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Avoiding Investment Fraud

Every year thousands of people lose millions of dollars to investment fraud. One conservative estimate is that one in 10 investors will be victimized at some point in their lives, and seniors are targeted more often than younger people. The number and sophistication of investment scams is ever-growing—but by maintaining a healthy dose of skepticism and training yourself to spot some common red flags, you may be able to protect yourself and your loved ones from becoming victims.

The come-ons
Be skeptical if investment opportunities come with any of the following features:
Guaranteed high returnsLow or no risksInvitations to join exclusive investment organizationsThe ability to “get in on the ground floor”Claims of breakthrough technologiesPenny stocksSeminars, free meals or travel offersThe tactics
Be particularly alert to these types of strategies:
Unsolicited approaches by phone, email or text or in personA hard sell and lofty promisesNo way to call back or follow up with the sellerInsi…

Improve Your Trading with These 20 Rules

Improve your trading with these 20 Golden Rules. But treat these rules as guides; with markets, there is no sure thing. But these will enhance your odds.
Forget the news, remember the chart. You're not smart enough to know how news will affect price. The chart already knows the news is coming.Buy the first pullback from a new high. Sell the first pullback from a new low. There's always a crowd that missed the first boat.Buy at support, sell at resistance. Everyone sees the same thing and they're all just waiting to jump in the pool.Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.Don't buy up into a major moving average or sell down into one. See #3.Don't chase momentum if you can't find the exit. Assume the market will reverse the minute you get in. If it's a long way to the door, you're in big trouble.Exhaustion gaps get filled. Breakaway and continuation gaps don't. The old traders' wisdom is a…

Lessons From a Trader

By Dominik Stone I learned about trading but I also learned a lot about myself and what I was good at, what I was horrible at, and what I was psychotic at — things that had nothing to do with day trading. Day trading is the best job in the world on the days you make money. You make a trade, then maybe 20 minutes later you are out of the trade with a profit, and for the rest of the day you think about how much money you made. It’s the worst job in the world on a bad day. I would make a trade, it would go against me, and then I wanted my heart to stop so my blood would stop thumping so loudly. I am now unemployable in every other way. Here’s what I learned. All of these lessons I will certainly use today, and many years after will stop trading. You can’t predict the future. Everyone thinks they can. But they can’t. This applies not just to trading but everything. You could be in relationship or married for 11 years and the next thing you know — you are splitting or divorced and you woul…

The Art of War, The Art of Trading

‘The Art of War / The Art of Trading’ by Dominik Stone

Rule Number 1: Always wait for the setup: No Setup-No Trade Easy, follow strictly designed plan of rules for entering any markets Rule Number 2: THE BEST trades work almost right away Best placed trades, at correct prices, will simply accelerate in right direction Rule Number 3: Never take a big loss. If it doesn’t ‘feel’ right. Remove it! Never allow losses to grow, cut them short if trade goes against you Rule Number 4: Always perfect your craft and sharpen your skills Study, learn, search, practice — always Rule Number 5: Be patient with winning trades: Impatient with sketchy trades Run winners and cut losers quick Rule Number 6: DISCIPLINE to follow your plan is the key to winning in trading Follow your plan, always, never deviate Rule Number 7: Never get emotionally attached to trades Emotions are in every trade, plan sizes correctly and stay detached Rule Number 8: Always trade with the size that makes you unemotional If you can’t sleep at …

An Investment Nudge

From Barron's:

Richard Thaler is a prolific academic, a successful author, and a principal at an investment firm with billions of dollars in assets under management. He has also appeared on the silver screen and has a Nobel Prize for his contributions to behavioral economics.

Thaler, a professor at the University of Chicago Booth School of Business, recently sat down with several of us at Barron's to explain how investors can be overconfident, nudged, and where they commonly go wrong.

Leslie Norton has some of the highlights:

It’s the new year. What behavioral errors should people watch out for?

Most people are under-saving. I blame the plan sponsors, because it means they haven’t employed my favorite intervention called “Save More Tomorrow,” where you automatically increase the saving rate over time.

We know that the best way to reduce biases is just to make decisions automatic. Investors are less stupid if they’re in a target date fund that prevents them from panicking when …

Stocks Overvalued: Three Indicators at Record Levels

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PEG Ratio
The price-earnings to growth ratio, commonly called the PEG ratio, sits at its highest level since Bank of America started tracking the data in 1986. What investors are willing to pay for stocks relative to their long-term earnings growth expectations is at an all-time high, according to Bank of America.

The price-earnings to growth ratio, commonly called the PEG ratio, sits at 1.8, its highest level since the firm started tracking in 1986.

“We have pulled forward some of the gains from later this year, and could see some multiple compression,” the firm’s equity and quant strategist Savita Subramanian said in a note to clients Thursday.

The current simple price-to-earnings ratio is at 18.4 times, hitting a level the ratio hasn’t seen since 2002.

Shiller PE ratio for the S&P 500.

This is the price earnings ratio is based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio), or Shiller PE Ratio.
It's c…

Is There Too Much Government (or Private) Debt?

This is a complicated subject, with opinions all over the map. Debt in most countries today is unsustainable. At some point, a nation runs into trouble; for example, Greece. Some borrowing is good, which provides more flexibility in funding government programs.

But if there’s too much borrowing, particularly when encouraged by misguided government policies, then households and businesses are very vulnerable if there’s some sort of economic disruption and they no longer have enough income to finance debt payments. This is when debt becomes excessive.

Yet this is what the crowd in Washington is encouraging. More debt to finance more government programs, as if there is no limit and no tomorrow.

Global debt of all types grew by $57 trillion from 2007 to 2014 to a total of $199 trillion, the McKinsey Global Institute reported in February 2015. That’s 286% of global GDP compared with 269% in 2007. The current ratio is above 300%.

See: Debt, Bubbles, and Reckless Government

The world's…