Archive for the ‘Investment Concepts’ Category

So Long For a While!

November 18th, 2010

Folks, I want to take this opportunity to thank you for subscribing to my blog. And I want to give special thanks to those of you who have added your comments, both supportive and contradictory. It’s flattering to know that others think enough about what you have to say to not only welcome it into their mailboxes every week, but to digest and think about it.

This will be my last post for a while—perhaps for quite some time. And, this evening’s broadcast will also be my last for a while as well, as I’m also going to take a sabbatical from my on-line “radio” show. Both of these activities have been labors of love. But they have both consumed considerable time, energy, and thought—resources that I’ve decided to apply exclusively to a couple of other things.

The first is a very exciting, new project whose mission is to promote financial literacy. As most of you who have known me for a while know, this is—and has been—a passion of mine for some time. And, I’m going back to school to acquire some skills in the graphic arts and video field that I can apply to this project. And I’m looking  forward to both the education and the constructive result.

I’m also going to play a more active role in helping my wife, Dianne, with her business. She’s been doing a fantastic job as it is; but it’s time for me to be more actively supportive than I have been. I think this will be fun as well.

So, thanks again for both your interest in my effort to help you be more successful investors, and your indulgence when I’ve occasionally drifted off target to rant a bit.

I’ll keep my Web site open at The archives for this blog will remain there for anyone to prowl around in and refer to. And, there’s no need to unsubscribe, should you want to know about it when or if I should start back at it again.

Best wishes and so long for a while!

Current Events, Food for Thought, Fundamental Investment Views, How to Invest, Investment Concepts, NAIC Veterans' Lounge, Stock Market Shams, Successful Investing

There, there. It’s gonna be okay!

November 9th, 2010

I’d like to provide something of a ray of sunshine to those who, while usually stalwart and rational investors, may have become dismayed by the current investment climate.

You simply cannot  judge the investment climate by the state of the stock market. Instead, I look at the number of companies whose shares are available on the major exchanges that meet my rigid requirements for sustained sales and earnings growth and for their ability to sustain healthy profit margins.

For that purpose, I consult the result of screening the database of companies provided by ICLUBCentral and NAIC for those which meet or exceed the “Acceptable” Take Stock Quality Index. In normal times, and until the recent market collapse, only about 150 companies, give or take 10, met those criteria. This meant that, of the more than 9,000 publicly-traded companies, fewer than 2 percent warranted my investment interest. When this recession was at its worst, that number of shares declined to only 32! There is no question but that the recession decimated the number of companies that could meet those strict guidelines. Happily, that number is once again commencing to grow.

Reminder: Join me on Take Stock with Ellis Traub, this Thursday evening at 7:30PM Eastern (6:30PM Central). Call (347) 857-3608 to listen. This week, we’ll talk about the stock market and what the election results may or may not do to it. Dial “1″ to jump into the conversation.

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Food for Thought, How to Invest, Investment Concepts, NAIC Veterans' Lounge, Successful Investing , ,

Smoke and Mirrors, or Facts?

October 12th, 2010

I was exploring some ideas for my watch list, and one of the companies that surfaced was Ebix (EBIX), a world-wide provider of custom software solutions for the insurance industry. It was recently ranked the third-fastest growing company in the world by Fortune magazine.

Now I’ve said many times that those who trade stocks and bet on the stock market are confused and bewildered. Nor do they have a clue as to what any stocks will do tomorrow. And, of course, that confusion is compounded by the contribution that technical analysis makes to the mix. As an example to bear out my conviction, I would offer the following two excerpts about Ebix from the Investors Business Daily, each appearing within three days of the other.

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Five reasons why my way works

October 5th, 2010

My mission, when I started this blog, was to persuade my readers that “investing,” is not what the securities industry has spent gazillions convincing everyone it is: betting on the stock market, which is risky and unpredictable. Rather, “investing” is a simple means of earning money with your money. It can make you wealthy and is virtually risk-free. For at least this week, we’ll return to our roots and stick to the mission, both in this post and in Thursday’s on-line “radio” show.
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Fundamental Investment Views, How to Invest, Investment Concepts, NAIC Veterans' Lounge, Successful Investing , , , , , ,

Where Money Comes From: A Primer

September 14th, 2010

There are only four ways you can get money legally. You can make it. You can earn it. You can be given it. Or you can borrow it (which is legal only if you give it back).

“Making money” means starting with something, adding value to it, and realizing something from that added value. Mining ore adds value to dirt. Refining that ore into metal adds value, as does creating parts from that metal, and constructing a machine from those parts. Agriculture adds value. So does construction.

The significance of making money is that assets are created and can be sold or accumulated. Intellectual property is also such an asset. And it’s the accumulation of assets (or the wherewithal to accumulate them) that creates wealth.

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The PE: On its way out?

August 31st, 2010

Technical AnalysisThe Wall Street Journal strikes again! This time it’s an article entitled “The Decline of the PE Ratio.” And once again, it was too hard to pass up as a topic for this blog.

The first sentence alleges that the PE ratio “is shrinking in size and importance.” And it points out that, in spite of the fact that U.S. companies announced record profits during the second quarter—beating forecasts by more than 10%—the market dropped 5% this month.

