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Author Topic:   How do you make money?
Cap'n Vic
Geek Larva

Posts: 23
From: Yukon
Registered: Jun 2002

posted June 28, 2002 15:25     Click Here to See the Profile for Cap'n Vic   Click Here to Email Cap'n Vic     Edit/Delete Message   Reply w/Quote
I have some money in AGF funds in a educational plan for my son, well this fund is taking a shit kicking, I bought in at $43 per share and it has been on a steady decline since then (january) Now with WorldCom going down the tubes I checked today and it is down $14 for this time last year!!!!!

I don't want to start selling dope or set up a porn site so does anyone know any legit ways of getting a good return on investments?

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I used to work at a factory where they made fire hydrants; but you couldn't park anywhere near the place.

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Alien Investor
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Posts: 419
From: New York City
Registered: Jan 2000

posted June 28, 2002 23:04     Click Here to See the Profile for Alien Investor   Click Here to Email Alien Investor     Edit/Delete Message   Reply w/Quote
I could write a ton on this subject. I work as a programmer about 6 months out of the year, and play the stock market professionally the other six months. "Professionally" means that I pay the rent out of what I wrest from the market.

Literally, "how do I make money" in this market? A lot of short selling in tech names, some long positions in retail (COST, HD, TJX, TGT, stuff like that), plus some momentum trading in QQQ indexes. That's me. I don't recommend this for other people, unless you can devote 30+ hours per week to your trading.

The first issue is: how long before you need to spend the money. If you have more than 3 years, then the stock market is (usually) the place to be. If you have 1-3 years, it's a tossup -- part stocks, part guaranteed (bonds, CD's, whatever). If you have less than 1 year to go, then you should not be in the market.

My first advice is to look at this allocation again and decide what percentage you want to be in stock and what percentage in fixed income.

The next issue is dealing with the loss. This is a matter of investor psychology. Most people, when they hear the words "investor psychology", think of it as a way to figure out the other guy's psychology so that they can fake them out. There is a grain of truth to this. It's much more important, however, to figure out your own psychology and deal with your own emotions. If you don't know who you are: the stock market is an expensive place to find out.

I deal with losses by accepting that I am imperfect and error-prone. Some of my trades are going to lose money. This is normal. This is okay. When I close a position at a loss, that just means I have to make more money somewhere else to cover it. And yeah it hurts and tears me up every time this happens. It's like a baseball player who has to cope with striking out -- every ball player strikes out sometimes, none of them enjoy it, all of them accept it.

The point of this mental exercise is to escape from a powerful and detrimental mind trap. The trap is: when an investor closes a losing position, it's an acknowledgement of failure. People go around thinking "okay, I messed up, I bought INTC at $48, and now INTC is at $30. If I sell, I'm admitting I'm a loser. But if I hold the INTC, there's a chance that it will go back up, and I can postpone the recognition that I'm a schmuck."

These are the people who ride tech stocks down from their March 2000 highs for years before they capitulate and sell.

I handle this by marking the position to market in my head. In this example (which is, embarrassingly, true), when I bought the INTC at $48 and rode it down to $30, I'm already a schmuck and a loser to the tune of $18 per share. Even if INTC comes back, then I'm just an $18 loser plus an $18 winner. It's a subtle point, but it's essential for my mental equilibrium so that I can make the decision rationally whether to keep the INTC or blow it out. No matter what I do -- I'm already a loser -- so I can relax and focus on the future without being locked into this "the only way to not lose is to hold the position and hope" mindset.

Hope is a form of fear.

Once I'm in that frame of mind, I can decide whether INTC is likely to come up from there, and I can comfortably sell at $30, which I did.

So ... my second advice is to get yourself into that frame of mind where all your past losses are in the past, so that you can make a rational decision about whether your fund is likely to go up in the future or not. If you decide that it's not, then you can pull the trigger and put in that "sell" order.

Now, where's the stock market going to go next? I don't know. I thought the American markets were going to have a massive drop this week on the Worldcom news. They did not. I was wrong, and I lost money because of that. So my crystal ball feels cloudy.

