Archive for June, 2006

No doubt the housing market has stalled. If it wasn’t willed by media and the public with all the talk of a housing bubble then maybe the interest rates rising has something to do with it.

The National Association of Realtors has reported that homes for sale jumped in April by 37 percent. That means there’s a huge supply. With rising interest rates, a lower demand is here, and the prices will have to come down to match the supply. It’s economics.

In markets that were previously the mecca of real estate investing like Phoenix, Arizona, where previously homes would stay on the market on average for 7 days has gone to 60 days. Still 2 months is a quick time for most, but an almost 1000% increase from previous times on market means the housing market has to be slowing.

Markets like Boston, where time on market was reported at 52 days previously has only gone to 58 days so it seems as though there is also a resettling of the market from its two poles, no time and long time on the market.

The Federal Reserve raised the interest rate to 5.25 %, the highest it’s been in 5 years on Thursday after the end of a two day meeting in Washington.

Fed Chairman Ben Bernanke and other policymakers talked about the need to raise interests rates this time around to fend off the continued inflation that is occurring in the US economy. They also hinted the more interest rates hikes might be needed to fend off still more inflation over the next year.

This news came and gave the DOW a sizeable boost in early morning trading and ended the day up over 215 points, with the NASDAQ following suit at up 62 points. Gold and silver were both up as well on news of interest rates increases from the fed, trading on these commodities continues worldwide throughout the day and night.

Short Selling is the opposite of buying long. When you buy long, or what has turned into just buying shares, you buy for the long term, usually above the actual value of the stock in the thought that the value of the company will increase over time and increase the value of your long term position in the stock.

Short selling is the bet you can make that the price of the stock will go down. Usually this transaction is made when buying long gets out of hand based on speculation rather than investing and the price of the stock is way over the actual value of the company on a per share basis.

Selling short comes in three steps but is done now a days with one step through online brokerage firms, so you can do it with the click of a button. The three steps to selling short are:

1. First what you do is you borrow shares from someone who already owns the security. So you essentially loan the shares from someone who already owns the shares.

2. You then sell the shares to someone immediately for some market price. Usually whatever the current market price is. This sets the price you need to eventually buy the shares back below so you can actually profit from the whole process.

3. Finally when you want to get out of the short sell you need to buy the shares back at some other market price and then fill out the loan you took in step one. If the price is lower than what you sold the shares in step 2 then you make money. If you buy the shares back at a higher price you lost money. You essentially took the loan on the shares for a price and then payed your loan back with those same shares for less.

It should be simple to follow but if not feel free to contact me or leave a comment and I’ll try and explain another way.

Just remember your trying to have the stock go down, you want it to loose. When it looses in a short sell, you win. People who saw the internet bubble of 1999 ready to burst due to stocks that had no chance of making money in the future sold short and more than likely made a small mint. Stocks went from $600 down to pennies in a matter of weeks. That’s a quick million.

But be warned, selling short is risky business. You’re taking a loan out on stock that you don’t have and you can loose a lot of money if the price of the stock goes up.

How do you overcome the rise in gas, the rise in prices at the supermarket, and the shrinking of your pocketbook. You can do a lot of things related to living below your means but what are they and how can they really help.

Yahoo Finance just posted an article called 10 Ways to Save $500, revealing 10 ways that you can save money doing little things everyday. The 10 things they write about are.

1. Drive Less
2. Bring your own stimulant
3. Conserve Energy
4. Dig gardening
5. Go small or pet-free
6. Don’t flush money down the commode
7. Limit media
8. Sign up for tax-advantaged plans at work
9. Eat in
10. Don’t bank on it

Head over to their article to read about the ways you can save money every day.

For some their home is and will be their largest “asset” they own or will ever own. Knowing the value of you home can be key to knowing what type of credit is available to you. Often finding the value of your home is really, really, really, tough and you’ll end up paying an appraiser or a real estate agent to value your home compared to those homes around you.