It goes on to connect the dots, making the point that “the market’s average price/earnings ratio…is in free fall, having plunged about 36% during the past year,” and claiming that, because PEs have declined while earnings have risen, that the PE ratio may no longer be a reasonable metric by which to value the market. They’re absolutely right…if the market is what you invest in!
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Current Events, Food for Thought, Fundamental Investment Views, Investment Concepts, NAIC Veterans' Lounge, Successful Investing , , , , , ,

Zero-based Education

August 24th, 2010

Why is it, with all the money we spend on education, we turn out so many students who are inadequately educated? Why do countries with far less to spend surpass the United States in preparing kids for careers in math and the sciences?

These are but two of a long list of questions we need to answer honestly.
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Now it’s the “Hindenburg Omen”

August 17th, 2010

This past Saturday’s Wall Street Journal contained an article entitled “‘Hindenburg Omen’ Flashes.” Although it wasn’t offered as tongue in cheek satire, it just has to be! How else can one explain such a respected publication giving space to Wall Street’s equivalent of “Chicken Little”?

For me, the article is priceless, because it so articulately describes the kind of thinking that surrounds the herd and its minions.
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Current Events, Food for Thought, Fundamental Investment Views, Investment Concepts, Stock Market Shams

Time to Choose Sides

August 10th, 2010

When it comes to the stock market, you’re either a gambler or an investor. You simply can’t be both. Gambling and investing are two entirely different things. And, they’re mutually exclusive.

You either think like most folks do, that investing is betting on the stock market—with, at best unpredictable, at worst disastrous, results. Or you understand that it’s putting your money to work for you in successful businesses—letting it earn more for you with little or no risk. You just can’t have it both ways.

In fact, as it happens, one group usually buys from, or sells to, the other.

Over the past 25 years, I’ve had the joy of knowing a whole lot of folks who not only “got it,” but were eager to share their convictions and their knowledge with others. So grateful were they to have learned from other willing mentors, they took pleasure in passing it on. But I can no longer find them. No longer does there seem to be anyone whose convictions—that they were right and the rest of the world wrong—move them to stand up and be counted.

It would be tragic if this commonsense, simple and successful approach to investing were to be lost to the world! But it will be, unless those of us who know what we know have enough conviction go out of our way to take sides and speak up.

It’s well past time we screamed bloody murder because a greedy and unscrupulous securities industry continues to get away with enticing the public into thinking they can get something for nothing—which is exactly what trading and buying stocks for the short term is, and what the whole business of derivatives and other speculative activity involves.

What’s as important, is convincing the public that there is a better way, and that there are some of us who are ready, willing, and able to show them how.

Reminder: Join me on Take Stock with Ellis Traub, this coming Thursday evening at 7:30PM Eastern (6:30PM Central). Call (347) 857-3608 to listen. Dial “1″ to join the conversation. Share your point of view on this topic.

Food for Thought, Fundamental Investment Views, How to Invest, Investment Concepts, Successful Investing , , ,

Financial Innovation: Architecture for a House of Cards

July 18th, 2010


  The genie is indeed out of the bottle; and the point when it became clear to me that it’s an evil rather than a benevolent genie was when the captains of the securities industry stood before a Congressional Committee and had the temerity to announce that their industry was the “backbone of the American economy.”

Once upon a time, a broker was a facilitator and nothing more. He was someone who was in a position to bring a willing buyer and a willing seller together and help them effect a trade. At that time, bringing investment money to enterprises in need of capital was constructive and deserving of the label of, if not the “backbone of the economy,” certainly its enabler.

Even after 1792 when those 24 brokers, meeting under the buttonwood tree at the foot of Wall Street, formed the New York Stock Exchange, the ability to assist investors desirous of owning shares in one or another company could be considered a wholesome service—but not for very long. Realizing that they could make more money from investors than from investments, the securities industry pioneers guided their industry down a path that took it from constructive investment to gambling, from earning money with one’s money to seeking something for nothing.

Financial innovation has been a characteristic of that industry; and, as the years have passed, the public has been duped into thinking that trading—short term speculation on the movement of the market itself—was actually investing, deserving of the same respect as the part-ownership of thriving businesses.

The genie’s name is Credit. At first reserved for fiscally responsible purposes—collateralized leverage that could produce revenue and income more rapidly than could resources limited to what existing assets could afford, financial innovation carried credit beyond its constructive business use and found justification in encouraging home ownership, collateralized to be sure, but by a home, an asset of substance but one which produced no income.

Eventually, such innovation carried it beyond the point where it was used solely for business and major purchases of valuable assets to the point where, today, credit is used for expendables and to satisfy the self-destructive trend toward converting luxuries into necessities: now the overheating engine of our economy. Like a Ponzi scheme, our society’s misuse of credit has an ultimate dead end. Credit is simply an obligation that extends into the future. And the future is not infinite! As it is, we have already mortgaged our own futures and those of our offspring; and we are well into committing the lives of our grandchildren to satisfy our own cravings for material things to which we are not entitled by virtue of our own productivity.

So, like the Ponzi scheme or chain letter, the trend must end. And just how chaotic and traumatic that end will be depends, unfortunately, upon the courage and intelligence of our elected representatives.

Investment Concepts

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