 12 feet. The diver must time his leap so the water is at the greatest depth when he enters or he could easily be killed as many novices before him have been. Timing is the key.

This reminds me of the stock market where timing is also the key to wealth or poverty.

The ocean waves surge in and out against the cliff in short cycles. The tide moves in and out in longer cycles and is very predictable. When you look at Nature you will see there are relatively predictable cycles everywhere. We see day become night, the changes of the seasons and birth to death of our own bodies. Some changes are so microscopically small we cannot see them and others are so long we are not aware they are taking place. Everything has a season or a cycle. It is up to us to be able recognize it and use it to our advantage.

People ask why did the stock market go up (down) today? These short moves can usually be laid to some recent event. Then there are longer surges and regressions of months or a few years. We have bull markets and bear markets that seem to have historical cycles that last decades. These latter cycles run for about 16 to 18 years and move similar to the surges of the sea against the Acapulco cliff. A knowledgeable market timer will buy when the water is out (stocks look their worst) and hit the ocean (sell) as the surge is at its highest.

The ability to do this is NOT guess work. It is an understanding that cycles apply equally as well to the stock market as they do to the forces of Nature. Unfortunately, the principles to learn this very simple technique are not taught in college. Most must learn the method in the school of hard knocks. It can be very expensive.

In our recent bull market from 1982 to 2000 we had one of the predictable long cycles. The mindset of the public has become so hardened to the bull concept that they (and almost all brokers) have forgotten that each up surge is followed by a down surge of approximate equal length. This is not very comforting to current owners of stocks and mutual funds, but once they realize it they can do the prudent thing to protect their money – sell. Then they can buy U.S. Treasury bonds and wait for the next bull market to arrive. It is not very exciting to be in cash, but it is much better than seeing your money slowly disappearing before your eyes.

You must learn entry and exit of the stock market just as the divers in Acapulco have learned the correct moment to jump off the cliff.

Al Thomas\’ book, \”If It Doesn\’t Go Up, Don\’t Buy
It!\” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he\’s the man that Wall Street
does not want you to know.

Copyright 2005

Writen By : Al Thomas

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