I do believe we are not out of the tech wreck yet, though. I recommend running away from stocks of companies with high price/revenue ratio (price/revenue over 5) and/or high price/earnings ratio (price/earnings over 50). You didn't say which AGF fund you are invested in. AGF has about 30 or 40 funds. If your AGF fund is oriented towards "growth" or "technology", then I'd recommend switching to a different AGF fund.

Keep in mind that the fund manager cannot change their investing style. If the fund's charter says that they invest in computer companies, then they are going to buy computer companies, not retail companies or drug companies or oil companies. It's your responsibility to choose the style you want and switch to a different fund when you want a different style.

Hope this helps!

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Erbo
Super Geek

Posts: 178
From: Denver, CO, US
Registered: Jan 2000

posted July 01, 2002 11:54     Click Here to See the Profile for Erbo   Click Here to Email Erbo     Edit/Delete Message   Reply w/Quote
By now it's becoming increasingly obvious: The stock market is a mug's game.

First Enron, then Tyco, then WorldCom, then Xerox, now maybe Qwest...how many more time bombs are there out there? And just how much money did the executives of those companies spirit away?

You can't depend on the "professional analysts," because they're on the take. You can't even appeal to the SEC for help, because they're on the take, too.

It's going to take something along the lines of the failure of a major financial institution before anybody does anything substantive to clean up the stock market. Of course, when that happens, we'll really be in the shitter.

For the last year or so, I've been trying to forget everything I ever learned about how the stock market works. You might as well buy Powerball tickets; at least they're honest. (And more fun besides...)

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Alien Investor
Assimilated

Posts: 419
From: New York City
Registered: Jan 2000

posted July 01, 2002 13:14     Click Here to See the Profile for Alien Investor   Click Here to Email Alien Investor     Edit/Delete Message   Reply w/Quote
How do you make money in a market that's too high?

I sell short. Hard. I was 160% short today (meaning, I have $X equity in my trading account, and $1.6x in short positions).

Works for me.

BTW, I think it's ludicrous to claim that the SEC is "on the take". Do you have any evidence for that?

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Erbo
Super Geek

Posts: 178
From: Denver, CO, US
Registered: Jan 2000

posted July 02, 2002 07:39     Click Here to See the Profile for Erbo   Click Here to Email Erbo     Edit/Delete Message   Reply w/Quote
Look at who Bush put in charge of the SEC: Harvey Pitt, who previously represented now-disgraced accounting firm Arthur Andersen, as well as KPMG (now under scrutiny for its audits of Xerox). He met in private with the heads of both KPMG and Xerox just as the SEC investigation of Xerox was getting underway. See this column by "reformed conservative" Arianna Huffington. If he's not on the take, it's not for lack of trying.

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Alien Investor
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Posts: 419
From: New York City
Registered: Jan 2000

posted July 02, 2002 08:41     Click Here to See the Profile for Alien Investor   Click Here to Email Alien Investor     Edit/Delete Message   Reply w/Quote
I note that Enron, Xerox, and Tyco began their accounting frauds when Arthur Levitt was SEC chairman, and they got away with it as long as Levitt was chairman. But their fraud is coming to light now, when Pitt is chair of the SEC.

Worldcom began their fraud in 2001, after Pitt was appointed.

Enron: began overstating earnings in 1997.
Worldcom: booked expenses as capital spending starting 2001.
Xerox: began overstating revenue in 1997. Stopped in 2000. (So *all* of Xerox's fraud happened during Levitt's term.)
Tyco: moved headquarters to Bermuda in 1997.

Neither Huffington's column, nor anything else I've read, point to corruption at the SEC. You don't like the way they do their job, but that doesn't mean they are crooked (in the way, say, that Arthur Andersen is systematically crooked).

The 2002 administration is doing a lot more than the 1998 administration did when Long Term Capital Management became insolvent. In 1998, the Federal Reserve led a $3.5 billion bailout for LTCM. I don't see this administration providing any such bailouts, but the last administration sure did.

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ASM65816
Super Geek

Posts: 115
From:
Registered: Mar 2001

posted July 02, 2002 09:23     Click Here to See the Profile for ASM65816   Click Here to Email ASM65816     Edit/Delete Message   Reply w/Quote
Alien .... (uh maybe you're not this old, but ......)

Do you remember the details of "The Savings and Loan" Debacle ?

I want to say it was mid-80's.....

