Posted on 03/17/2009 2:38:26 PM PDT by SeekAndFind
You can't be a successful investor unless you can overcome your fears. So what's bothering you? Maybe, after reading one too many stories about investigations of Ponzi schemes, you are fearful that your entire portfolio may have been embezzled. Huge and scary! Yet I've seen nothing addressing this well and simply. There is one foolproof, easy way to be sure this never, ever happens to you.
If you hire anyone to make investment decisions for you, be sure it, he or she is separate from whoever has custody of your money. That's it. Have your assets held at a major-name custodian such as Schwab, Merrill Lynch, Fidelity, ubs or the like. Have someone else nonconnected make decisions about what to buy and sell. End of embezzlement story.
Every story ever about faked accounts, including those involving Bernard Madoff and Allen Stanford (who, by the way, has been the subject only of a civil fraud complaint), combines custody with decision making. Once the portfolio manager has custody he can take the money out the back door. Some set up this way to embezzle. Others start out honest but later fall to the temptation to exaggerate their returns. Separating the two functions is a prophylactic. Without some grand collusion between the two firms, embezzlement is impossible.
Note that even when Lehman failed completely, those who had securities custodied there were fine. Yes, doing this means some types of commingled investments like hedge funds may be harder to do or impossible. But if you set up this way, you will never be Madoffed.
The other fear these days is that of falling stock prices. This is not an irrational fear; stocks that are off 50% from their highs (and a lot are, at this point) can keep falling.
(Excerpt) Read more at forbes.com ...
I have to add that Ken Fisher is a perpetual bull.
He says that you can temper your fear by realizing that low prices make stocks less risky, not more risky. Unless there has been a corresponding collapse in its business, a company whose $50 shares are now at $25 is less risky for the investor. That’s how he see’s things.
Fisher also thinks that the next bull market will be led by stocks in the energy, materials, industrial supply and consumer discretionary sectors.
You can do even better if you have a system of choosing entry points where the probability of a successful trade is better than 50%—but again, only if you know what to do after you've entered the position, and what size position to use.
Key fact: What matters most is a) having a trading system that fully controls your trading, so that your emotions no longer are in control, and b) the expectancy of your trading system (which is not at all the same thing as the probability of success of each trade you take—a profitable trading system can be constructed even when the probability of any one trade making a profit is relatively small.)
Want to know more? Here's a book that explains in great detail why the above is all true, and will also show you how to actually use that knowledge to be a successful trader: Trade Your Way to Financial Freedom.
And you can lose great amounts of money in this market. How many Trillions have been lost? Where did it go? When people made Trillions of $, where did it go? All worthless paper into poof poof land.
I’ve lost enough money, thank you anyway....
There is usually a good reason to be afraid of something. Sometimes that fear can be healthy. I can think of more than once when fear (or respect for the potential consequences in a certain situation) has kept me alive.
By taking trades designed to make money over different time scales, by making proper use of both long and short positions, and by using a trading system with positive expectancy, you can make money in any market conditions. Failing to do those things will lose you money—in any market conditions.
Most traders lose money, regardless of market conditions. That's a fact. The question no stock broker wants to hear is "Where are all the customers' yachts?"
Here's an example of his perspicacity, from the February 26, 2007 issue of Forbes: “For months now the debate has been over whether America will have a hard landing or soft landing, the answer hinging on how big 2007’s housing disaster turns out to be. Well, there won’t be any housing disaster. We won’t have a landing at all, soft or hard. Right now the U.S. and global economies are both accelerating.”
In that same article he touted three homebuilders (Pulte, Toll Brothers, and Beazer, trading at $34, $34, and $44, respectively). A year later Pulte was down by more than half, Toll by a third, and Beazer by 75%.
He does know that Obama won, doesn't he. The Obama-Pelosi side show is the corresponding collapse that has knocked an extra 20% or so off prices, and it's hard to convince myself that prices are done falling.
As much as I hope that Obama will party like it's 1999 and never again come out for those socialist pronouncements that hurt our economy or even to sign Pelosi's socialist bills, I'm not willing to be that we'll be so lucky.
The biggest Ponzi scheme in world history is Socialist Security. it’s a gigantic, unconstitutional fraud. It takes my money and pays it out to someone else. Without new suckers, the old suckers would not get paid. No one even has an account balance, just a promise to pay which can be changed at will by our Socialist Congress and White House. There is no trust fund, just a stack of IOU’s - more public debt.
Everyone should have the right to opt out of SS and receive a lump sum payment which would be the total of all employee and employer “contributions” plus interest over the years, less any retirement funds already received. Most younger people (under 50) would take the money and run, reinvesting it privately, which in turn would Really Stimulate the economy.
Socialist Security should be terminated -— closed to any new participants (i.e., Suckers). Let those who want to stay with it do so, until they are all Gone. Unfunded liabilities probably total $3 trillion, but hey, what’s a little more debt? /S
But, but, but, I SURE I heard something about a lockbox .................
Yeah, funny isn’t it? The “lockbox” is a file cabinet filled with a few trillion dollars in IOU’s. Madoff is a small time operator compared to the U.S. Government. Congress thinks we are all stupid, and they may be right.
all I will say is, it’s not there....
Agreed, but another step is needed. Current obligations need to be phased out over time based on a two step system that qualifies years to retirement and specific need.
Regarding specific need - social security, a social safety net, has, in my opinion, value. Personally, I have no problem kicking into the collective kitty to help people with a debilitating disease that removes their ability to be gainfully employed, no matter how much they want to.
Bias note - I have a bias regarding this. My father was diagnosed with MS at about age 35. He worked until he just physically couldn't anymore and his employer helped him stay on board every step of the way. But, when you can no longer walk or type, the options for value get slim quick.
I do want to help people like my dad live a reasonable life.
Also in that group needs to be existing retirees that depend on SS. Not dealing with the promise made to these folks is immoral, even if none of us paying made the decision.
The other group, the not yet retired, well they have to be part of the solution. Depending on your age your SS returns need to be diminished on a gradual scale with all non-specific need returns eliminated within 20 years.
This would require a phased reduction in benefits and for the youngest of the too be retired in 20 years a decision as to whether they will do more to secure their own retirement income or plan on working past SS target retirement dates.
Personally, outside of specific need issues, I'm not a fan of SS period. All of my retirement planning zero's out that option. Additionally, since there were promises made, I believe there is a responsibility to keep those promises, but no reason to continue extending them.
As one of those poor suckers who got a fixed rate mortgage on a house that he could afford, I am willing to pay my part into a system to pay off my predecessors debt. I want to do that for moral reasons and for the simple fact that there isn't anything such as a free lunch so it has just got to be don. But, I want an end point at which I can claim the "mortgage" paid.
I have 37 years until I hit SS retirement age. I will commit to using those 37 years to fix a problem if for no other reason than helping my children avoid having to fix a bigger one later.
If by invest he’s referring to the stock market...NO WAY...not with the Marxist in Chief attempting to destroy the US economy.
What do you do when the embezzler is the Federal government and they take the money out the back door through inflation?
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