Financial Preservation Advice from Michael Southam

Michael Southam of Rockcliffe Parners, based in Geneva, Switzerland, gave a talk in 2010 that had the catchy title "How to lose a billion."

Five major points in summary

1. Hold your position: The chances of having wealth in successive generations is remote, as lightning rarely strikes twice, and what created wealth in one generation might not necessarily work for the next. So it's important to develop strong wealth preservation strategies to position the family to take advantage of future opportunities.

2. Defend your position: Beware of all who would have you part with your money. All families interviewed by Southam had been victims of scams, thefts, bad investment decisions through dubious schemes, even from close advisers. 

3. Multi-generational truths: An even distribution of wealth among offspring will dismantle large fortunes over time, and multiple spouses have a "logarithmic effect." A conscious decision must be made to sustain the fortune whether in the descendants' quality of life or the continuity of the company that created it.

4. Focus on inter-generational flexibility: The majority of descendants won't contribute to sustaining wealth, but it does offer 'vocational freedom' or the opportunity to give back to society in form of philanthropy in arts, science, medicine, and so on. Since 19/20 members in Southam's study spent more than they made, 1 in 20 helped sustain the fortune, and only 1 in 50 created wealth, it's important to fast track the family business talent, maintain the non-business talent and isolate the 'dangerous' ones.

5. Educate and inculcate values and principles: Pragmatism, realism, and a strong sense of respect for themselves is a key factor in avoiding conflict. Perceptions of unequal treatment, personal grievances and divergent strategy can result in destructive conflict.

Words of wisdom we would all do well to aspire to internalize. In his talk, Southam described his 'glorious heritage' as descendant of two wealthy European families that commenced in businesses in the 1800s. 

Courtesy: Michael Southam, Rockcliffe Partners, with gratitude.

Akamai: Backbone of the Internet

It's high time for me to put in a good word for Akamai Technologies (AKAM:Nsdq). Akamai's business services a serious and vital necessity of life on the internet today. This is a company without which we wouldn't have streaming video content or be able to have seamless internet service. It hosts the infrastructural network architecture and security backbone of the internet; the product it delivers is better than television, and might in the future actually deliver streaming content online from networks, called "over the top" or OTT.

It's a company with great potential that has a history of rolling out streaming services on the internet, delivering a fast user experience, and making the internet better for everyone. It delivers higher quality, lower cost, and better performance than its weak competitors, doesn't face fast-lane regulatory scrutiny for this reason, and has strong propspects for the future. Scale, cost, and quality are important to the company, according to the founding CEO Tom Leighton.

With strong leadership, proven history of technical and corporate expertise, and an elite work force, Akamai rolled out streaming video beginnning in the late nineties and 2000s. It owns important servers and key patents many other companies would kill to have and the product it delivers offers consumers greater detail than television.

Akamai has lots of unique agreements with other companies, posts huge goodwill numbers, and hosts fake versions of many government websites to safeguard national security. For example, if Sony had been a customer of Akamai, it couldn't have been hacked by the North Koreans.

Akamai's stock price flew up to around $400 in 2001, and made a sharp drop when it was caught in the tailwind of the down draft that plunged most tech stocks off the cliff, but it didn't deserve to fall in tandem and shouldn't have. Isn't it time for common sense and basic know-how to prevail and return to tech valuations?

My point is that Akamai is worth much more than facebook, which is a stock that can be duplicated in many foreign countries such as China and Russia, whereas Akamai is unique. While facebook may be a leader in personal communications, arguably as pioneering as a magazine in its own way, facebook is a website that not everyone likes or uses, and for all its lofty valuation does have competition from mainstream and internet news services: Skype, Twitter, Pinterest, Craigslist, reddit, Instagram, Snapchat, and other constantly proliferating and mutating website services competing for everyone's attention.

Facebook, for example, isn't as integral or essential to the backbone of the internet as Akamai is, so why isn't Akamai valued a lot higher? By the way, I'm also a huge fan of facebook, as I am of many of its social media competitors. But in my mind Akamai is unique. There's nothing else anything like this company with the name that means witty or intelligent in Hawaiian. Without it, facebook and all the others might not exist. Everyone uses Akamai, like they use electricity and water. For more about Akamai, this video and this older one show founding CEO Tom Leighton, who was on CNBC yesterday.

