A year ago on March 3, 2009, Joseph Morse released “Surviving the Second Great Depression.” At the time, it was heresy to even think that the markets were going to rebound. After all it was just a few months earlier that widely popular television host Jim Cramer had told viewers to sell everything and get out of the stock market. Great Cramer, where was that advice at the top of the market? He was telling people to buy buy buy from October 2008 until a reversal a year later all the while the S&P 500 lost 40 percent of its value.
Then, right before the release of “Surviving,” stocks took another dive. But, as the below excerpt shows, a sense of history is key in avoiding acting like another Cramer.
And stocks are indeed low. At the time of this writing, the Dow was near a 6-year low and the Price to Earnings ratio (PE) for the S&P 500 was just under the historical norm of about 18. It’s impossible to determine exactly when the market will rebound and when it rebounds, if it is rebounding for good, but it’s almost guaranteed that the market will eventually rebound. After the economic depression of 1893, the Dow Jones Industrial Average more than doubled in the rebound; then after losing over 40 percent of its value in the 1907 crisis, the Dow nearly doubled again from 1908-09. Another plunge in the Dow in 1914 following the installation of the Federal Reserve System was met with another doubling in 1915-16.
The Great Depression was another story altogether however. With the massive intrusion into the free markets, Roosevelt’s seizure of gold, and unbearable regulation, the market did not react as soon as it could have otherwise. After the Dow Jones Industrial Average lost 90 percent of its value in the four years following the stock market crash of 1929 (why did they establish the Federal Reserve again?). The Dow didn’t get back to its previous high for quite some time, but the average did more than quadrupled in value from mid-1932 to 1937.
Since the first Great Depression, we’ve had plunges of 30 percent (1962), 40 percent (1973-74), 30 percent (1987), 20 percent (1998), 30 percent (2000-03), and the 40 percent plus decline of 2008-09. In each case, the stock market has rebounded within the following five years and in each case, the Dow surpassed the previous high. Granted, it probably seemed like the markets wouldn’t ever recover in each of those cases, but they did. And each retraction probably seemed irreconcilably devastating (as does the current one), but they weren’t. Yes, this market is statistically worse than all of the declines since the first Great Depression, but even in the 1930s, stocks came back with a vengeance. They will come back with a vengeance this time too.
The trick is how to know when to start investing so that you aren’t part of the decline, but instead you are part of the recovery. I’m not a fortune teller and I think that anyone who tells you that they know exactly when then markets will start a real comeback are selling snake oil. But one thing is clear, investors fear losing their money more than they fear missing out on potential gains and this mentality leads to one generality one can make about the market: stock markets drop very quickly but rise gradually. After the crash in 1929, stocks recovered, but took 23 years to get back to where they were in September 1929. In 1962, it took six months to plummet 30 percent and a year and a half to get back to where it was prior to that. In the seventies, it took two years for the Dow to fall 40 percent, and eight years to get back to where it was before. The 1987 crash took two months to occur and over a year to recover from. The 1998 crash is the only exception to the rule, but this could be accounted for the fact that the correction in the late nineties was relatively minor and wasn’t accompanied by an economic recession.
There have not been any studies on this quick-decline-slow-recovery phenomenon, but the facts available in any market chart. Of course, this applies to the market as a whole as opposed to individual stocks. An individual stock can skyrocket on news that it just sold a million widgets in a day, then slowly decline based on the news that the widgets are faulty and a competitor just came out with better widgets and so on. Still, you can take advantage of this market by buying low and holding on during the long haul upward.
Stocks turned around and gained upwards of 60-90 percent of their value the next year. Is that a coincidence?
The real question is, will the markets keep pushing up before a major retraction? My answer to that is probably not. Two factors are working in the market’s favor.
First: inflation. The Fed has inflated the dollar by absurd amounts since the beginning of the economic crisis and with continued low interest rates originating from that all-powerful entity, cash is a loose as the “Biggest Loser’s” pants after a week of dieting. And more money in the system, the less it’s worth. The less money is worth, the more of it will be needed to buy assets. In other words, higher inflation = higher stock prices (no matter how good the stocks are).
Second: manipulation. There have been some extremely bizarre trading days during the stock market comeback that look suspiciously like market manipulation. The technicals have been throw out the window for much of this comeback and, while the Fed hasn’t admitted to such behavior, Well over a trillion (on the books) in TARP money and other programs could heavily affect the market.
While I have been just waiting for the market to go down again, there are some things working in the market’s favor, so I’m in long on a couple of my all-time favorites: MT and GOOG. Good luck in your investing strategies and be careful!
