4/14/2008

Investing in Every Aspect of Life

Gosh, it has been a loooong time since my last post! I have been extremely busy with work, and with rennovating our new home. With my new responsibilities at work, a usual week consists of 50 hours (or more). When I get home, the brain turns to relaxation mode. Unfortunately, this has meant that I am not on top of the markets as much (or this site).

The reason I chose the name "Rational Investing" for this web page, is because using rationality can be the best way to achieve long-term financial success. Many of you have careers that may be separate from investing (much like myself). Most importantly, you have family and friends that mean far more than work, investing, or any other money matter. In order to be successful, you must invest energy, time, and money in the most important things in life such as family, health, and work. After these aspects of life are in harmony, then I suggest that you spend the residual time to study investment opportunities.

I made the difficult decision late last year to sell all of my stocks and put the money into my new home. This was very hard for me, as stock investing was (and still is) one of my favorite "hobbies". However, as a new home-owner in my late 20's - I feel that it was a must for me to take this step. Looking back, I am happy that I sold everything as the markets have tanked over the past 3-4 months.

Therefore, I will say that investing depends on your situation. It also depends heavily on the markets. Always look for extremes (any assets that are in the news as being "high" or "low" i.e. Oil/US Dollar/Gold -or- Real Estate/Stocks). My wonderful wife and I decided to buy a house while everyone was scared to buy. This seemed like a good idea, instead of buying our first home in a hot market - only to see the price decline.

Going forward, this site will encompass a broad range of "investing" in all asset classes - including stocks, bonds, real estate, and most importantly - yourself!

1/23/2008

A Contrarian's Dream Come True

I would have to say that one of the better long-term Contrarian indicators to use is one that focuses on what the average guy (or gal) on the street thinks. Ron Insana of CNBC desrcibed a story in his book of a homeless person asking him for money near the end of the late 90's Bull Market so he could save up and buy stock with it. Insana said that he became very nervous about the market at that point. By the time the vast majority of folks who aren't familiar with the stock market start talking about a Bull or Bear Market, it is time to take the opposite stance. At the time the homeless man was talking about the "Bull Market", there were few buyers left as so many had already bought (and the only option left for them would be to sell!).

I went and had my Emissions Test done on my car yesterday, and one of the mechanics in the shop looked at the newspaper which exclaimed how badly the markets were doing over the past few months. He said, "Man! What happened?". I remember that the Dow was down nearly 500 points when I left home, and someone must have heard that mechanic because it was only down 50 points when I returned around lunch time. Today, the Dow was down 300 points and rebounded to finish up 300! This type of Contrarian investing works better over the long-term (6-18 months), than the short-term. I can't say that it is "fool-proof" either, as I don't think anything is "fool-proof" when it comes to investing. Even Warren Buffett makes mistakes, even Hank Aaron struck out...

1/03/2008

Get Ready for a Big Rally

Now that everyone and their mother is talking about a "slowing economy" and a "housing bust", it's a perfect time to step in and buy stocks. I would focus on Financials and Technology foremost, and Energy and Precious Metals the least (in fact, I would be a seller of these assets at today's lofty levels). The U.S. economy will likely slow-down over the next couple quarters (opening the way for further rate cuts), and energy prices should peak soon (thereby dampening inflationary fears).

Consider this, the U.S. markets went from extreme bubble proportions driven by "irrational exuberance" only to crash due to over-supply of technology products and Fed Rate hikes - and went through only a mild recession. What makes people think we are going to go through a recession now? High energy prices? That's baked into the cake my friend (and perhaps will decline soon). Will it be the housing slump? Ah, I believe that has been under-way for a couple years now, and will likely turn around before people are assuming. Home Builders are going bankrupt, slowing production, etc. When things turn around, there will be a wonderful bull market in real estate as their is more demand and reduced supply from the bankrupted builders.

I know the majority will disagree with me, which is why you should consider buying stocks NOW. Ask someone you know that is not very stock-savy about their opinion on the economy, housing market, etc. If they give you a not-so-rosey outlook, then you should be BULLISH! When the "Average Joe" is worried, you should be licking your chops. This is when bottoms are created...

12/25/2007

Ummm, Unum Group (UNM) - Part Deux

I wrote a bullish article roughly 18 months ago on Unum (UNM) when it was at $16. The same reasons I thought it was a buy then hold true today despite the stock's rise to $24. Longer-term investors can expect the price to rise to the low $30's as the general markets continue their bull run. If you look at the company's fundamentals, valuations, and technicals - you will likely agree that this stock is a wonderful value play. Do your own due diligence, of course...

12/06/2007

A Valuable Lesson

Many investors and traders use Margin as a part of their strategy. When buying stocks on Margin, you borrow money from your broker to fund stock purchases. The investor must pay the broker an annual fee of 10% or so (depending on market interest rates). Nimble traders can use Margin to their advantage by amplifying gains when a stock moves in the desired direction. Unfortunately, despite all of the homework they have done, the market may not always agree. Normally, if you have done your research it will only take patience for your predictions to come true. When buying stocks on Margin, you may not have the ability to be as patient as the markets require. This could force an individual to sell at an inopportune time simply to avoid a portfolio crunch.

Therefore, I suggest most investors to stay away from buying stocks on Margin. Only seasoned traders should do so. However, if you think about it, the experienced investors/traders that are so confident to justify buying on Margin should be so wealthy that it is unnecessary. These Wonder-Traders should simply use their own money to churn out greater returns.

Everything considered, I truly believe that you should avoid buying stocks on Margin. It just isn't worth it...

11/29/2007

A Great Message Board for Investors!

Here is a LINK to an excellent resource for investors. I suggest that you use this site often to check up on what other savvy investors think of your portfolio. You can utilize this message board in many ways, and I think you should add this to your favorite tools to research possible assets to add to your holdings.

Best of Luck to ALL...

11/27/2007

Selling Pressure Will Dry Up Soon

Long-Term investors should use this market correction as a buying opportunity. If you are 20+ years from retirement, it would be wise to move a portion of your IRA or 401k into Emerging Markets and Small Cap Value funds (or add to existing positions).

With all of the headlines regarding the "Credit Crunch" and declining home prices, the markets have held up quite nicely. The bottom in the U.S. real estate market should come in the next 8 months or so. That being said, the stock market tends to fluctuate depending on economics 6 months into the future (or longer).

Be prepared for a serious market correction in the next few months or so, but try to use any decline as a way to add to your more speculative positions.

Please let me know what you think will happen to the US markets over the next 6-12 months...

Rational Investing