Removing Any Doubt: Developed vs. Emerging Countries

As defined by Morningstar, the regions of the world are identified as these countries:

1. North America: United States and Canada

2. Latin America: Anguila, Antigua & Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia, Bonaire, Brazil, British Virgin Islands, Cayman Islands, Chile, Colombia, Costa Rica, Cuba, Curacao, Dominica, Dominican Republic, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Mexico, Montserrat, Netherlands Antiles, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, St. Kitts & Nevis, St. Lucia, St Vincent & the Grenadines, Suriname, Trinidad & Tobago, Turks & Caicos, U.S. Virgin Islands, and Venezuela 

3. United Kingdom: United Kingdom and Isle of Man

4. Europe Developed: Andorra, Austria, Belgium, Cyprus, Denmark, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Malta, Monaco, Netherlands, Norway, Portugal, San Marino, Slovenia, Spain, Svalbard, Sweden, Switzerland, and Vatican City 

5. Europe Emerging: Albania, Belarus, Bosnia & Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Poland, Romania, Russia, Serbia & Montenegro, Slovakia, Turkey, Ukraine 

6. Africa/Middle East: Algeria, Angola, Bahrain, Benin, Botswana, Bouvet Island, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo, Cote d'Ivoire, Democratic Republic of Congo, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gavon, Gamvia, Ghana, Guina, Guinea-Bissau, Iran, Iraq, Israel, Jordan, Kenya, Kuwait, Lebanon, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mayotte, Morocco, Mozambique, Namibia, Niger, Nigeria, Oman, Qatar, Reunion Island, Rwanda, Sao Tome & Principe, Saudi Arabia, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, St. Helena, Sudan, Swaziland, Syria, Tanzania, Togo, Tunisia, Uganda, United Arab Ermirates, West Bank and Gaza, Western Sahara, Yemen, Zambia, and Zimbabwe

7. Japan: Japan

8. Australasia: Australia and New Zealand

9. Asia Developed: Brunei, French Polynesia, Guam, Hong Kong, Macau, New Caledonia, Singapore, South Korea, and Taiwan 

10. Asia Emerging: Afghanistan, American Samoa, Armenia, Azerbaijan, Bangladesh, Bhutan, Burma, Cambodia, China, Christmas Island, Cocos Islands, Cook Islands, East Timor, Fiji, Georgia, Heard & McDonald Islands, India, Indonesia, Kazakhstan, Kiribati, Kyrgyzstan, Laos, Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Nauru, Nepal, Niue, Norfolk Island, North Korea, Northern Mariana Island, Pakistan, Palau, Papua New Guinea, Philippines, Pitcairn Islands, Samoa, Solomon Islands, Sri Lanka, Tajikistan, Thailand, Tokelau, Tonga, Turkmenistan, Tuvalu, Uzbekistan, Vanuatu, Vietnam, and Wallis & Futuna Islands.

Buyer Beware

Being merely smart isn't good enough in the investment profession because everybody is smart. You also have to have the cynical attitude and ability to sniff out bs. Sounds like [certain investment managers] were sorely deficient in that department based on [what] they were buying. This is where Warren Buffett excels, and is often underappreciated.

From Daniel Mauro, on Knowing when to Quit: The Key to Success

This idea is very true...and it works as much for everybody, in different walks of life. For example, we all have to make sure we aren't misled in our daily lives. 

Making good investments has a lot to do with not being misled and lied to. Be careful. 

May the buyer beware.

How to Register Your Business

 Have you ever wondered how businesses register their names? You can  now check a name online for possible use as a business name. The New Jersey State Business Gateway Service has a free online search feature here. Checking Google is also a recommended site to get an understanding of similar names to ones you like.  The IRS does not accept punctuation in the title of a business of any kind, including apostrophes, except a dash (-). Asking an attorney to check a prospective name is also a good idea.