And by the way, yes, it was a coincidence that I said the markets would come roaring back just days before it actually did.
I just experienced the Super Bowl for the first time and made some observations you may find useful. Enjoy!
1. Wait to buy
This year might have been a little out of the norm with regard to the Super Bowl because both teams in the largest-scale sporting event in the world were small-market teams. Having said that, it’s likely that the pricing trends are the same no matter what teams are in the big game. So what was the trend? With regard to ticket pricing, the trend was a spike in the first few days after the Championship games and a slow taper off right up until game day. Ticket prices on sites like StubHub and TicketCity averaged around $3500 when the teams were decided and ended at about $2200 hours before kickoff. (Side note: I bought my tickets through TicketCity and was thoroughly impressed. The transaction was simple and clear without haggling and the personnel were friendly and professional. The transaction did incur a 15% charge, but TicketCity was considerably cheaper than their competition and I was able to use my credit card and recovered a couple percentage points).
I saw the dwindling prices and decided to wait. I got into the game for just $300 over face value of $800, which isn’t bad considering the 15% service charge that most of the ticket sites charge.
2. Don’t expect a win
I’m a diehard Colts fan and had every intention of leaving South Florida with a huge grin on my face from a second Super Bowl victory for my team in four years. That was not the case. The loss was shocking and depressing. If you’re contemplating a Super Bowl trip, I recommend some soul searching: if a loss would make the trip worthless to you, don’t go. Luckily for me, the trip was an all-around great time and the loss, while very difficult to stomach, didn’t completely wreck the weekend.
3. Soak up the local flavor
The NFL has some great events to keep you occupied during your stay in Super town. But travelers should recognize that they’re on vacation and to soak up the local flavor. You can see fireworks anywhere, but only in Miami can you see hotels like the Delano, hear choirs like the one at St. Patrick’s, and run into former heavyweight champions (local Lennox Lewis) at bagel stores next door.
4. Meet celebrities
The Super Bowl brings celebrities from all over the place as highlighted by the in-game shots of Adam Sandler, Jamie Foxx, and Fergie at this year’s game. Luckily for googly-eyed celebrity-seekers, those famous fans like to participate in the festivities just like everyday fans. If you look good and have gumption, you can try sneaking into one of the big SB parties. Or you can just hang out at the swank celebrity-filled hotels. Fountainbeau on Miami Beach housed a number of celebrities at one point during the weekend and a run-in was inevitable if you’re persistent (as a friend of mine found out with Tim Tebow and another with Fergie).
5. Write the thing off
As I describe in “How to Take Advantage of the People Who Are Trying to Take Advantage of You“, the governmental system used to tax us is corrupt and arbitrary. If you have a business, you can write off legitimate business expenses off against your income for that year. In other words, you can get a tax deduction for experiencing one of the most amazing events of the modern age. You just have to be in the right business!
iPods are brilliant pocket computers that allow you to take your work and cultural life wherever you go. And, if you know how to take advantage of the people who are trying to take advantage of you, you can get the mp3 devices for less moolah. Typical iPod shoppers would go to into a fun bricks and mortar Apple store and buy the different versions for $199 to $399 plus sales tax. The main with this decision is that it could end up costing the shopper over $180 more than it has to.
Instead of going into a bricks and mortar store, I did my shopping for my new iPod touch on Amazon.com and the savings were considerable.
First off, Amazon, being the competitive marketplace that they are, reduced the price to $357 for the 64GB version (a $42 savings).
Next, Amazon, who is affiliated with Audible.com offers a $100 discount on media players if you order a monthly audio content service at $14.95. Since, I already use Audible’s service, I just signed up for a new account to receive the $100 discount and the monthly cost was a wash.
Next, I ordered the iPod through my Amazon store’s link, which returned an additional royalty fee to my company (described in the first Advantage book).
And last, but certainly not least, using Amazon.com avoids the dreaded sales tax, which bricks and mortar stores are forced to comply with (some $35 in savings).
All in all, I saved over $180 in my iPod shopping, making the mini computer even more fun to get. Now that you know how to take advantage of the people who are taking advantage of you, so can you!
So, you’re slowly coming down from that Christmas high in which, among the video games, cute plates, and food being exchanged, you managed to walk away with a nice gift certificate from Amazon. Well, it’s time to turn that $25, $50, or $100 gift certificate into real money by checking out the classic unconventional personal finance book, “How to Take Advantage of the People Who Are Trying to Take Advantage of You.”
