The James Dicks Blog

Welcome back.

Follow up to previous blog post.

Once you have actually seen yourself spending and enjoying your newfound financial success, you can move on. Please don’t fudge—OK, let’s move on together. Let’s change your visual focus. Where do you live in your new life of prosperity? What does your house look like? How many bedrooms does it have? Can you see it? If you can see it, spend a few minutes creating details. If you can’t see it, spend a little more time with the exercise until you can.

Someone once said that what the mind can see, the body can achieve. I believe it. I go a step further. I believe that the mind must see it before the body is able to work for it. Look at another realm of human endeavor: sports. When Roger Bannister broke the four-minute mile, he saw it long before he did it. Over and over in his mind, he later recalled, he visualized doing what had been deemed to be impossible. Interestingly enough, once Bannister did what no one else had ever done before, others quickly succeeded in doing it. Why? Because in minds all around the world, mental barriers had been broken. People understood that the impossible was now possible.

The same analogy applies to wealth creation. There is a process one must go through to achieve it. Bill Gates, in his best-selling book The Road Ahead, writes about his “play” with computers in high school. Even then, when computers were the size of large rooms and far less powerful than our miniature hand-held PDAs, he dreamed about what they would be able to achieve in the future.

His dream was so strong, in fact, that he feared missing out on the revolution he saw in his mind. He dropped out of Harvard University—dropped off the safe path he was on—to get a quicker start. There was simply no way that he was going to let the software revolution start without him.
Bill Gates saw the future of computers in his mind long before it became a reality. He saw a role for himself in that future. He dreamed the dream, developed plans to fulfill that dream, and then took action. This could be called the “science of success.”

It’s not restricted to Roger Bannister and Bill Gates. It’s something that each of you can participate in and benefit from. But before you can do it, you have to knock down the mental barriers to your financial success. You must learn to envision your achievements. Once you do, the achievements will follow. So far, so good? Are you beginning to see the mindset you need to have if you are to achieve financial freedom? Let’s go a little further.

What about a family? Will you have a spouse? Children? What will they be like? These are extremely important thoughts to consider and plan for. You must see it before it happens, but once you do; financial freedom will be more than one step closer.

All of the questions I have posed to you so far will become an important part of creating your dreams and ultimately achieving goals based on those dreams. Now that you see the process unfolding, you can also see how the end results will be different for everyone.

More to follow don’t miss reading the most important aspect of how this exercise can make such an impact on your financial life.

My Best
James Dicks

We are approaching the final quarter of the year and I just want to remind you about something that I consider a very important aspect of any well-balanced financial life.  Make sure that you accomplish frequent financial checkups to ensure that you are on the proper path to develop your assets effectively.  Situations can change very quickly in life and you must consider, on a regular basis, the composition and structure of your personal financial goals, tools and investments.  There are many issues to consider.  Things like getting rid of unnecessary debt, developing proper spending habits, checking your insurance needs, examining your taxes, and determining whether or not you need to rebalance your portfolio. I’m sure you could come up with a number of other areas that, on a personal level, will positively or negatively affect your financial life.  Check it all.

There are numerous methods of determining the best methods of handling our money that didn’t exist a decade ago.  Most of us have personal computers at home that can be used to assist your financial development.  There are many software programs that can help guide you by showing where your money is currently going.  These programs can help you determine the best methods of using your cash to enhance your investments.  Determine how much is coming in, how much is going out and establish where the money is going.  It’s really that easy.  Once you know those facts, you can make your adjustments.

One question that you really should ask yourself is whether the investment methods you use are actually working for you to build financial wealth.  If there have been problems, changes in the market trends, an alteration in your personal lifestyle (a new baby, a recent move, a new job, you’ve just married, just divorced) then make the necessary changes to make sure your money is working to fit your life’s changes and goals.  Interest rates are down today and it may be time to consider refinancing your home but only you know whether that’s something you should do or not.  Plus, make sure you build at least three to six months worth of living expenses, if you don’t already have that amount put away safely. 

