The Bull Hunters Guide

Over the next few entries in this article, we’re going to be discussing the Federal Reserve and the role that it plays in the market. When we’re done, you’ll have a more thorough knowledge of the American economy and thus will be better prepared as an investor to make smart decisions about your money.

Federal Reserve Purpose

Simply put, the Federal Reserve was created in 1913 as a means to keep an eye on the United States’ official monetary policies and ensure that they were in keeping with the country’s best interest. In addition, before the Federal Reserve was instituted, people were reluctant to make use of the banking system due to having no real guarantee that their money would be there when they went to withdraw it.

The Federal Reserve is led by a board of government appointed individuals, seven of them to be precise. They act as the governing head of the whole institution and are centrally located in Washington. Below them are twelve Federal Reserve Banks, which are spread out across the United States and located in some of the country’s most populous cities. These individual branch banks accomplish much of the work of the Federal Reserve by analyzing local markets. They also generate income themselves by acting as traditional banks.

Federal Open Market Committee

The Federal Reserve also operates a board known as the Federal Open Market Committee, which is the branch of the Reserve that makes policies based on the research and findings of the other branches. National interest rates and other monetary policies of similar scope are decided upon at meetings of the Federal Open Market Committee, in order to establish a balance between taxation and inflation that is beneficial to all parties involved.

Of course, these are just the big parts of the Federal Reserve. If we want to be totally accurate, we should also say that each of the individual banks you are likely to do business with are also allied to the Federal Reserve, making it a truly nationally operating institution.

Next time, we’ll discuss some of the particular obligations of the Federal Reserve.

See you next week for part 3 of the Federal Reserve.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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Investment scams aren’t limited to the fast paced interaction of bulletin boards, of course. Newsletters are another popular way to scam unsuspecting investors who are looking for a valuable tip on where to put their money next.

Newsletters Can Be A Scam

There are a lot of stock pick sites out there. Not surprisingly, each one claims to have the best strategy or formula when it comes to picking stocks. One of the most popular features of these sites is that they offer periodic newsletters, sometimes as often as one a day.

Some of these newsletters are legitimate, and actually offer the unbiased market advice that they claim to offer. However, just as many or even more of them are written by companies under the guise of a third party pseudonym to boost and promote their own stock!

Obviously, this can lead to all sorts of trouble. A legitimate company that was doing well in the marketplace through honest means would have very little reason to artificially inflate the value of their stock through disseminating disinformation in a newsletter. Any company with a future would also be wise enough to realize that this tactic is only setting themselves up for failure in the future.

In addition to the artificial inflation by paid companies, newsletters are also a popular place to run the pump and dump scam, offering what looks like a valuable tip, but is actually intended to ruin the investors who are duped into acting on it.

Newsletter Advice Things To Check

When you get an online newsletter that offers what looks like good advice, make sure of a few things. First, ensure that you actually subscribed to this newsletter. If it comes from an unknown source, you should delete it immediately, because it’s certain to be spam, and therefore certain to be a scam or at least a terrible waste of time.

Secondly, make sure that the newsletter you subscribed to accurately discloses who paid them to write it, how much they were paid, etc. Federal law requires this, so those newsletters who skirt around it are probably looking to hide something.

Lastly, proper grammar is critical. A professional newsletter might have a single typo, but it definitely won’t be full of misspelled words, use all capital letters, or endless streams of exclamation points.

See you next time when we talk about actual investment fraud.

See you next week for part 5 of Investment Scams.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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Recently in this blog, we’ve addressed the topic of general stock market tips that were intended to help new investors come to terms with some of the myths and rumours that dominate the market, as well as to avoid some typical mistakes that often spell the downfall of first time investors. Having addressed a sufficient amount of those, however, it’s time to move on to some more specific topics. In particular, we’re going to begin to discuss the different strategies that are normally employed for choosing winning stocks and comment on the pros and cons of each one.

Having it all figured out

Everyone out there seems to have it all figured out when it comes to the market. They all think they have the sure-fire formula for picking up on the next big thing and hitting it big all with one well placed investment. The truth is, of course, that no one can accurately predict the future all of the time. If they could, there wouldn’t be any fun in playing the market!

