The James Dicks Blog

We are inundated on a daily basis by the 24-hour news and business channels that the United States has experienced the worst of the economic downturn and is now coming out of the greatest recession since the Great Depression of the 1930s. But if you ask your neighbor, you’re likely to discover that the typical American family just doesn’t buy it; they aren’t feeling any better today than they did yesterday.

In a recent poll of more than 1,000 Americans conducted by CNN/Opinion Research Corporation, 84% of those surveyed believe that the U.S. economy is still very much in recession which is s slight improvement from September’s poll where 87% felt the recession was still alive and well. This kind of public sentiment, while heartfelt, seems to be just the opposite of what the nation’s economists are telling us; that the “Great Recession” has finally come to an end.

Economists are in almost universal agreement that, according to the numbers, the worst of the economic slowdown appears to be behind us. According to the latest reading on gross domestic product, the U.S. economy grew at a 2.8% annual rate in the three months ending in September, the broadest measure of the nation’s economic activity. And while job losses continue, the number of jobs lost in November fell to 11,000, the smallest amount of any month since the start of 2008, while the unemployment rate fell to 10% from 10.2%. Plus a recent survey of top economists from the National Association of Business Economists found 81% agreed that the recession was over.

So, why the discrepancies?

While there have been some economic improvements, economists believe that it will take a long time, perhaps even years to dig out of the economic upheaval that this recession caused. Because the improvements have been slight, the average American family just doesn’t feel it yet. One economist put it this way, “The hole is a very big hole this time and the recovery is very modest so it might take us a number of years to get out of the hole.” And this startling result also came to the surface recently. While economists are getting more optimistic, the consuming public appears to be getting even more pessimistic. The same poll found that only “15% believe the economy is starting to recover from the problems it faced in the past year or so, down from 17% who saw improvement in the previous poll in September.” And the public also believes that things will get worse before it gets better.

This is something that the retail industry didn’t want to hear during the biggest shopping period of the year. Holiday shopping so far has been less than stellar. A recent Christmas Retail Survey released during the first week of December by America’s Research Group (ARG) and UBS showed that sales were weaker this year than in 2008. Of those consumers not shopping, an overwhelming number, 95.1%, said they will wait until just before Christmas (some even said they’d wait until December 24) to get more items on sale.

And further evidence of a shaky American consumer base, the most recent Consumer Credit report released by the Federal Reserve showed that Americans borrowed less for a record ninth straight month in October, another sign that consumer spending will remain weak and make it more difficult for the economy to produce a sustained rebound. And unless the U.S. consumer develops some confidence in the nation’s economic foundation, the chances for recovery are probably negligible.

We are all hoping for a more profitable 2010, and the last thing I want to be is pessimistic (it just goes against my nature). But until our national housing and mortgage industry is repaired, until the banks start loaning money again, until jobs start picking up, until the confidence of the American consumer is bolstered by a feeling that our economy is, in fact, returning to normal, this country could continue to experience the same economic doldrums in the New Year. Let’s hope the effects of the technical economic improvements economists are seeing today will soon show themselves fundamentally to those of us who live on Main Street USA.

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I’ve noticed recently that we seem to be worrying about everything.  Yes, the past year has been tough on a lot of people and a lot of businesses. We agonize about the current state of the economy, we are concerned about the horrific possibility of terrorism in our local communities, we worry about whether we’ll be ready for retirement, and we are very concerned about how our children will fair in this highly demanding and , at times, difficult world. 

I usually find that if I’m not certain of where I’m going or how I’m getting there, I will tend to have more concerns than if I actively sit down and plan for the future.  We hear on the financial news programs every day that investors are “worried” about a variety of things that will move the markets lower.  What’s the point?!  Let’s start planning our personal situations and stop creating the anxiety.  The summer months are over and we are now preparing for autumn and the changing colors of the trees, feeling a nip in the air, and the smells of the season from cinnamon to evergreen.  I don’t know about you but I think this is a great time of year.  

Sure, there are some challenges ahead which could complicate our national and personal finances.  The negative scenarios that the U.S. economy is pushing through today along with the ever-increasing cost of energy could certainly cause a drain on our personal finances and put tension on the retail sector as well as pressuring the trade gap.  But there’s not a lot we can do personally to generate solutions for these hot topics.  The one thing we can do to sustain our personal “corner of the world” is to develop a positive and constructive attitude.  It really does help.  When you decide to carve out your personal path using even a small amount of confidence, you can’t help but develop the belief that you can succeed at anything you set out to do, no matter what the odds.  Believe me, I’ve done it. 