It's important to register the name of a new business to get a national or federal tax ID number and pay taxes. This exact situation happened to me last  week as I registered the name of my new business. Your banker can help you set up a sole proprietorship, and draw up papers for Limited Partnerships and more complicated businesses.

An article in today's Wall Street Journal happens to address this very topic of  choosing business names and the legal problems that can arise if names are repeated or even close to another name. Many big businesses monitor the market to be sure their names aren't misused around the world as well. Perhaps McDonald Corp.'s hounding of the "McDonald Castle" owners in Scotland was going a bit too far in the direction of reputation management.

Watch Out For Flaming Tornadoes!

These must be exogenous shocks; any one of which, if true, could conceivably affect stocks and real estate investments:

dailykos.com

* Flaming tornado: On rare occasion, the wind can whip fire into a whirl as strong as a tornado. A storm of such twisters killed 38,000 people in Tokyo in 1923.

* Poisonous cloud: In 1986 in Cameroon, 1,700 people and 3,500 animals mysteriously dropped dead simultaneously. Scientists discovered that a nearby lake had absorbed carbon dioxide from the dormant volcano beneath it, and then spewed out a 16-mile cloud of death that moved at 125mph.

* Asteroid strike: Astronomers believe a 220 million-pound asteroid hit the earth's atmosphere over Siberia in 1908, producing an impact equal to 185 atomic bombs, and felling 80 million trees—but killing no one, because the area was so remote.

* Snake attack: Days before Mount Pelee blew in the Caribbean in 1902, hordes of poisonous snakes, sensing the coming eruption, poured into the streets, biting and killing at least 50 people.

Daily Beast

Christina Romer's Optimistic Presentation: "Back to a Better Normal"

    Christina Romer's lecture called "Back to a Better Normal: Unemployment and Growth in the Wake of the Great Recession" presented at Princeton University, April 17, 2010, exceeded my excited anticipation. Her message remained solidly optimistic, despite present day observations of an ominous nature. My synopsis is taken from my notes and the written speech.

   "By almost every indicator, the US economy is finally on the road to recovery."

   "The New Normal" is a concept discussed by President and advisers frequently. "We are very far from normal."

    Current unemployment rates reflect a severe shortfall, a collapse of aggregate demand as an effect of the financial crisis that caused a loss of wealth, disruptions of credit, devastation of state and local government budgets, greater caution on the part of consumers and firms, and fall in output around the world. The "rise in long-term unemployment is the almost-inevitable consequence of the severe recession." Romer emphasizes "there is every reason to expect that long-term unemployment will come back down when aggregate demand recovers."

    Challenges reduced but not yet eliminated are credit that remains tight, businesses aren't hiring, state governments have budget shortfalls...It's currently "a replay of what happened during the recovery from the Great Depression."

Christina Romer, President Obama, Lawrence Summers

Photo by Pool/Getty Images North America

    Consumption is not likely to be "the main engine of a strong recovery." Monetary policy is "unusually tight given the condition of the economy". We are"growing again, but not booming". The economy is "not predicted to reach normal levels for an extended period...There are limits on the role government can play."

"What More Can We Do?"

a) "Our focus as policymakers should be on how we can help the private sector recover faster."

b) tax incentives for businesses to employ and retain workers.

c) "additional fiscal relief to the states" extend unemployment insurance benefits extensions, caused by shortages of jobs not workers, and provide capital to small banks to lend to small businesses.

d) open markets to US goods, to move "global economy to more balanced growth."

e) energy conservation through rebate programs.

    Rapid recovery can "help ensure that unemployment does not remain permanently higher". Return of economy to normal is "both possible and a policy imperative...High unemployment is a disaster for the economy"and "more importantly, a tragedy for those affected."

   Can we do better than "just get back to where we were before the recession?" "Could good economic policies lead to economic growth that is stronger and more durable than before?" The answer, Romer says, is yes, with these economic transformations:

1. "Dealing with the Budget Deficit": "budget problem was years in the making." To get fiscal house in order, health reform legislation include mechanisms experts say will "slow the growth of health care costs over time...Vigilance on "implementation of the reforms" is necessary "to make sure that those mechanisms work" and a range of other measures are needed.