The book will show you entertaining descriptions of these major economic industries and 50 ingenious ways to capitalize on the system. Morse isn’t talking about scamming the system or doing anything questionably legal, he’s suggesting clever, time-tested, and legal techniques to help you maximize the financial benefits from companies you already do business with.
As one financial adviser puts it, HTAPWATTAY will, “allow you to make the most of the financial transactions you already are making.”
Question: Is it okay for Joe Thug to take money from your wallet?
Answer: I hope the reader agrees that the answer is no. That is what is called stealing. Forcefully taking money from someone is a crime against the natural law and against a civilized society and is not okay.
Question: Is it okay for Joe Thug to tell Peter Proxy to forcefully take money from your wallet?
Answer: Again, I hope the reader agrees that the answer is no. If someone doesn’t have the right to do something, they surely don’t have the authority to ask someone else to do that same thing. It’s still stealing when someone asks another person to forcefully take money from a third. In other words, a proxy doesn’t make theft okay.
Question: If it’s not okay for Joe Thug to assign Peter Proxy to steal money from your wallet, why is it okay for voters to do the same thing through a coercive government?
Answer: It is not. A coercive government is exactly like the proxy theft from question #2 and is not just or okay. When faced with this question, many readers will realize that they think it’s okay for the government to forcefully take property from its citizens because it is for the general good (or, more shrewdly, I’m the thief, so it’s okay). But the first question did not involve a qualifier of what the thief would do with the money; no matter what the thief does with the money, it is wrong. The same applies to government.
If the reader is consistent, the questions above leave only two possible ways of thinking: (1) If it is wrong for Joe Thug to steal (even through a proxy) and it is wrong for Joe Citizen to steal (even through the government); or (2) It is okay for government to steal, so it is okay for Joe Thug to steal also. This second conclusion cannot be avoided. If you accept the idea that government should be able to steal, you cannot logically condemn everyday theft by your neighbor.
Unfortunately for civilization, more and more people are going along with the second philosophy and it has just one natural conclusion: the dissolution of natural rights. When the people realize that they have the authority to steal (if only through the government), you can kiss civilized society goodbye. As Alexander Tytler said, a democracy, “can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury.” The result is tyranny. That is what is happening and that is what will happen.
When people allow for a coercive government, the race is on to see who can manipulate the government the most to their will. Generally, that will be those with the most power (i.e. money) and connections. When the government decided to spend $750 billion of the taxpayers’ money on troubled assets (TARP), banks with political connections got money and those without connections were left to fend with bankruptcy. And this type of thing is the norm in what one Congresswoman has termed, “gangster government.”
We are left to deal with the consequences of the gangster-style government unless we acknowledge what the government has become, which is a proxy thief for well-connected Joe Thugs. Once we acknowledge that, we will be able to use our collective power as freedom-loving people to ensure justice over cronyism and keep what you deserve in your wallet.
“Green” is often used as a catch-phrase to garner attention and push sales to people who want to do the right thing. It’s also often used by companies that don’t do the right thing and want to act like they are.
Code Publishing (and our imprints Amelior Books, New Classic Books, and LoBraü Books) don’t do much self-promotion about how they’re saving the world by doing the green thing, we just do it. We recycle more than twice as much as we throw away. We don’t use air conditioning or central heat at our offices (we are in San Diego after all). We encourage our employees to walk or bike to work as well as the grocery store and mall.
As a publishing company, we also look to be environmentally responsible. We promote electronic versions of our books and make strides to reduce the number of pages in our paperbacks. Whereas some publishers will release 400-page books that could easily fit in a compact 200-page size (usually they go with the “more-pages-higher-price-tag” philosophy). We try to condense as much good stuff into tiny packages.
It’s good to talk conservation, but it’s also good to mean it. Code Publishing means it.
I can’t understand people who camp out in front of stores to get discounts on certain electronics or toys or anything else for that matter, especially when they have to miss one of the best holidays ever conceived of (Thanksgiving) to do it. Don’t get me wrong, I’m all for saving money, but there are other, more sensible ways of doing it.
One of the techniques in the original TAP personal finance book is to set up an affiliate account with Amazon or other online retailers so that anyone (including yourself) who buys a product through your affiliate links will direct a portion of the sales amount to your bank account in the form of a commission (around 6% on Amazon).
When you compile those savings with the savings that you get from Black Friday deals, you’re saving more money than you’re actually spending in some cases. And you get to eat turkey all night on Thanksgiving.
