The Bull Hunters Guide

I trust you enjoyed our post last week on mortgage backed securities. At the moment we’re a little over halfway through our series on the wide world of investing. So far, we’ve focused on covering those types of investment opportunities that are too often overlooked by those who deal in stocks, or are concerned too complex or risky for the amateur to get involved with. Hopefully, we’ve been able to demonstrate that that’s not always the case.

Municipal Institutions And Bonds

This time we’ll discuss the ever popular municipal bond. Municipal bonds are essentially an investment that involves you loaning money to a municipal institution, from one of the many levels of government. In order to draw in money to engage in their necessary ventures, many municipal organizations sell municipal bonds, with the intent to pay them back later, after having received profit from the venture in question.

Municipal bonds are very popular among investors because they allow for a unique opportunity to make investments that are very often free from taxation. Most are free from federal taxes, and as if that wasn’t draw enough in and of itself, the majority have no liability towards state taxes either. Essentially, any income you make off of a municipal bond is tax free.

Low Risk Investing

Municipal bonds are another form of investment where the main purpose is to establish a continuous income of sorts rather than to accrue a lot of money all at once in a lump sum burst.

There is a very minimal risk involved with buying and profiting from municipal bonds. Basically the only way to lose your investment is if the municipal organization in question goes belly up. This happens very, very rarely. However, it pays to learn a little bit about the organizations you’re dealing with. Whereas big city municipal organizations might sell more expensive bonds, they’re also much more likely to stick around for the long term, allowing you to profit with greater confidence.

See you next week for part 11 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Last week was the first week in my new Investment Series, and we kicked it off with a post on Closed End Funds.

We’ve spent a lot of time in the Bullhunter blog talking about all the different types of Investment Strategies that every investor should at least know about. The idea behind this is to expand your concept of investing beyond just the stock market, and at the same time, gain a greater understanding of that market by analyzing its competitors and alternatives.

Investing In Collectibles

In this particular entry, we’re going to talk about something of significant interest to many people, which is investing in collectibles. This is something that’s not only potentially profitable, but also a lot of fun for many people because it entails the acquisition of physical objects rather than electronic shares.

Simply put, investing in collectibles is the process of putting your money into the acquisition of some physical goods that are predicted to increase in value over time. Then, at a later date, you’ll be able to sell them for more than you paid for them.

Whether you’re investing in fine art, stamps, or antiques, there is one clear advantage here, which is that the value of these objects will always be tied to inflation. Therefore, unless an object actually depreciates in value, you’ll always be getting, at the very least, a fair price.

Disadvantages Of Collectible Investment

That said, there are a number of disadvantages as well. The most obvious is that you don’t “earn interest” on collectible investments, and you can’t collect dividends on them either. There’s also the matter that you’ll need somewhere to store these physical objects which can be a big expenditure in and of itself. Furthermore, there is always the potential that these items could be damaged by various circumstances, and if this happens, your investments could be totally destroyed.

If you’re going to make an Investment in collectibles, be sure that you know all the risks and benefits that are present. It can be a very rewarding experience, if you know what you’re getting into.

See you next week for part 3 of Investments.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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As we mentioned last time, we’re going to talk about the various kinds of scams that you might run into the world of investing; scams designed to separate you from your hard earned cash with false promises. The internet has given the people who perpetrate these scams a new lease on life by providing them with the anonymity needed to operate in secret and the technological means to target a much wider number of people than ever before.

However, just because the technology has advanced, the basic scams themselves are still fairly old. That’s the one thing that we have going for us when it comes to spotting investment scams: there are really only a few basic types of scam out there, and they just tend to get repeated over and over. Here are the most frequently seen:

The Pyramid Scheme

This is a scheme wherein money is solicited from investors in order to pay off previous investors who are now expecting to receive a return. Of course, such a scheme will eventually implode when the money coming in from new investors is insufficient to cover what is owed to the old investors.

Pump and Dump

This is a practical wherein a group of people purchase a stock, almost at random. They buy a large number of shares, and then they go about recommending that stock to as many as they can, usually thousands of other investors. When those people buy the stock, there is a sudden spike in the value of the stock. The duped investors will lose when the spike is followed by the inevitable fall, but those in the know will sell their holdings during the high point of the stock, thus making off with lots of profit.

In general, one should also beware of trades that take place in off shore accounts, because this is usually done to avoid operating in the jurisdiction of local law enforcement. They almost always are looking to hide something.

Next time, we’ll begin to take a look at some of the schemes in greater detail, beginning with the bulletin board scheme.

See you next week for part 3 of Investment Scams.

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

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Lately, we’ve been talking a lot about short selling in this blog. In particular, we’ve been talking about the pros and cons of short selling, and last time I mentioned that there was a distinct dark side to the practice that causes many to cringe when they even hear the term. This time, we’re going to talk about exactly that.

Short and Distort

Short selling is a somewhat cryptic process that is rarely understood all that well by the amateur investor. Because of this, it creates a ripe opportunity for unscrupulous traders to take advantage of short selling and twist it into a market-harming “money making machine” that doesn’t respect the true meaning of free commerce and investing.

When this happens, investors resort to using a tactics known as the “short and distort”. The way it works is this. Imagine that you have a bear market. The prices of stocks are almost universally down, and prospects all around aren’t so great. Traders might take this opportunity to buy a bunch of short options in a stock. Of course, that in itself is perfectly normal and ethical. However, what makes the “short and distort” such a terrible practice is that the investors then go on to spread slander and lies about the businesses that they’ve bought shorts in.

Slander Is Believable

Obviously, in a bull market, everyone is already nervous and pessimistic. Slander is thus easily believed, and it’s easy for investors to cripple a company through these means. When that happens, they walk away from the smoking wreckage with a handy profit, purchased at the cost of their integrity as real business people.

Of course short selling has its dark side. So do all forms of investing. It’s the ease with which short selling can be exploited however that makes it a particular target for scepticism.

See you next week for part 8 of Short Selling.

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

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Last time in this blog, we started discussing the ethics of short selling. We mentioned how it’s often the case that short sellers are looked up with something of a blend of derision and skepticism simply because their own profit is dependent upon the losses of others. However true this may or may not be, there are more pressing accusations being leveled against the short seller that demand our attention; namely, the accusation that short sellers actually harm the market.

Controversy Surrounding Short Sellers

Many of you might remember the huge stock market crash back in 1987. While there were a lot of contributing factors to that fiasco, such as the sharp increase in program trading around that time, there are many who are eager to blame the entire situation on short sellers. While there’s not a ton of evidence to support this claim, there’s enough of a correlation between spikes in short selling and downturns in the market for market regulators to have enacted certain guidelines and limitations that inhibit the short seller’s ability to actually affect the direction of the market.

Contribution To The Market

Of course, for all these claims of being bad for the market, there is one aspect of short selling that undeniably makes a contribution to the market that can’t come from anywhere else. It provides a sense of liquidity to the market, keeping trades fluid, and while it tends to drive down the price of stocks overall, it also tends to drive down those that are actually overpriced and should be driven down. In this sense, short sellers can be seen as a fail safe measure against those who would seek to commit fraud by introducing securities that they know are unstable and will soon crash on hopeful investors.

All in all, short selling is a give and take kind of situation. While many aren’t fans of it, they allow it to stick around because of the undeniable benefits that it offers the market in general. Next time, however, we’ll need to take a look at one aspect of short selling that is all-around negative: those investors who make use of distinctly unethical tactics in order to facilitate their short selling.

See you next week for part 7 of Short Selling.

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

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