2. "Rebalancing Demand": higher personal savings and investment are the goals. New investments in clean energy, biotechnology, healthcare and information technology are better than borrowing, consumption spending and "unsustainable" construction.

3. "Financial regulatory reform" : new sets of rules needed to "curb destructive bubbles" require greater accountability of Wall Street, consumer protections, new rules for financial system  -  a "regulatory framework where capital and liquidity requirements control excessive risk-taking and where regulators consider risks to the system as a whole and not just to individual institutions."

4."Investing in Education and Innovation": with investments in education, basic science, new labs and research facilities.

The Cold Heart of America: Are American Banks Global? Iff They Convert Currency As A Service

Janet Tavakoli

Janet Tavakoli wants us to talk about how American banks could improve, when she says that "most of the media covers-up for the banks." I have great admiration for her vast accumulated knowledge of investment banking. Coming from the same cohort as Michael Lewis at Bear Stearns, Goldman Sachs, etc., she has written fantastic articles and videos to watch on C-Span.

I do have one teensy suggestion that could help win the hearts of minds of visitors and travelers of all nationalities. That is, local American bank branches should be global money-converters.

Most American banks will not change small amounts of money (U.S.D. $200, say) if you walk in and request it. You must have an account at that bank, and then deposit it into your account. There may be a few that do, but in general American banks won't. They are not "of service" in that way.

Last week when I drove through the Canadian border crossing at Ivy Lea, the foreign exchange building at the border where I have changed my dollars in the past was seasonally closed. When I stopped to change currency of my few dollars at an HSBC branch in the next large town, Watertown, New York, I was haughtily, imperiously told by a branch supervisor that HSBC is a "Global Bank" and that this is why they don't change currency.

I retorted that this is exactly what global banks do: they change money, otherwise they are not "global" ipso facto. They were definitely not being of service to me. It appears arrogant and narrow not to change small amounts, at least of popular foreign currencies. As my teenager says, "it's not good." American banks could do a lot better.

This is not some service that changed after 9/11. It has ever been thus in America, at least for the last thirty years. I am only referring to currency exchange that is a routine service at airports that good travelers need, not the money-laundering that is legendary to the mafia and terrorists. Sure it's probably an intractably hard legal issue and most Americans will think I'm just spinning my wheels (like I did last week!) and dismiss it. It's just one easy example of what outsiders of every country consider American arrogance. It makes others angry at America; it doesn't endear America. No country is perfect, but at least this is changeable.

Since my last post, I have been thrown off course by the double whammy of a death in the family - my mother was in her 93rd year - and an almost fatal car crash on the day-long drive home from the funeral. We thought it would be a clear day to drive home, with a little drizzle in spots, but ran into wind and saw a few snowflakes.

Most unexpectedly somewhere between Scranton and Wilkes-Barre, Pennsylvania, on my way to the Princeton area of New Jersey, my car spun in more than a complete 360 degree circle and then stalled to a  complete stop in the middle lane of the Pennsylvania Turnpike in a wintry mix just over a week ago, on Tuesday, March 30, 2010.

Alone with my sixteen-year-old, we were extremely lucky traffic was light. I got out and stopped all traffic, just by waving my arms myself on the Pennsylvania Turnpike and told her to stand beside the road. It was in elevated mountain terrain, and the highway itself was elevated fifty feet. There was nowhere to go, no houses, police or plows to help us out. I would love to be able to thank the Good Samaritan who drove my SUV to the side of the road while I slowly stopped Turnpike traffic all by myself. It all took fewer than ten minutes and then we were off again. My recently-tuned Lexus RX350 SUV had only 17,000 miles on it. I guess I shouldn't have pumped those brakes when we slid.