Anyway, it seems to me that Lobbyists get legislation passed so their clients can use these loop-holes.... Then, in the course of a few years, a "Legalized" Scam Accidentally results in $Billions$ Lost and a lot of Paper Shredding.

In my experience as an accountant: "Money is neither created nor destroyed."

- In other words, if your accounting is as follows: you put $10 in pot, put a lid on it, shake it, open it, and a $20 bill falls out -- Something is amiss.

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Once a proud programmer of Apple II's, he now spends his days and nights in cheap dives fraternizing with exotic dancers....

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Alien Investor
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Posts: 419
From: New York City
Registered: Jan 2000

posted July 02, 2002 10:21     Click Here to See the Profile for Alien Investor   Click Here to Email Alien Investor     Edit/Delete Message   Reply w/Quote
I remember the Savings and Loan debacle. I lived through it. Even if I didn't live through it, I would read up on it, just like I read up on the Nifty Fifty (which were before my time).

It was a watershed in American finance. It was the biggest bailout in American history -- roughly $500 billion, 100 times the size of the LTCM bailout.

The government created insurance agencies, Federal Deposit Insurance Corporation (FDIC) and Federal Savings and Loan Insurance Company (FSLIC). These agencies guaranteed the deposits of banks and savings and loans, respectively. You know the signs in your local bank that say "deposits federally insured"? That's the insurance.

Watch closely what happens. The government tells savings and loans: if you lose money, we will pay all your depositors back. So if a savings and loan buys a ton of speculative real estate, and the deal works out, they make money. But if it doesn't work out, then the government pays for the losses.

I'd like to have a deal like that. I'd like to run an investment fund where if I win, my investors and I make our profit, and if I lose, the government pays my investors back their original money (small investors only, $100,000 limit per account -- but you can have several accounts). And if someone could have a fund like that, with guaranteed depositor safety, a lot of people would join. Heads, we win; tails, the government loses. We'd flip that coin all day long.

That's what government deposit insurance does. That's exactly what happened, to the tune of $500 billion in government bailouts, including the infamous Silverado savings and loan run by Neil Bush et al, and thousands of other savings and loans.

That particular debacle was bipartisan. In the name of protecting small depositors, the FSLIC enabled thousands of S&L's to speculate with taxpayer-funded loss protection.

Back in 1997, HFS and CUC merged to form Cendant. In April 1998, Cendant revealed that CUC had falsified its revenues and earnings. Cendant stock got chopped in half overnight. But I didn't see any journalists saying that dozens more companies were doing this shit. Walter Forbes of CUC, and Al Dunlap of Sunbeam, were pathological. The problems were individual criminals, not a systemic problem (so it seemed at the time).

Now it looks like this crop of problems are systemic. EBITDA accounting is everywhere. Just about every tech company screws with options reporting. ("If options are not compensation, what are they? If compensation is not an expense, what is it?" -- Buffett). The whole system of public reporting is starting to stink like Japan. And executives from Inclone to Apple are selling stock in front of bad reports.

It's a great time to sell all the stock you own, and then keep on selling.

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guerrilla
Single Celled Newbie

Posts: 1
From:
Registered: Jul 2002

posted July 03, 2002 21:41     Click Here to See the Profile for guerrilla     Edit/Delete Message   Reply w/Quote
quote:
Originally posted by Cap'n Vic:
I have some money in AGF funds in a educational plan for my son,
...
I don't want to start selling dope or set up a porn site so does anyone know any legit ways of getting a good return on investments?

The lengthy post by Alien Investor has some good information. It does take considerable time and focus to successfully play the stock market. A little luck doesn't hurt. (Who knew Canadian Pacific would do a five-way split after being one of hte few stocks to rise during a market collapse? Not me, certainly. I bought it because I believe it was well positioned to survive the inevitable downturn in tech due to over-inflated valuations. I expected it to go slowly increase in value and provide dividends. but I got lucky due to a little foresight.) Most individual investors rely on mutual funds because they have neither the time nor the interest to do the research and learn the minute details of stock investment. Unfortunately, it requires researching the mutual fund managers as much as researching an individual stock.

