Retirement Talk Two
NOTE>>> It's that time of the year again where I have to travel north to NJ and winterize our little "trailer in the woods" so to speak. While Hurricane sandy erased our bayfront house, we also had a permanent trailer out in a local campground that we own. So I've got to scoot up there and "shut it down" for the winter. Thus, the next two letters might not be as in depth as usual, but I'll be back home next week and all will be back to normal.
Last week we were talking about what you'll want to do to retire. I said that the best approach is at least a 3 pronged fork, and possibly more. So we looked at one of the prongs, which is to buy a home and rent it out. NOT with the idea of making money on a monthly or yearly basis, and NOT to flip for fast profits. Just to have an asset that someone else pays for. Again, if you buy a home with a 15 year mortgage and you can get 95% of that monthly payment by renting it out, at the end of 15 years you have a solid asset that you can sell or live in "mortgage free". Having two or three of those is a major retirement builder.
Since I wrote that, I've had no less than 16 people write in to say they were doing that very thing. They'd bought homes to rent out, but not with the idea of making "income". Just for the idea of ending up with a free and clear home, by letting someone else pay for it for 15 or 30 years. The way the internet works, if 16 wrote in to agree with my piece, that means at least 3 times that are also doing the same thing, but just didn't take the time to write about it. I say "congrats!" to you all.
Next up is "streams of income". We all need income just to survive. For most people that income arrives via way of a "job", which is fine. But think about it, if all the money from your job is funneled into your house, your cars, your food, your insurances, etc, it leaves very little to "put away". So along with your "job" you really need an alternative stream of income. Thus the question... like what?
Some folks sell things on Ebay. Some folks do side jobs. Some folks run online stores, etc. All of that is fine and I encourage you to do it too. I don't care if it is cutting lawns on Saturday, to giving classes on woodworking, you should do something to supplement your job's income.
For us that something is "investing" in the stock market. There is simply no other form of income that I've ever found that creates as much income as personal online investing. But it isn't just the income that is important, it is the ease of making trades, the fact that you're in your own home, sitting in your PJ's if you want. In other words, Think of the comfort factor here for a minute...
Let's suppose you're great at building decks. So on your days off you build decks for folks. Great! But you've got to deal with the weather, picking up materials, and the physical aspect of actually doing the work. In other words it isn't always easy. Now on the other hand consider investing. I'll use the Q's as an example. About a month ago we liked the idea of a big bounce coming after the 10% correction we had. All I did was hit a couple keys on my computer, and I had bought 100 shares of it. I didn't have to deal with the weather, I didn't have to lug materials or tools, I didn't have to deal with obnoxious people. I just pushed a button.
Those 100 shares are now up over 10 dollars per share for me. That's a thousand dollars folks. My physical output was nothing, and yet my return is quite wonderful. What other stream of income allows you the CHANCE to make a thousand dollars in a month by pushing 3 buttons? None come to mind.
But of course if it was easy "everyone would do it". I'm here to tell you that it isn't' that easy. That's the big catch. If you just blindly stumble around and think you're going to make a ton of money, let me tell you something...the market's going to eat you alive. No, it takes an education to learn how to do this right and even then you're going to make bad trades. NO ONE wins all the time. The idea is just to win more than you lose and you do that by risk management, stops, cutting losses and trying to hold winners.
Over the past five years it has been pretty easy to make more than you lose. The market has been rigged to go up and when the market is going up, it is pretty easy to buy something and have it work out for you. But where people get in trouble is that they forget that markets come down too. More times than not, folks "give back" all they made and then some. Once again it comes down to being educated about how it all works.
Which brings me to the topic of shorting the market. I find it incredible that in this day and age, there are still people "afraid" of going short. I want to clear that up for you all right now, there is NO danger in going short. NONE. Don't listen to the idiots on TV, they don't want you short because it hinders their chances of pushing stocks to levels they don't' belong at. Ignore them.
The reason they tell you that shorting is dangerous is simply ludicrous. Here's the thinking... if you buy a stock "long" the most you can lose is the price of the stock. In other words if you buy XYZ at 50 bucks and then the news hits that the CEO was having sex with a unicorn, the CFO stole all the money, the Product is defective and they go out of business. What's the most you can lose? 50 bucks a share.
If you go short XYZ at 50 and instead of bad news, they cure cancer, the CEO is found to be Godlike, the CFO is the only honest financial manager in the world and the stock rises for "ever" it would bankrupt you. Well DUH! Yeah if you continued to hold it instead of "covering you short" you'd go broke. But would you really do that? If you shorted XYZ at 50, would you continue to hold it short as it rose over 75, 100, 125, etc? Of course not. You'd manage your risk and take the 5% or 7% hit and move on to the next trade.
