Personal Economics 101

President Warren? President Sanders? Even a President Bloomberg, who thinks California is the model for the rest of the country, would add risk to stock and bond markets. Some of Wall Street’s biggest investors have already raised the alarm that stocks could see a big sell-off if markets start to believe that Sanders could prove a meaningful political threat to President Donald Trump. Bond investor Gundlach said that the biggest risk to the market in 2020 was the possibility of Sanders becoming president. Longtime hedge fund manager Stanley Druckenmiller said something similar last summer, warning that stocks could plummet if Sanders is elected president. “If Bernie Sanders became president, I think stock prices should be 30% to 40% lower than they are now,” he said in June. “The good news is we’d all be much more equal because everybody would be poorer but the rich would have lost a lot more wealth than the poor would have,” Druckenmiller said. Similar forecasts of doom...

Quoted in CNBC: “If you have 40 years left to invest, a bear market right now is just noise and should be ignored — in fact, often celebrated,” said Doug Bellfy, a certified financial planner at Synergy Financial Planning in South Glastonbury, Connecticut. On the other hand, Bellfy said, “a stock market crash that starts the day after you retire can cause a permanent lifestyle impact if all your money is invested there.” Oh my! This is the buy and hold advice that most young (and old, in fact) investors are given. It's taught in financial schools. It's a common paradigm for long-term investing. There are whole theories in finance that revolve around this; for example, the Efficient Market Theory (EMT). I don't buy it. Avoiding bear markets, no matter how many years you have left, can be a huge difference in the outcome of your retirement portfolio. The charts below show that just holding can mean holding for more than a decade to "break-even." You don...

This guy gets it. Climate change or global warming has become a political tool to change the economies of the world. Embrace environmentalism, but not global domination. View it on YouTube .

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 returns Low or no risks Invitations to join exclusive investment organizations The ability to “get in on the ground floor” Claims of breakthrough technologies Penny stocks Seminars, free meals or travel offers The tactics Be particularly alert to these types of strategies: Unsolicited approaches by phone, email or text or in person A hard sell and lofty promises No way to call back or ...

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...

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 ...

  ‘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 tr...

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 p...

The SPY ETF, which tracks the S&P 500 reached new highs. This is a weekly chart, beginning in 2011. 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-adju...

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 wor...

If it doesn't exist yet, politicians will create a new tax. For example, Maryland legislators want to tax online advertising . Can you think of anything that is not taxed? The Atlantic Monthly says 2019 was the hottest year on record and the last decade was the hottest ever measured. But the Heartland Institute , which studies such data impartially, claims this data is cherry picked. For one thing, the term measured "means about 125 years." Climate changes are normally measured in much longer periods. And I'm pretty tired of the fear-mongers out there. If the climate is changing, let's take steps to adapt to it. The prospect of changing it to what we want are limited at best. I enjoy our current standard of living. I don't wish to go back to the middle ages, which is what the Green New Deal would do. Sorry Bernie. Glacier National Park used to be adorned with signs warning tourists its precious natural treasures would be "gone by 2020." The new ...

By Dominik Stone , former JPMorgan trader I will give you one simple rule: When a stock doesn’t do what you expect it to do, sell it. Here's some more: 1. Trade to trade well; not to make money. The money will follow if you trade well. 2. Fiercely protect capital. Keep losses small. Remember Buffet's rule: Don't lose money. 3. Act immediately without hesitation on qualified setups. 4. The only thing worse than being wrong is staying wrong. 5. If confused, see step #2. No hesitating, no questions or doubts raised, no conjectures of the way it should have turned out, or might still turn out, no dreams of how it will do, what it was supposed to do‚ tomorrow. The pro never says, "I’ll watch it one more day." He doesn’t phone an analyst who’s been following the company and ask, "What’s happening? Is there any news?" All too often, the delay in searching for the "bullshit why?" is costly! The desire to be perfect is one of ...

Personally, I have read hundreds, if not thousands, of articles and books, and watched countless hours of video (besides sitting in classrooms) about personal finance, investing and economics. There are certain principles that remain timeless; I'll focus on personal finance here, but there are certain principles for investing and economics that can be consolidated in just a few ideas. But first let's mention some things to avoid, in my opinion. In most cases, the message will be the same, and your time is valuable, so I've already wasted my time for you; no need to waste yours. You'll see headlines and memes like this:    1. How to Retire with $2.6 million When You Only Have $1,000 to Start    2. Turn $535 into a Million    3. 9 Simple Steps to Become A Millionaire by Investing Just $200 a Month    4. How to Turn $100 into $500,000 in the Stock Market And then they get really inventive:    5. $300 - $500 Everyday with Just 5...

Reprinted from Jeff Clark's Market Minute . This essay, originally published in 2012, brilliantly explains the problem with the U.S. government's tax and deficit problem. Reprinted with permission. by Jeff Clark, editor, Market Minute The United States of America could be the happiest place on Earth. We just need to change our income-tax structure. After filing and paying my 2011 taxes, there was still a little money left in my checking account. So I decided to splurge a bit and take the wife and kids on a mini-vacation to Disneyland. As I stood in the ticket line outside "the happiest place on Earth," I noticed the wide variety of people standing in line with me. There were tall people… short people… fat people… skinny people… people of every ethnic background imaginable. There were kids, teenagers, young adults, mid-lifers, and senior citizens. Every genetic and chromosomal background possible was represented, as was – I think – every income class. Cert...