As one plays the market and grows accustomed to its ups and downs, one can’t help but to begin to see patterns. This is just the nature of the phenomenal (and shortcut-loving) human mind at work. Everyone develops their own strategies. Be that as it may, there are certain strategies that have risen to the forefront and tend to be seized upon as “sound strategies” by a majority of individuals.

Fundamental analysis

The first of these, and the most important is the concept of “fundamental analysis”. Simply put, this is, of course, the analysis of the fundamentals of a company. But what exactly does that mean? The main theory here is that stocks tend to have a “real value” which is separate from the nominal value that it is being traded at on the market.

This “real value” is determined by looking at a number of factors, including the projected future cash flows of the company in question (the same thing you would look at when buying a company outright, which in a very real sense, is what stock trading is all about), as well as how fast it will generate the profit it seems to be ready to generate, and what that passage of time means in terms of inflation.

Differing schools of thought

Phew. It’s a lot to think about, and maybe that’s why there’s so many competing schools of thought on how best to determine what the real value of a company is. Those differing schools of thought are what we’re going to be discussing over the next several posts in this blog.

Until then, happy trading!

See you next week for part 2 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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The stock market has dropped 2 years worth of gain in the last few months.  One would be tempted to call it a large correction in a Bull Market or the start of a Bear Market.  Either way there are ways to make money in both markets.  I have personally not felt the drop since I’m 100% insured at the level I got in at and have locked away profits along the way.

Trust Me - Said The Smiling Bank Manager

The market has people worried!  It’s dropping and suddenly the “Fed” (Federal Reserve Bank of New York), a non-US Government controlled corporation that makes a living from lending money to it’s biggest customer: The US Government, decides to “issue”  Billions of dollars to “prop” up the economy…  Well, that money never existed in the first place.  Seriously, how is that going to help?  We all know it does, short term, but the long term effect is this:

• 150 Billion Dollars issued to the US economy (or was it 200? Does it really matter?)
• The money isn’t backed by squat! It’s simply issued. It is only regulated.
• Inflation devalues the existing currency in circulation, which will possibly increase interest rates. Oops! Who collects interest rates?
• The US now pays annual interest on that money, presumably from taxes as it surely doesn’t have many other sources of income. But the US Government doesn’t issue money, so how will it ever repay the debt?
• The US National Debt increases (by over 1 Billion Dollars per day). Remember, the money isn’t issued by the government.
• The downward spiral is fueled even more.

Money Is An Illusion

If money can just be issued without any backing (i.e. gold), then what controls the supply and demand?  Who controls whether we have another recession or depression?  Who stands to benefit from a major stock market crash and / or a depression?  Only really the people that issue and charge interest on money.  True value is running out over time, a bit like an option, melting away, like sands through an hour glass.

Are The Bears Here To Stay?

First of all, this doesn’t matter if you are financially educated.  You know what to do, right? I’ve already mentioned how I protect my investments.  There are many things to think about for the future direction of markets. I’ll mention one major one…

The current (42nd) US president has added more national debt to the US than the previous 41 between them.  Last I looked, the deficit was growing by USD700 Billion per year. China and Japan, between them, hold enough US treassury bonds and US cash to crash the US economy back to the stone age.  All military equipment (and the soldiers) around the world would need to be dumped in the sea, WWII style, because there would be no money to ship them home…

Another reason…

US hard assets are being sold off to former enemies (and future wanted enemies), such as Russia, Japan, India and China. Meanwhile US money is largely being invested in soft assets such as technology that ages (and depreciates) very fast, especially during war (or a stock market crash).  Hard assets, such as factories, can still produce product, regardless of the assets value.

Don’t get to carried away when you see the markets take a massive leap upwards next time. It will likely take the opposite direction the next day. Great for options traders! It’s volatile and will move in big jumps, reacting to almost artificial signs. Like the Fed pumping in 150 Billion Dollars of money it doesn’t even have to print. It’s like the Milk Man telling you that you need 4 litres of milk instead of 1 litre that you normally use. Why? No reason… just that you’ll need to pay him more for the extra 3 litres of milk.

Oh dear…

See you in a few days for part 5 of the “Basic Investment Strategies”

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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