Other areas of interest to your personal financial life include your insurance coverage.  If your agent hasn’t called you recently, pick up the phone and dial your agent’s office and request that you take an inventory of your coverage (home, life, auto) and adjust where needed.  For goodness sake, examine your credit report at least once a year.  It might be a good idea to actually contact the credit agencies twice a year, especially if you are about to make a major purchase.  

Just as you need to develop and then redevelop your short and long term goals throughout the year, so it goes with the state of your financial well-being.  This should not be an unpleasant chore but rather something enjoyable.  Remember, by conducting these occasional checkups, you are insuring that positive financial results are more likely to be attained. 

Anything can happen throughout the year (as this year has shown), which can force you off your fiscal course.  Events that can make a difference in your life occur at a moment’s notice.  Just make sure that when unforeseen events occur, you make the needed corrections that will rebalance your financial life.  Plan to make a quick check every three months or so.  This is all part of goal setting that I believe is so important to leading a balanced and prosperous life.  Stay focused and make sure you perform your personal checkups on a regular basis. 

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

It’s here the next great cycle in real estate.  If you want to make some money in real estate then now is probably the time to think about getting in.  I have been investing in real estate for nearly 20 years, and my family has been in the business for a lot longer than that.  I have personally invested through several cycles and have seen many more.

It seems that the real estate market runs in cycles, about five to ten years.  We just got through a big one where everything was going up.  Homeownership in the U.S. has risen to nearly 70 percent.  Now we are on the down side and we are already near homeownership levels of 1985.  The time for rentals is back.

But what you will see is that most of the apartment buildings that sprung up during the last great rental period have converted to condos, and thus have started to experience foreclosure.  Today we are facing a huge inventory of foreclosed properties, and all of the people that lived in those properties will be looking for places to live.  Why not in your condo or home?

The next great real estate cycle is now at your feet.  When is the best time to get into the real estate rental market?  How about when interest rates are low and prices are even lower?  Ah…..would that be now?  I think so.  Now what we have to do is get creative and we have to find out how to get into the market using leverage or better yet – cash.  I personally have begun a life of living debt free, I simply believe that cash is king and credit will enslave you.  However, with that said, leverage and finance have their place and you may not be able to run out and pay cash for your next rental property.

There is no question that buying bank-owned properties for cash will get you the best deals, but banks are now more motivated than ever before to get real estate they own off their books.  They are motivated by their own business model and oversight by the federal government.  So, these banks are more willing to loan you money now than ever before.  Laugh out loud if you will but it is in their best interest to do so.  You can get creative and work some pretty good deals out with them and they will be the bank.  It is better for them to loan you the money on the house than to have the bank sit on it.

The way this cycle will work is that you can go out buy a house or a condo for dirt cheap prices – I mean 30 cents on the dollar.  Remember that the real estate market will run in cycles (trends, if you will).  On average a typical home in the U.S. will double in value every eight to ten years.  And we saw that prior to the last pull back.  If you bought or buy at the end of the cycle you can get hurt, so we buy our home now when prices are at an all time lows; we rent the home and start using the strategy in which we pay extra principal payments.  With interest rates so low you should be able to have enough extra principal payments that will allow you to pay this home off in eight to ten years. 

You are then sitting on a piece of property that is 100 percent cash flowing, even if the market pulls back again you will still have cash coming in with little overhead which will allow you to make the next cycle.  But this is the best part, let’s say you buy a home for 50 cents on the dollar.  Say a $200 thousand home that in today’s value is $100 thousand. Believe me, you can get them for far less today.  Over the next 10 years you pay it off and the value of the home increases to nearly $400 thousand.  But you own it free and clear; so let’s say you have another correction.  It would have to go a long way down before it really starts to affect you because you own it free and clear.  Even if it went back to 10 year lows you still have equity to pull out. 

On a side note you can always get a mortgage or refinance later and pull cash out to invest tax free later.  Although this is not a debt free type of mentality, there are circumstances when leveraging money will be to your advantage.

With all that said, keep looking for more articles from me on this subject as I am personally doing this.  I love real estate as a way of diversification and now is the time to make your next fortune in real estate.