Now you don’t have to look any further, call twenty realtors, or get an appraiser out to your how. Zillow.com is the latest in what web 2.0 has to offer to the world and can help you learn the value of your house as well as the houses around you. The value of your house is critical to determining your equity. Equity is what the present value of your house is minus the remaining mortgage loan you have, if you have one at all!

Zillow.com goes above and beyond what normal MLS listings do if you are able to get those. Zillow puts what are called comps or comparables right at your fingertips, something only real estate agents used to have access to. Comps can help you pin point what the value of your home is based on those around you and those that have sold in your area that a similar or comparable to your home.

If you’re looking to move to another location and don’t know where to begin looking, the newspaper can be a horrendous place to start looking. All those daunting prices. Go to Zillow put in the neighborhood your thinking about moving into and presto, Zillow will tell you all about it.

Square footage, year built, bedrooms, bathrooms, land area, improvements, etc, etc. Some areas are covered more than others but they are expanding their reach every day. Give them a try and check out what your homes value is.

Bill Gates, founder and chairman of Microsoft, Inc (MSFT), has built the ultimate business system. For those of you wanting financial freedom take note.

As junior at Harvard University he and childhood friend took a an already developed technology and built it into the world’s number 1 operating system. Number 1 by a long shot, over 99% of computers worldwide run the Windows operating system in one form or another (or something like that statistic). He then got people to work for him, went public with his company, figured out how to ingrain the Windows system on every computer, and has been the richest man in the world (according to Forbes) for the last 12 consecutive years.

Now after 20 years Bill Gates will be removing himself from the day to day duties of Microsoft to attend to some of his other passions. Family and philanthropy. At 50 years old Gates not only has one of the most powerful companies in the world, is the richest person in the world, he also runs, with his wife Melinda Gates, the worlds biggest charity foundation. The William and Melinda Gates Foundation.

Although he will remain chairman of Microsoft he will continue to allow financial matters to be handled by fellow Harvard Classmate and CEO Steve Ballmer and will slowly allow Ray Ozzie to take over chief software architect. The shift is said to bring in a new mind with Ozzie that will allow the company to transition out of the desktop software industry and into the online arena. Bill Gates will wait out the release of Windows Vista and Microsoft Office 2007 and stay on to help ease the transition until 2008. Also heading up the research and strategy arena will be Craig Mundie.

Gates has made it clear that these three people. Ballmer, Ozzie, and Mundie are fully capable of taking Microsoft to the next level and increasing the value of MSFT for its shareholders.

Commodities are down, stocks are down, the housing market is down. Sell, Sell, Sell!? Wrong. Don’t jump on the bandwagon of sellers and get rid of everything you have just because it’s the in thing to do.

The stock market, although driven in the long term mainly by financial facts like earnings and earnings growth in the short term it’s driven by nothing but emotions. If the chairman sounds like he’s speaking gibberish, the “investors” sell. They don’t know what it means so why not panic and get rid of your stocks until the market comes back around. Then buy.

Sure you could do this, but by the time you know it’s time to sell, it’s probably too late. Unless you can predict what Bernanke is going to say we suggest sticking with the stocks you have. Now of course if you have a lemon don’t hold onto a lemon. But if you know you’re stock, or mutual fund, or commodity is strong and shows room for growth and earnings potential then why sell?

This brings us to the point that you need to know how to analyze financials and have a good idea as to what the long term outlook of that particular asset is going to be. Once you can do this you’ll be welcoming down markets. You’ll want Microsoft stock to get buried and be there to buy buy buy, so long as you can assure yourself that market emotions are to blame for the drop in stock price and not financial outlook.

To do this you have to be able to weed through the emotionally backed news articles and get to the financial articles. We use MSFT as an example because there are a lot of articles out there shooting down the stock because of the delay in launching vista. Is this delay going to cause IBM, dell, and other PC manufacturers to bundle Linux rather than Microsoft with their computers. Probably not. (NOTE: please take this as only an example and not financial advice, please consult a financial adviser as to what stocks to buy and sell).