Positive thoughts and actions create positive results. If you have the wrong attitude then your trading could also be affected.  Doing anything with the wrong attitude will lead you in a direction that will be a burden rather than a blessing.  Individually, things can be tough to deal with but collectively – as an encouraging population – we can do anything.  As we approach the final quarter of the year, I’m hopeful for the months ahead and I hope you are too.  We’ve proven this factor in the past and I have no doubt that we will bear it out again in the future. Become proactive and cheerful by developing your attainable goals while staying focused on the situation(s) at hand.

The improvement of anything you do in life requires you to get the education you need, whether formal or informal.  If you feel like you need to improve your personal investing skills why not find a trading group in your local area and work with others to perfect your skills or take a formal class.  You’ve heard me say it before – it’s all about education.  If you are learning to play golf, I’m sure you have to practice.  If you are trying to master algebra, you have to study.  The same is true for an effective and profitable financial life.  Never give up! Determine your direction, get educated and you will get results! 

Happy trading!

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When it comes to making something happen in business, or in life for that matter, taking a calculated and creative risk is necessary to get to the next level.  While this might sound frightening, it is a part of entrepreneurship that must become second nature if you are ever expecting to achieve any semblance of success.  Entrepreneurs must put their time, their ideas, and sometimes, their very reputation on line to realize success in something they believe.  

Anything you do in this life requires some risk.  There are very few things that offer us a 100 percent guarantee and a certain amount of risk will normally be required and inevitable.  There are methods of limiting the effects of potential volatile decisions but the time always seems to come when we must make a choice; decide to move in one particular direction and hope for the best.  If things cave in, as they sometimes do, just regroup and take responsibility for your mistakes and select a new course of action.  Then, once you’re satisfied with your new position, cast off again and try to make big things happen.  That’s part of the spirit of an entrepreneur.  There are times when your personal courage will set the pace of who you are and determine whether your company will progress forward. 

Especially in today’s business world, there is a danger of becoming too complacent when we stay in our personal comfort zones.  I took a risk when I decided to join the U.S. Marine Corps and that ‘risk’ helped to create the person I am today.  I have found that generally top-notch performers and those who excel are relentless risk takers.  Those who take the risk always see the possibilities that others can’t even begin to imagine.  I constantly strive to take the road less traveled and pull away from the crowd. 

Although risk can create energy and bring you to a much higher level of accomplishment, there’s more to it than that.  There’s the satisfaction that the risks that we take will create rewards for those we serve.  I hope that the decisions I’ve made over the years and the corporate directions my company has taken have helped to improve the financial lives of our customers and our employees.  Important financial improvements that will help to send their kids to college or might help a family discover a method of creating a successful and needed cash flow. 

We have no idea what kind of rewards we will enjoy by taking that first step into the unknown; by looking risk in the face and moving forward with head held high.  But one thing I do know; there will be no rewards unless we’re willing to take the risk.  So, plan on leaving your comfort zone today.  No matter what your profession, commit yourself to success, enjoy the passion you possess for your job and get ready to reap the rewards that taking a risk can bring.

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Buy and Hold – bet you have heard about that financial strategy at one point or another.  The older you are the more likely you have heard it and probably the worse off you are today.  When the markets go down, like we have seen over the last few years (forget about the rebound of late) your portfolio seems to go down harder.  Why does it seem that your portfolio can fall 50 percent or more over night but you can’t seem to get it to move higher at the same rate? Great question!

If you are plugged into the financial news of the day, you know that we just had the best July in the markets since 1997. I say “whatever.” I know one too many investors that don’t agree with that.  Buy and hold as a strategy has been around a long time, I mean since the beginning of trading. Gone are the days when you could buy a good blue chip like the IBM of late, sit on it year after year and receive a safe double digit return without ever having to look at your stock. 

The problem with “buy and hold” as a trading strategy is that it is like any other great way to make money; the first one in makes all the money.  If you get in at the bottom and you start your buy and hold plan, odds are you will make money in the long run.  However, at some point the market will retrace its moves and then give back your gains, some or all of them. Then if you get into a reversal for a prolonged period of time, which is what we saw when the markets went down significantly to the levels it is currently holding, you may not have enough time to recover.