Happy investing,

James Dicks

I was sitting around this weekend, and as I often do, I check my credit reports. I try to examine my credit reports at least once a month; that seems like a lot and probably is for the average consumer.  But for me my credit standing is vital for my business and its success.

I am probably not the best person to talk to about credit, or at least the credit bureaus; since I believe the credit bureaus are the biggest scam of all.  I mean they give you one free credit report a year so you can see what’s on it, but that only happened after they were forced to do so.

I pay for credit report monitoring and, unfortunately, I suggest you do the same.  Be assured I don’t get paid for recommending this but it’s the only way to really know what is going on with your credit reports.  All three bureaus have a monthly service that will send you alerts as things change on your report.  You probably don’t need all three just chose one, that way if you get an alert you can check it and then you will know most likely the other two reporting agencies will have the same information.

I have been keeping track of my credit reports for many years, and I literally have a three ring binder for each bureau that is five inches thick full of old reports. I keep very close track of what is on my file.  Listen in the last few months I have had several things hit my report that were erroneous.  It pays to check.

The first error involved a bank I had a loan with; they said I was 30 days late on a payment which wasn’t even close.  I had to actually show them my receipt of the payment to prove I wasn’t.  Then I had to diligently stay on top of the bank to make sure that they fixed my credit report. In the last year, I have had at least three or four separate instances where a payment was not recorded correctly.

Here is a good story for you.  I had a car that I wanted to trade in. I went to the dealer, bought a new one and traded in the old car.  Thirty days latter I received an alert that something had changed on my credit report.  I logged in only to discover that I had a 30 day late pay for the first car – the car I traded in!  After tracking down all individuals involved I came to find out that the car dealership didn’t pay off the first loan.  Can you imagine that!? Apparently this is going on far more than one would imagine.  Anyway, I finally got the dealership to do what they were supposed to do and, from that point, it took about a month to get my credit report fixed and back on track.

In the past, I have had erroneous inquires, people and organizations pulling my credit that shouldn’t.  Each inquiry can affect your credit score so you want to make sure that your credit report isn’t being pulled unnecessarily.

These examples are extremely important and fairly common, especially in today’s economic climate.  The credit bureaus are very busy right now and lots of people are having issues.  With all the reporting going on things are getting messed up more now than ever.  That’s why it’s ever so important to stay on top of your report and credit score.  If your score goes down you could be paying a lot more for your credit in the future.

The whole credit scoring system is just simply broken.  In fact, the FICO scoring system is one of the reasons the whole housing industry is crashing.  The credit reporting agencies were supposed to provide a score that helped lenders lend money, but obviously it didn’t work out well for them or for us.  In addition, I hear the major banks are in the process of suing the credit reporting agencies because of their scoring systems.

Just recently Experian pulled out of its agreement with myFICO.com, which had been the only place where consumers could buy their FICO scores from all three bureaus.

The FICO scoring system is suppose to be a leading credit scoring formula used by most lenders. Experian will continue selling it to lenders, acting like it’s no big deal by not offering it to consumers anymore. In my opinion, it is just another way for the credit reporting agency to keep us in the dark.

Experian spokeswoman Susan Hensen wrote in a recent e-mail, “There is no one credit score that all financial institutions use to make decisions, and there is also no one credit score that consumers must use to help them understand and manage their credit. There are many reputable credit scores on the market that consumers can use to evaluate their creditworthiness before making financial decisions.”

Experian Executive Vice President Peg Smith downplayed any disadvantage to consumers, saying Experian will still offer individual customers its own credit rating scoring system.

Yeah, whatever…don’t you believe that for a minute!  Bottom line – you should check your credit reports often.  It should be illegal for these reporting agencies to hold us hostage; basically extorting us into having to pay so that we can see what is on our credit reports but they do.  They pay a lot of money each year to lobbyists to push their agenda on us.  So it’s time to fight back, write your Senator and your U.S. Representative and tell them it is time to overhaul the Fair Debt Credit Reporting Act. 

To learn more you can visit www.JamesDicks.com

As always,

Happy Investing

All my best

James Dicks