White-out conditions then began, traffic slowed to 30 mph. and prevailed until I could reach the next (rare) exit over an hour later where we stopped unexpectedly for the night at a new Best Western three miles down the mountain in six heavy inches of snow.  Another daughter had just told me the weather radar for the area was clear! That area of Pennsylvania doesn't get the weather attention Philadelphia gets, where reporters stand outside six hours before a flake drops.

If only I could thank this thirty-five-ish man and his girlfriend in their black SUV for saving my life, I would love to. He really risked his life to drive my car to the side of the Turnpike. I admired him so much. He was extremely brave, but I have no idea who he is. Hope he emails me.

The good news is, at least not all Americans are as cold-hearted as they appear to be in the banks when you just want to change a few dollars.

Managing the Unknowns in a Time of Uncertainty

M. El-Erian Photo: CNN

I like the way Mohamed El-Erian, CEO and CIO of PIMCO, on CNBC just now, talked about the need to second-guess in business, because of the "known-unknowns" and the "unknown-unknowns" as he called them.

Most of life is uncertain, and the need to manage uncertainty will always rule our lives, both business and personal.

(As it did the Fedex driver who was just stuck in the snow in our driveway for over an hour.)

The LIMB Method of Choosing Mutual Funds

I have been revisiting the year's top gainers list for a future post, and have looked again at the "CANSLIM" method for stocks invented by William O'Neill, founder of Investor's Business Daily newspaper and author of investment guidebooks, just for mental exercise. I always get somewhat confused and tied up in knots worrying about stocks, so funds are relaxing for me to look at.  As far as mutual funds are concerned, the "LIM" are more important than the "CANS" in my view. (This is something I decided myself, and it really simplifies the process of choosing mutual funds.)

L - Leaders vs. Laggards. Choose leading mutual funds. The leadership of previous mutual fund success is easily found in fund charts (e.g. bigcharts.com) by checking longer time horizons. The bigger vista tells you more with mutual funds, as John Bogle says. This also tells you how they have fared in the most recent bubbles, and helps you invest based on how much you can afford to lose. The less you can afford to lose, the more conservatively you must invest. The younger you are, the more risks you can take with some of your money.
I -  Institutional Support. Again, choose leading mutual fund companies, because they mostly are the institutional support and some have lower fees than others. Easy.
M - Market Direction. Not so easy. In fact, this is the hardest. You want a fund heading up, right? This is why Bogleheads stay in funds and won't move out. Don't get me wrong, I like Vanguard et al. But funds tend to move up and down slowly, with some exceptions giving you time to think about your moves. Certainly, it's normal to change mutual fund lanes more slowly, SUV style, than to day-trade stocks lightning fast, because diversification and staying in the market are constant themes for good reason. The idea is to put money to work at all times, if possible, and choose carefully based on "your risk tolerance."
B - Beta. Beta is the financial term for volatility. 1(One) is the baseline for mutual funds, and the more risky, the farther away from 1 the beta is. It's a factor to compare when choosing mutual funds, especially sector and commodity funds as these move fastest.

L and M especially are the most important criteria for choosing leading mutual funds because they're all we have to go on. Even Jim Simons, the legendary hedge fund owner, says he chooses stocks based on past performance because it's all the information he has.  Of course, for legal reasons, stocks and funds constantly have the "beware" sign up.

Even though most of us aren't full-time day traders, there's still plenty of opportunity to do well in the market. We have lives. Full lives. With computers, we don't have to make charts by hand laboriously as we certainly used to have to do.

It's possible to invest in tax-exempt mutual funds and make off well all by yourself without spending hours and hours on it with the help of your quick online research. Morningstar.com and Fidelity.com are some online resources to check because you can compare funds and their fees (lower is usually better). You may want to spend hours depending on the size of your portfolio, but you don't have to. You can choose a mutual fund based on incomplete knowledge of a fund, and that's all right,  just as you won't ever know everything about a company if you buy its stock. For most consumers of mutual funds, fund leadership and market direction are key. Like children, vigilance is everything, but less so with mutual funds than stocks.

To summarize: funds are a lot easier to manage for the average investor than stocks for the following reasons,

(L) leadership - previous fund success
(I) institutional support - lower fees
(M) market chart direction and
(B) beta or volatility.