In cases where you have little choice, such as my husband's company 401(k) program, it's best to hedge your bets. Gamble a comfortable percentage in one of the riskier, aggressive fund, but accept a lower return on investment for security with bond, balanced and money market (or fixed) funds. You may only average 5-10% over the life of the investment, but it's likely to be there.

Now on the larger issue of better returns on investment, let me introduce you to the only 2 intelligent things Robert Kyosaki of the "Rich Dad, Poor Dad" series has to say and save you wasting money on his books and seminars:

1) The only way to acquire real wealth is a) win the jackpot (this includes those "option millionaires" who companies made it before the bust) or b) move to the business owner/investor side of the income equation.

When employees and the self-employed aren't working, they aren't earning any income. When the business owner/investor isn't working, his or her assets are still earning income. Spend your time and money on "Assets" which are things that actively earn you money even when you aren't working.

yeah, yeah. That's why you were investing in a stock fund, right? Except there's point Number 2 -- Focus, focus, focus.

In other words, don't spread yourself thin. If you aren't interested in reading the annual and quarterly reports of your investments (either mutual funds or stocks), if you don't want to learn how that particular business you're investing in operates, then you shouldn't be there. You'd probably do better betting on your favorite sport! Better yet, would be actually investing in a local business that interest you (either buying something you can do part-time or building a business that you can do part-time).

Kyosaki did create a pretty good game for teaching people how to change there mindset on money and build toward "financial freedom". One of the sites you might find interesting is: http://www.kestrelsfinancialfreedom.com/ (it's not my site and I'm not affiliated in any way except that the friend who introduced me to the game and series created the site after she began having success in reaching her target of retiring at 35 from her corporate job -- and yes, she's still on target because following Kyosaki's basic guidelines she invested in only a very few things she was interested in and therefore knew when to increase or retreat from her positions.)

Anyway, that's my suggestion. And while free advice is pretty much what you pay for it, I will point out that despite most of my husband's co-workers taking the same kind of beating these past 2 years that you're taking, I've managed to actually generate a small,but postive total returns in his 401(k). (He's your quintessential geek and wouldn't have even remembered to sign up for a 401(k) if I didn't handle investments...but he can chew up and spit out topflight code literally in his sleep!)

Good-luck and if your son is over 12, he should be starting to do some entrepreneural things like starting a detailing or lawn maintenance service (or a programming company) to earn money for his own college.


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Cap'n Vic
Geek Larva

Posts: 23
From: Yukon
Registered: Jun 2002

posted July 04, 2002 10:11     Click Here to See the Profile for Cap'n Vic   Click Here to Email Cap'n Vic     Edit/Delete Message   Reply w/Quote
Thanks for all the tips, I guess I should have mentioned I was in Canada, and the boy is only 1. So with my $2000, the Feds kick in $400 and he has until he is 21 to use it or I slide it into my RRSP (401K for y'all South of the 49th...still it is taking a beating, I may try GIC's od Canada savings bonds this year

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I used to work at a factory where they made fire hydrants; but you couldn't park anywhere near the place.

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Alien Investor
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Posts: 419
From: New York City
Registered: Jan 2000

posted July 04, 2002 11:20     Click Here to See the Profile for Alien Investor   Click Here to Email Alien Investor     Edit/Delete Message   Reply w/Quote
Guerilla, thanks for saving me the time on those books. I picked up the "Rich Dad, Poor Dad" book at the book store, and I kept looking for the darn point, and I kept running into these "you must buy the whole damn book to extract the point" stories. I hate it when authors do that, turn 20 pages of ideas into a 400 page book. It's a pet peeve of mine. I'll still buy the book when I can get a cheap used copy.

Vic, I would recommend staying with GIC's and bonds for a year or so, and then switching back when the tone of the market changes. You don't have to be in a hurry to switch back, either. Me, I have to catch the move, or my diet plan is gonna get a little involuntary help ... I am hurting a lot from Wednesday.