For those of you that get in at higher points, you then get caught up in great so called strategies like cost average down.  You start allowing your emotions to take over as you ride the stock all the way down.  You feel like it’s a great company and are sure it can’t go any lower…it will come back…I have a feeling about this! Any of these sound familiar?  You bet! How did that feeling work out for you? Probably not too well.  All you did was build a portfolio that has a lot of a stock that you cost averaged down and that is still a long way from break even.

Don’t email me and say it’s not a loss until you book it on paper. Are you kidding me!?  I have heard this one time too many. It’s a loss, oh believe me it’s a loss.  Try paying a bill or retiring on a stock that is down 80% or more in your portfolio.  You can’t because it’s a loss. Let’s try this concept on for a moment- Time Value of money.

Time Value of money is something we must take into account, especially those of us that are already in retirement or nearing that very important point in our financial lives.  If you are sitting in a stock that has done well with your “buy and hold” mentality then great! Now do something to protect your profits.  Try using a stop loss order, which will allow you to set a price that if (or when) the stock drops to will get you out of the market.  If you love the stock so much, buy it back when it bottoms out in order to protect the profit.  You can’t book the profits until you sell the stock.  Why be up 40 percent on your favorite stock, and then watch it retrace its profits to break even or worse, wind up with a loss.  You can sell at the 40 percent profit and buy it back if you love it so much when it gets back to your original price.  While it is going down you can put your money in something that is doing well. Thus, the Time Value of money.

If you aren’t making at least 3 to 5 percent on your money, you are losing out to inflation.  You better be planning on bumping that return on investment higher as inflation is surely on the rise.  So you sit in your favorite stock and if you are lucky enough to make 5 percent a year and you feel happy.  But inflation is running higher than 5 percent.  Guess what? You are losing money more than you think, and your retirement will not be what you had hoped for, if at all.

It is okay to let someone manage your money for you, but you had better know a little about what they are doing for you so you don’t wake up one day and wonder how your portfolio is doing and where all the money went.  All I am saying is take a little time to learn about the markets and learn how to use some of the tools out there to help you do that. You can always go to my web site James Dicks.com to learn about some of the best tools out there to help you trade or learn about the markets.

No reason anymore to sit in a stock that is about to go down or that is going down when you can be in one that is moving forward.  With a little education and support, you can take control of your financial future.  Add a little diversification and money management and there is no stopping you

Happy Investing,

James Dicks

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Whenever I speak to customers and investors at my conferences or while traveling I always seem to get the same sort of objections.  I am always telling people how I am no different than anyone else; I made money and I lost money, more than once.  The difference is….I learn from my mistakes and the next time I don’t make the same mistake. 

One of the most profitable times in my life was during my dedicated real estate career; I say that because, at the time, that is all I did.  That period also taught me about diversification and the importance of good money management, but that is another story.  Anyway, during this time (the late 90’s) I began to invest in real estate.  The market was a good buyers market so there were lots of opportunities, however interest rates were a little higher and I had pretty bad credit.  As I was growing up through high school and after my graduation, I didn’t maintain my credit as I should have.  Contrary to what people believe, think or say, you can fix your credit. I did but it took many years.  I was able to eliminate all the bad and replace it with all good. Yet again, that’s another story but you can do that to.

As far as this story goes, I identified a great place to make money in the real estate market place, most specifically rentals, and investor rehabs.  The problem was I didn’t have any extra cash and poor credit. So, I set out to accomplish my goal. I had to use private money; in fact I was paying interest as high as 18%, one year notes and five points.  Yikes, you say.  Me too!

The difference was this; if you aren’t putting any money down or little money down then your return is infinite regardless of what you are paying for the use of the money.  I always get the terms of the money first then I look for a deal that fits within those parameters.  That way I can still make money paying whatever the terms are.  That’s what I did.

I bought literally hundreds of properties and then started buying multi-family properties.  As I have written before, you need to move the ball along.  I was able to eventually find better pricing that was still high but not as high.  The point of all this is to show you that credit and using private money is a possibility that you can consider and today’s financial landscape offers a great opportunity to go out and find deals.

Let’s talk about no money down deals and better yet getting money back. First, there are lots of them out there. Maybe not as many no money down deals as in the past but certainly little to no money down deals are still available.  When I first started out I was able to do a lot of deals that actually paid me when I closed.  The key is to find someone that will deal with you.  Do your homework and keep moving the ball forward. 

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