The point is that buying anything is a whim, including investments, necessities and groceries. Sorry if this is too basic, but there are thousands of stocks and funds to buy and it's a buyer's market. I can't help giving my two cents for what it's worth.

How Fast is America?

By nature I am optimistic, and it worries me that "too big to fail" American company officials are getting government bailouts excessive enough to allow the usual comfortable fancy travel junkets and bonuses. At the same time, "too small to survive" companies, despite many being deserving, are being eaten alive for lunch by shorting day traders ganging up online with impunity.

The government has drawn a line in favor of big business while sending thousands of its best former students to invade a far-away country in wintertime. After the Second World War, returning troops created the largest post-war boom the country has ever had and didn't sit around doing nothing as expected according to this book. America continues to believe it can afford everything but healthcare for all and helping American small businesses.

Glad to see that averages went up in November on American exchanges, despite the fact that I spent most of it writing my novel, keeping an eye on the market, as usual, though not positively glued.

Here's a good speed test website called 10-fast-fingers.com that tests your typing speed and lets you practice and improve your score. It's like playing a game against yourself and includes simple English words. Other languages are possible on this test, too. I found it fun, and got 85 words per minute to my surprise, with 0 errors. If only I were that way in real life and with my investing!

National Novel Writing Month

Since I am writing a novel about a financial journalist this month, my posts will not be as frequent. Should be back soon.

“It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!” Reminiscences of a Stock Operator, Edwin Lefevre.

Ben Franklin:"The Art of Making Money Plenty in Every Man's Pocket"

Sallie Krawcheck at Bank of America is currently on CNBC and letting it slip that consumers are using personal [financial] advisers far less now than they used to. That would appear to give more opportunity to personal finance blogs like this one. Of course, since I don't make the salary that she does ($10.6M+) all my advice should be given the proverbial grain of salt. I do, however, like to quote the famous and illustrious from my rare book collection. Here is another I found:

"At this time when the general complaint is that money is so scarce it must be an act of kindness to inform the moneyless how they can reinforce their purses. I will acquaint all with the true secret of money catching, the certain way to fill empty purses; how to keep them always full. Two simple rules well observed will do the business. 1st Let honesty and labor be thy constant companions: 2nd Spend one penny every day less than thy clear gains: Then shall thy purses soon begin to thrive, thy creditors will never insult thee nor want oppress nor hunger bite, nor naked freeze thee, the whole hemisphere will shine brighter, and pleasure spring up in every corner of thy heart.

Now thereby embrace these rules and be happy."

Ben Franklin, 1709-1790.

Forbes: Billionaire Similarities

Forbes Magazine found a few connecting dots between billionaires in this year's The 400 Richest Americans 2009 list:

Many of them :

1) Had an important early failure that they learned from.
2) Had parents with math-related careers.
3) 15% didn't finish college. Of course this means that 85% did finish college, and the others, such as Bill Gates had superior social advantages and earlier schooling.
4) Received MBAs from top-tier colleges. At least MBAs don't hurt.
5) Had September birthdays.
6) Worked awhile at Goldman Sachs.
7) Were members of Yale's Skull & Bones Club.

Few of us have September birthdays or were members of Yale University (and a former boys' club). Few of those who made their own billions had dark skin or were female, I notice. Oprah Winfrey, a notable exception, powered past many of the white male majority of billionaires.


Oprah Winfrey

Obviously, these billionaires are more different than alike. The world is changing, and the future has yet to be written. Let's see more diversity. That list should include more women, too, more than one half of the world's population.

Famous Investment Quotations

When asked what the stock market will do, J.P Morgan (1837-1913) (banker, financier, businessman) replied:"It will fluctuate."

October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February. -Mark Twain

Keynes:The market can stay irrational longer than you can stay solvent.

Buffett:You only find out who is swimming naked when the tide goes out. – (many more from Buffett here)

From Poor Richard’s Almanac, Benjamin Franklin, 1735-47:

• A fool and his money are soon parted….
• Poverty wants some things, Luxury many things, Avarice all things….
• Beware of little Expenses, a small Leak will sink a great Ship.
  