My point is this... the single biggest income year we've ever had, was being short the financial sector of the market during the 2008 - 09 meltdown. We had gains on some issues of 70 dollars a share, and it didn't take ten years to get them, it was done in 9 months. We had "put" options that gained over 400%. We didn't lose a dime in the great meltdown, we made tons of money. But it came via way of education folks. We've been doing this for years. The fact is however, that there's going to be another crash and I absolutely believe we'll make even more money on this one that we did in 08.
So here's my plea to all of you. Don't quit your job, that's silly. But find an alternative stream of income that you can use to build your nest egg. I suggest you learn how to trade and invest in stocks, both UP and DOWN. With today's technology and tools like cell phones and online trading platforms, it is incredible what you can do even if you work 9-5. Follow along here for a minute...
We have a paid for membership area, where every single day we show you what we're looking at, the price we'd pay for that stock, and the initial stop we'd implement on it. Suppose you cough up the 199 bucks for a year of our service, but you have a full time job. Does that mean you can't trade along with us? Not at all, it's called advanced orders.
Lets say it's a typical weekday and our 8:30 am update hits your email box. In the update we say something like ... I like the look of LRCX if it gets over 80.50. That simply means that if LRCX get over 80.50 I am looking to buy it. But you could be at work when/if that happens. Does that mean you can't enjoy the trade? Not at all, it's called an advanced order.
You simply call up your trading account on your screen or your phone and place the order. It would read something like this "If LRCX > 80.50 buy 100 shares at market"... Now lets say that at 11:25 am, LRCX crosses 80.50. Your platform will place the order and you'll get filled. Maybe you get it at say 80.53. Fine, you're in.
You can then even add more to that advanced order depending on the trading platform you use. For instance you can say "if I fill on LRCX> 80.50 attach a stop loss at 79.90". So without even knowing what's going on in the market, you very well could have bought LRCX and attached a stop to save you from any deep loses...while you were at work. You can do this at 8 am, or 11 pm or any time you chose.
So "having a job" doesn't keep you out of investing safely in the markets with us. My point is that I have not found anything else that can bring the returns that investing does, with so little physical work. You don't need inventory to sell, no warehouse, no manual labor, no web site, no nothing. All you need is a good education about investing in the "REAL" world, and to follow along with someone like us to find good investing ideas. The technology will do the rest.
Finally, let me say this... you're not trying to "beat" the market. You're simply going along for the ride WITH the market. You won't buy in at the lowest and sell at the highest, you'll simply take a chunk out of the middle time and time again. It adds up.
Take the plunge and see if I'm right. Join the Insiders Club for a year and let me try and help you create that second stream of income. Between the newsletter and the Insiders Club you'll be the most informed person you've ever met. The Market...
It's been a slog for them that's for sure. We opened Monday with the DOW at 17812 and ended the week at 17828. While along the way there were dips and pops, the overall market really only traded sideways. That's a bit disturbing because the Thanksgiving Holiday week is usually a pretty good one.
The market has felt heavy for two weeks. While they've dug in their heels and kept the wheels from flying off, you can sense the desperation of it all. You can feel how "controlled" it is.
I will NOT be surprised if we see some true red show up next week. A likely scenario is a bit of a pull back for a bit, and then a final run up into the Holidays which is classically nicknamed "the Santa Claus rally".
There's an old adage on Wall Street that you should never short a dull market, because it often has a habit of jumping higher just when you think it's been flat too long and ready to roll over. We actually saw that "two" weeks ago. The market was moving sideways and up, but it was struggling to do it. Then on that Friday for no apparent reason it popped higher for 90 points. So why is this different?
It really isn't. We've got a tremendously "flat" market that's probing for direction. So it wouldn't be unusual for it to just pop higher for no good reason as it's known to do. But the reason I think that this week we might actually dip some is because this is TWO weeks in a row of flat sluggish trading with just ONE pop higher day.
The good part is this...if I'm wrong and we continue higher, FINE! We're carrying four long positions and I'm okay with it just going higher. But if it does decide to roll over, that's fine too. Why? Because we employ what we call "trailing" stops. As the stock moves higher, we move our stop loss higher, "trailing it' so to speak. So even if the market was to roll over this week, we'd simply get stopped out and take our profits.
Right now we're in the Q's, LLTC, LRCX, and SBUX. All of them are green for us, with the Q's being the real winners, they're up over 12 dollars a share for us from our entry. (Note, if you remember last weeks letter we also had CSX long. It had done well, but then with oil falling again it started to fade and we sold it for a meager 20 cent a share gain. That's sad, it was up over a buck for us. Oh well, a profit is a profit)
So watch out for a bit of profit taking "redness" this week folks. It might not happen, as they've managed this market from command central, but it "feels" like it might hit. Take care and I'll see you all on Wednesday.
PS.. If you'd like to see the exact stocks/options/metals/ETF's and 401K moves we will be looking at for this week, please consider becoming a member of the "Insiders Club" located here: www.investyourself.com