The Bull Hunters Guide

So far in this blog, we’ve mostly been discussing matters that are very obviously directly related to the topic of investments and the stock market. However, it strikes me that there’s a very important topic to be covered that might at first seem a little bit out of place. With the Presidential election nearly over and all this talk of a crumbling economy and economic stimulus packages, it’s more important now than ever for anyone who cares about their investments to have a thorough understanding of the American economy and the forces that drive it.

The Federal Reserve

In particular, I’d like to talk about the singular entity that controls most aspects of the economy as we know it, including the regulation of the value of currency and the welfare of the banks. This entity of course is the Federal Reserve. Any investor who wants to be able to truly read any market accurately and do smart things with their money no matter how grim the forecasts might be needs to know everything they can about the Federal Reserve and the impact that it has on the market.

The Bank For The Government

To put things simply, the Federal Reserve is the bank that is used by the United State Government itself. Despite the title being the “Federal” Reserve, it’s important to note that this institute is not really a part of government at all, but rather was begun as and remains a private money-lending institution. It just so happens to be the case that they only handle the one client directly (the government), and have done exclusive business with them since their inception in the 1910s.

Woodrow Wilson’s Biggest Regret

The inception of the Federal Reserve Bank in 1913 was approved by the Woodrow Wilson government. This was Wilson’s regretful statement, in hindsight:

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world, no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” - Woodrow Wilson, President of The U.S.A.

Beginning with the next entry, we’re going to cover topics such as what the Federal Reserve is and what their duties are, as well as the monetary policy that they nominally use to guide their decisions. Lastly, we’ll discuss the Federal Open Market Committee, that aspect of the Reserve that probably affects us as investors most directly.

See you next week for part 2 of The Federal Reserve.

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

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Over the last few sections, we’ve been talking about all the various security issues that can come up when dealing with online investing. While most of the techniques used to scam investors online are similar to their offline analogues that have been used for decades, things can still be tricky, especially for those who don’t have much experience yet.

Security And Exchange Commission

We’ve already talked about a few of the things that you can do to help ensure that you remain safe from online investment scams, but there’s something else that all online investors should be well aware of. Investment scams and investment fraud are serious crimes in the eyes of the federal government. They have the potential to undermine the entire economy. As such, they are taken very seriously, and an entire organization was established to help protect real, honest investors from those who would defraud them. This organization is the Security and Exchange Commission, or the SEC.

If you ever encounter investment frauds online, or if you even suspect it of being perpetrated, then you should contact the SEC as soon as possible. There are two ways to do this. The first is to register a complaint online at their website: http://www.sec.gov/complaint.shtml, or to send actual copies of the scam emails or newsletters to enforcement@sec.gov via email.

Alternately, you can write to the organization’s physical address at: Securities and Exchange Commission, Office of Investor Education and Assistance, 450 Fifth Street, N.W., Washington, D.C. 20549-0213.

Give A Detailed Description

Whichever method of contact you choose, be sure to include as much information as you possibly can about the perpetrators of the scam. Tell how you became aware of the scam, which email address sent it to you, what message board you found it on, and so forth. As for your own personal details, these aren’t really necessary, but include what you feel is essential to investigating the case.

Next time around, we’ll conclude our talks on online investment scams.

See you next week for part 6 of Investment Scams.

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

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The internet is set up in such a way that it’s very easy for people to gather around a common interest that they all share and form communities. The form that these communities take is typically that of a message board, or bulletin board. These are websites where users can sign up and engage in discussions on a variety of topics pertaining to their interest. So, for example, on an investing bulletin board, most of the discussions would revolve around investing.

Bulletin Boards And Scams

The internet puts us in contact with a lot more people in a given day than we would have in the course of a regular day offline. Because of this, the ratio of questionable encounters to good encounters increases quite sharply. Nowhere is this more abundantly clear than on online bulletin boards. While there might be a handful of contributors on most bulletin boards who know what they’re talking about and are there to dispense genuine advice and conversation, many people view bulletin boards as just another place to find a mark.

It stands to reason that when investors get together and talk, there’s going to be some advice given, or “hot tips” passed around. Scam artists take advantage of this by appearing to be “just one of the guys” and offering what seems like a friendly stock tip. In reality, this is a pump and dump scheme, designed to make lots of people invest in a stock, spike its value, and let the scam artists walk away with bundles.

Use Your Common Sense

Of course, bulletin boards do contain valuable and legitimate information from time to time. Not every stock tip you see mentioned on a bulletin board is a scam in the making, but you have to use your common sense. Just as in real life, you’d be wary about taking a tip from a stranger, treat people on the internet the same way. As you spend time online, remember that all those usernames represent someone who exists in reality. Observe their reactions and get a real feel for their character before you decide to believe anything they say.

See you next week for part 4 of Investment Scams

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

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Hi again. Recently in this blog, we’ve been covering the topic of short selling and all that it implies. We’ve gone over exactly what short selling is, who does it, what they hope to gain by doing so, and perhaps most importantly, what they stand to lose. Yet, apart from all of these concerns, short selling carries its own unique set of questions that don’t tend to come up in other discussions regarding the market.

Questions Of An Ethical Concern

Despite the degree to which short selling has become an accepted and standardized aspect of trading on the free market, it’s no secret that short sellers themselves aren’t really seen in such a positive light. The reason for this is that short selling itself is an inherently pessimistic process. You only stand to make a profit from short selling when the securities that you invest in do poorly.

Of course, if you only take part in short selling, it’s easy to see why others would regard you as someone who is hoping for the worst. Because most people have at least some investments that stand to profit from upwards movements in the market, you become some of their antithesis – when one of you makes a profit, the other one has to suffer. In other words, short sellers often find themselves set apart from the crowd when it comes to investing.

Bringing The Market Down

However, perhaps more importantly than this emotional impression of short selling, is the argument that short selling can actually have a detrimental effect on the overall status of the market. More than just being a practice founded in betting against one’s neighbour, it is often said that short selling actively works to bring down the market as a motivated force in itself. Next time around, we’re going to take a look at these accusations and see just what truth there is to them, if any.

See you next week for part 6 of Short Selling.

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

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Last time in this blog, we introduced the concept of short selling, something that we’re going to be discussing over the next few entries. It’s a pretty simple technique that quite a lot of people are involved in, but like any aspect of trading, it involves its own unique set of risks and opportunities. As such, it warrants a closer look than you might have given it in the past.

What Exactly Is Short Selling?

Like we said last time, it’s a way to profit off of a bear market. You invest in a stock, but you profit when the value of the stock decreases rather than increases. Here’s how it works.

When you short sell a stock, you’re essentially selling a stock that you do not own. If that sounds weird to you, well… that’s because it’s a weird situation, and hard for many to understand. When you short sell, your broker is entering an agreement with you that they’re paying you for the selling of a stock today and that you’ll actually buy that stock at a later date, in order to restore balance to the transaction.

One typically engages in short selling when they expect that the value of a stock is about to fall soon. Say that you short sell on a stock that is worth $1000. You do this and the broker gives you that $1000. Then, before the time period expires in which you have to actually buy the stock in question, the stock collapses and is worth only $500. You’ve just made $500 off the decline of a stock!

Of course, there are risks to be had here. For example, if the value of the stock rises, then you’re still obligated to make the purchase. You might well find yourself having to shell out significantly more than you sold for in the first place. Next time, we’re going to take a closer look at what goes on in a short sell transaction.

See you next week for part 3 of Short Selling.

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

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