  A bull is someone who believes the stock market will go up and a bear is someone who believes the stock market will go down. A bull market is a rising market and a bear market is a falling market. Where does bull and bear come from? Some sources say that a bull knocks you up in the air (rising market) and a bear knocks you down (falling market). Investment Trivia
  
  Shakespeare: Neither a borrower nor a lender be; for loan oft loses both itself and friend and borrowing dulls the edge of husbandry.
  
  Winston Churchill said this: “Saving is a fine thing. Especially when your parents have done it for you.”
  
  Groucho Marx: “Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.”
  
  Julius Rosenwald: “Do not be fooled into believing that because a man is rich he is necessarily smart. There is ample proof to the contrary.”
  
  Ecclesiastes 5:10 "Whoever loves money never has money enough; whoever loves wealth is never satisfied with his income."
  
  Ecclesiastes 10:19 "A feast is made for laughter, and wine makes life merry, but money is the answer for everything."
  
  You’ll want to stay away from the brokerage firms who's motto is 'Win 'em, spin 'em, churn 'em, and burn 'em.' Investment Trivia
  
  We can all be reassured by this comforting saying from Bertrand Russell: "The most valuable things in life are not measured in monetary terms. The really important things are not houses and lands, stocks and bonds, automobiles and real state, but friendships, trust, confidence, empathy, mercy, love and faith."

American Financial Proverbs

A proverb "expresses a basic behavioral truth in a rather universal metaphor." (Deproverbio.com)

Some are applicable only to the American market, while others pertain to investing in general and could apply internationally. They may or may not be true, as a little warning! Most countries and cultures have their own proverbs.

These are a few of my favorite anonymous well-known proverbs I've heard many times, although there are many, many more and another post will have financial quotations. It’s an interesting area to research. Please send in your suggestions and attributions and this post will be updated.

Buy when the blood is running in the streets.

Buy low, sell high.

Bulls make money. Bears make money. Pigs get slaughtered.

Don’t try to catch a falling knife.

Buy on the rumor, sell on the news.

Sell in May and go away (not true this year!)

The trend is your friend.

Sell your losers and let your winners ride.

Don’t fight the tape.

The trend is your friend.

Buy when there is blood in the streets.

Think big. Think positive. Never show any sign of weakness.

Now is always the most difficult time to invest.

Look after the pennies and the pounds will look after themselves.

The last one is definitely British.

Here's An Interesting Stock Strategy

Bryan and Bob Auer | Auer Growth Fund

Bryan, 73, had been managing his own investments quite successfully for a long time when his son Bob, 48, took a job as a broker at Dean Witter Reynolds in 1986. Bryan opened accounts with his son but wasn't interested in the firm's research or recommendations. Rather, he had his own stock-picking system -- one the duo continues to employ at Auer Growth fund to this day: Cull through thousands of stocks looking for 25% earnings growth, at least 20% sales growth and a forward price/earnings multiple of less than 12. "Once a stock stops having those characteristics or doubles in price, we sell," Bryan says. "We started that process in 1987 and by 2007 our accounts had an annualized return of more than 30%," says Bob. So in late 2007 they launched Auer Growth, with Bob acting as portfolio manager and Bryan in charge of portfolio analysis. Naturally 2008 was an inauspicious time to start a fund, but for the year to date it's up 22%. When asked what's the greatest lesson he's learned from his dad, Bob laughs. "Only how to compound money at 30% a year." Wall Street Journal

Bob Auer was interviewed on CNBC today and made some sense on the bullish side. The article, called "Five Father-Son Teams Share Investing Secrets" by Dan Burrows,isappropriate to read anytime and now, just before Father's Day.

Their criteria :

1. EPS Growth This Year Over 25%,

2. Sales Growth Qtr over Qtr Over 20%,

3. P/E Under 10.

For Many Investors: Buy & Sell, Not Buy & Hold

A cogent article in today's Wall Street Journal makes the convincing point that the long-term buy-and-hold strategy has, by now, fallen out of fashion. Investors, especially those discouraged from the recent historically sharp downturn, are saying,

"things are different this time. "The problem I have with the buy-and-hold strategy is that it's a bull-market strategy," says Matthew Tuttle, a financial adviser in Stamford, Conn. "In the bust, you give all of your profits back."