Before I get to the continuing IRS numbers game, the above Times quote underscores something I’ve said many times that official IRS policies too often amount to fostering tax terrorism and intentional fear.
In mentioning the IRS fear factor I’m in the good company with three leading advocates of personal liberty I’ve quoted before.
In 1757, one of the patron saints of conservative political philosophy, Edmund Burke, wrote: “No passion so effectively robs the mind of all its powers of acting and reasoning as fear.” In 1776, John Adams of Massachusetts, that fiery leader of the American Revolution, and second U.S. president, correctly observed: “Fear is the foundation of most governments.” Adams spoke of a tyrannical English king, but his words could be the official motto of the U.S. Internal Revenue Service.
And in 2002, and at many other times, my former colleague in the U.S. House, Rep. Ron Paul (R-Tex) has said of the IRS: “It’s the use of fear to try to intimidate people. Fear is the tool used to intimidate most Americans to comply with the tax code.”
That Numbers Games
I’m not going to replay the stats that prove the IRS engages in intentional deceit, but for those who are interested, see my run down of the numbers in my Oct. 17th blog entry.
There I recounted how, in recent years, the IRS commissioners have publicly claimed that offshore tax evasion supposedly amounted figures ranging from US$447 million to US$40 billion. At the same time the number of Americans allegedly who were offshore evaders was given variously as 82,000 or 505,000 or 2 million. (The numbers changed with every IRS press release).
But let’s consider that number the current IRS Commish finds so pleasing — 14,700 possibly fearful Americans came forward when offered amnesty, with reduced penalties and interest. If they did not, they faced losing half of the funds they had in unreported accounts and possible criminal prosecution.
Tax Paying Americans
The total population of the U.S. at the moment is about 304 million. 14,700 American who did not report offshore accounts equals .000048355% of all Americans.
Let’s say one million of those Americans have offshore accounts and have failed to report them. 14,700 is .00147% of that 1 million.
An estimated 6 million Americans actually live offshore. 14,700 is .00245% of that group living abroad that might fail to report.
Lastly, the IRS statistics state that there are a total of 151 million American so-called “taxpayers” — but when the IRS uses that word they mean only the people who file annual income tax forms, not necessarily those who owe and pay taxes.
Tax Free by Law
An astonishing 43.4% of all Americans now pay zero or “negative” federal income taxes, (negative is a liberal cover word meaning they get welfare payments simply for filing their tax forms for various reasons Congress has deemed to be tax-free worthy).
The number of single or jointly-filing “taxpayers” - the word must be applied sparingly - who pay no taxes or receive government handouts has reached 65.6 million out of the 151 million who do file.
That leaves about 86 million filers who really do pay taxes, (and recall that the top 10% of those folks pay 80% of all the taxes). 14,700 non-reporting Americans with offshore accounts figures out to be .000017093% of the total 86 million Americans who do obey the law and pay their taxes.
As one observer noted: “The perils of today’s situation should be obvious. The United States is close to a tipping point where most people can skip the post office run on April 15 to mail a check because they’re expecting one from the government instead.”
Loose money from the Fed and restrictive land-use policy by local governments caused a housing bubble post 2001. When the bubble burst, some people (lots of them) couldn’t afford their houses and foreclosed, which led to defaults in loans and defaults in securities packages which were based on those loans. Credit froze and banks stopped lending to their detriment and to the detriment of their customers. Businesses stopped getting money and fired people (over seven million of them).
But more money and restrictive land-use policy wouldn’t have caused a bubble if the recipients of the money were responsible human beings. I bought my townhome mid-bubble, but I still have it because I didn’t borrow beyond my means. So, how do you ensure that the loose Fed money gets into the hands of responsible people as opposed to greedy reckless ones? You take away the financial backstop for lending companies that wished to profit on the easy money this past decade. If companies were responsible for their loans (and couldn’t easily sell them off to government-sponsored-now-owned Fannie and Freddie), they wouldn’t have made such careless loans. But they did and Congress bailed them out (at least the ones with political connections), setting up another cycle of corruption.
Get 35 free songs and a free audiobook for signing up for Emusic’s free trial. There are some limits during the free trial, but it’s a great service and a nice opportunity to take advantage of the people who are trying to take advantage of you.
1. Wait to buy
3. Soak up the local flavor
4. Meet celebrities
“Green” is often used as a catch-phrase to garner attention and push sales to people who want to do the right thing. It’s also often used by companies that don’t do the right thing and want to act like they are.
is to set up an affiliate account with 