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FatGnome
Alpha Geek

Posts: 275
From: Idaho
Registered: Jan 2002

posted July 06, 2002 16:10     Click Here to See the Profile for FatGnome   Click Here to Email FatGnome     Edit/Delete Message   Reply w/Quote
It isn't hard to start a mutual fund company. all you have to do is start several of your own mutual fund accounts and then put all sorts of random stocks into them. Then you hold them for a year. about 75-85% of these will loose money but some will grow realy fast. These you advertise in the Wall Street Journal and other trade journals and make a mint from the "administrative fees." There are surprisingly few restrictions on this sort of thing and you just have to have the money to start the funds in the first place. Don't forget to make realy nice fliers for your funds that made money. =-)

In reality I bought some balloons and some books and learned how to twist them then I started selling them and people paid me so I now get about a 150% return on investment. I would say with $500 you could start your own balloon entertaining business from home and be ready to go in about 2 months.

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Rednivek
Alpha Geek

Posts: 276
From: Detroit/Windsor
Registered: Feb 2002

posted July 07, 2002 11:50     Click Here to See the Profile for Rednivek     Edit/Delete Message   Reply w/Quote
I do it the old-fashioned way... by contributing to the GNP.

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Alien Investor
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Posts: 419
From: New York City
Registered: Jan 2000

posted July 07, 2002 13:37     Click Here to See the Profile for Alien Investor   Click Here to Email Alien Investor     Edit/Delete Message   Reply w/Quote
I work on Free Software (the linux kernel and gnu gdb), so the work I do on that does not contribute to the gross national product. In fact, it reduces the GNP, by reducing the amount of money transferred from software users to software vendors. It does make people better off, though.

Then I go finance that activity by trading the stock market, which is GNP-neutral (except for all the commissions I generate).

It's a strange world.

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LifetimeTrekker
Highlie

Posts: 623
From: Albuquerque, NM, UD
Registered: Sep 2001

posted July 07, 2002 15:15     Click Here to See the Profile for LifetimeTrekker   Click Here to Email LifetimeTrekker     Edit/Delete Message   Reply w/Quote
Well, there was a time when a laser printer and laundry change machine were one way of making some quick cash, but six or eight pockets full of quarters makes it tough to run from the attendant.

Somehow they objected to having to fill the machines after I visited.


This is a joke, btw, counterfeiting is something any of our respective governments will frown upon heavily.

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Minsc
Mini-Geek

Posts: 59
From: The mist-veiled mountains where the butt-kicking denizens of goodness dwell
Registered: Apr 2002

posted July 15, 2002 15:22     Click Here to See the Profile for Minsc     Edit/Delete Message   Reply w/Quote
Well damn, I don't have any advice... I sell dope through banner ads on porn sites.

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You and Boo and I... Hamsters and Rangers everywhere! Rejoice!

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Evilbunny
Uber Geek

Posts: 822
From: A Calculus book near you...
Registered: Nov 2001

posted July 16, 2002 14:23     Click Here to See the Profile for Evilbunny   Click Here to Email Evilbunny     Edit/Delete Message   Reply w/Quote
GO TO WORK

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Evilbunny
Uber Geek

Posts: 822
From: A Calculus book near you...
Registered: Nov 2001

posted July 16, 2002 14:28     Click Here to See the Profile for Evilbunny   Click Here to Email Evilbunny     Edit/Delete Message   Reply w/Quote
lol! just kidding!

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Steen
SuperBlabberMouth!

Posts: 1322
From: Maryville, TN, USA
Registered: Jan 2000

posted July 17, 2002 18:32     Click Here to See the Profile for Steen   Click Here to Email Steen     Edit/Delete Message   Reply w/Quote
Evilbunny wrote:
GO TO WORK

Where do you think most of my posts are made from?

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Plum
Geek Larva

Posts: 25
From: Toronto/Waterloo, ON, Canada
Registered: Sep 2001

posted July 18, 2002 08:09     Click Here to See the Profile for Plum   Click Here to Email Plum     Edit/Delete Message   Reply w/Quote
I sign up for one of the highest interest bank accounts - President's Choice Financial or ING Direct and put some money in GIC's.

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Minsc
Mini-Geek

Posts: 59
From: The mist-veiled mountains where the butt-kicking denizens of goodness dwell
Registered: Apr 2002

posted July 18, 2002 15:43     Click Here to See the Profile for Minsc     Edit/Delete Message   Reply w/Quote
To follow the addage "Buy low- sell high" would mean that the time to invest most heavily would be when the market on the whole is taking a shit kicking.

For what it's worth, I just started a 401K.

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You and Boo and I... Hamsters and Rangers everywhere! Rejoice!

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