Every time I hear "it's different this time," it usually isn't. That maxim has long been echoed in times of flux, whether it concerns the housing bubble, the internet bubble and going all the way back to the tulip craze.

Of course, the traditional view of die-hard buy-and-hold investor John Bogle disagrees. "It's a fools' game," says John Bogle, the 79-year-old founder of mutual-fund giant Vanguard Group, which helped popularize index funds and the virtues of buy-and-hold investing. Not only will short-term investors pay more commissions, fees and other costs, but various studies have shown that market timers typically lose more money than buy-and-hold investors.

"If you want to trade the market, you've got to be right twice -- you've got to get out and get back in," he says.

What do you think? Is it different this time? Were you always skeptical of "buy-and-hold forever"? What will make money for you this year?

WSJ article

Merit Prizes Are Over-Taxed

Larry Kudlow said in his show this evening, that taxes shouldn't punish legitimate earnings. But, of course, they do. What is he thinking?

Merit prizes, professional prizes, especially, for example, the Nobel Prizes, are not regarded tax-wise as an inheritance. They're taxed at 50% after deducting federal and state taxes, because they're thrown into the same tax bag as gambling winnings!

Is it any wonder, therefore, that UBS isn't giving out the names of Americans who have deposited money in Switzerland in private accounts to avoid taxes? It's not happening anytime soon.

Can you imagine the uproar if Nobel Prize winners and elite government officials were found to bank their money offshore, away from American taxes and the IRS? Can you imagine the backlash from voters?

America Is A Wonderful Country

Now we hear that the AIG bonus money was paid out last Friday. Those bonuses won't be returned. What could the administration and AIG have been thinking? It's a wonder there isn't a revolutionary mob at the doors of the kings (and they are mostly male) of AIG (my former neighbor included).

There are so many causes of the recent financial collapse and each person will have a different explanation of the causes when they think about it. Memories fragment over time. The mists of time prevail.

If we could only rewind the clock and go back and change what went wrong. How far back would we have to go? Would we really want to go back to a possibly mythical simpler time with a straightforward, easy set of rules?

Looking forward, how will America adjust to new tight economic credit markets? If the Chinese obtain dominating control of our market and tighten credit? No American wants to go there. No one in the administration wants to talk about it, or even acknowledge it.

The focus is on credit and the economy, housing, foreclosures, lending limits, the stock market. The large issues of energy, healthcare and educational reform will have to wait.

What is the destiny of America that it can map out by itself and form a strategy to get there? What does America do well, the best in the world?

Here are a few important social values:

1. education for all.
2. cars, making and distributing, for almost all adults, green initiatives notwithstanding, and the oil and gas to run them.
3. household heat for all.
4. computer and software makers.
5. wealth consciousness and compassion for those less fortunate.
6. washers and dryers.
7. air conditioners.
8. crowd control when necessary, e.g. Disney Parks.
9. Disney and other outdoor parks.
10. food distribution is excellent.
11. Post office delivery sometimes is next day.
12. excellent highway infrastructure.
13. delivery services, like UPS and Fedex.
14. news services are pioneers.

There are so many more that I haven't listed. These above are a few values to get you thinking about "what makes America great". A friendly bank-lending environment may have dropped off my list. Financial services need better regulation to help Americans hold onto democratic ideals in the country. Saving AIG and Goldman and other companies involved in the bailout, if that's been useful, has many of us wondering when improvement will become clear.

As Dr. Christina Romer said yesterday on "Meet the Press", America has a wonderful base of labor, a capital base, technology and we will learn how to recover from this current economic "mess". She says it will take some time, but things should improve. Sales should pick up, jobs numbers should turn around, and consumer confidence should return.

Today's rocky stock market didn't instill much confidence. But hey, tomorrow is a new day.