Our point is, when the markets go down there are deals to be had. Please educate yourself as to what emotions drive prices you’ll be better off in the financial long run.

Gold dips back below $600 for the first time in over a month. Silver is following suit dropping back below $11 an ounce. Both are current spot price via the London exchange.

For those of you following precious metals you may want to check out The Bullion Desk. They have great news and great quotes to allow you to follow all the precious metals indexes from all the markets all over the world.

Hopefully your money comes originally from a certified mint. But seriously, how do you earn most of your income? Is it from a job, stock earnings, selling things on eBay, trust fund, charity, a business? Where?

If you are at all familiar with the Rich Dad series of books then you know about his Cashflow Quadrant. It simply breaks down a persons earnings into four groups; employment, small business, business, or investments. People, one way or another earn their income from one of these four.

Have you ever stopped to think about where your money comes from? If you haven’t chances are you are working way too hard for your money. People who are employed obviously work hard for their money. They may invest, have a 401K (which doesn’t earn you income for a while), maybe play the stock market on the side, have some CDs that barely beat inflation, but they work really really hard for their money. People in small businesses feel a sense of ownership and independence and likewise play the stock market through small portfolio’s and retirement funds, but 9 times out of 10, work harder than those who are just employees. These are the people who want to do it on their own and feel pride when the job is done right, by them.

That’s all great, being an employee is what builds a nation and keeps the economy strong, but don’t you want to have fun in the sun and get out of the 9 to 5? That’s what people who own businesses do and invest for a living. People who own a business own the system that the business runs on, they aren’t the system as in a small business. They would rather have a bunch of teenagers run the shop and make money for them than run it themselves (just look at who runs McDonald’s, that’s a great system.)

Investors truly invest. They don’t tell others what to invest in (some might), they aren’t personal finance managers. They invest to win and they invest to get rich. They learn how to play markets and make money just like you probably went to school to learn how to program computers. You are comfortable programming, they’re comfortable risking money to make money.

The true difference is one of those pairs has something or someone working for them while the others work hard for themselves. When you start having others work for you, you have time to come up with more ideas to make more money and the rock just keeps rolling down the hill. Making more money.

Sit down in the near future and really think about where your money comes from. You may not have to think too hard. Once you find out where your money comes from we can begin to help you grow money in other places. Like having money work for you through true investing. That’s the best and easiest way to make money. You could be sipping Mai Tai’s while your little greenbacks work extra hard to increase and finance your wealth.

The market is going down no matter how bad you want to deny it. Commodities are selling of, gold in particular, stocks are moving back below 11,000 and the housing market is seeing it’s share of downturn. Most people who look at this type of market see nothing but bad news and want to get all their money in a savings account ASAP.

Those people are also the people who think investing is risky and buy a lot of poster child mutual funds. People can win in a down market, and most of those people are the rich. Not because they’re rich, but because they know what to invest in. They’ve learned over the years, taught themselves, taken their blows and can now come out smelling like roses no matter what way the market turns. The trick they have is they took the time to learn how to invest and took the risk out of investing in an up or down market.

You’re probably now saying, “But I don’t have time to learn to invest in all those rich investments.” Well you’re reading this and probably 20 other blogs and financial advisement sites out there so I say bully to you. The problem is you may not know where to look or what to look for. It’s a big deal sifting through all the crap that’s out there especially on the internet but we’re going to give you a couple places to start looking.

First off, we find Yahoo Finance to be a great resource. On their homepage they usually have featured articles from investing guru’s like David Bach, Suze Orman, and Robert Kiyosaki. Start here and begin searching the archives for articles about what to do when the market goes south. We found this article to be a helpful starter, are looking for, DEALS. Some stocks are dropping based just on speculation and investors (aka gamblers and speculators) worries. Look for the deals and look for stocks that are slowly becoming great deals.