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

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

On a day-to-day basis, the stock and bond markets pretty much follow the sentiment of the day.  And, at times, it actually gets to be pretty ridiculous.  For instance, the stock exchanges were extremely weak recently based upon the fact that the Chinese reported a $2.0 trillion deficit. Or was it the fact that an economic report didn’t hit street estimates or what the G8 might or might not do?   Investors seem to worry about everything.  Let’s remember, there are very some dangerous and volatile things happening, both in the global scene and in our own personal economic situations.  Events like the war in Iraq and Afghanistan, poor earnings reports, weak economic numbers, or the threat of missiles or cyber attacks from North Korea.

Look, we all have enough to keep our minds busy on a daily basis.  Our day-to-day routines with our families and our jobs normally guarantee a steady stream of decisions to make and problems to solve.  So, why worry about the world’s financial markets.  Most of the situations that change the direction of the markets are completely out of our control anyway.  What we should be concentrating on is how we can create a personal portfolio that is relatively immune to these outside events.  Create a portfolio that can weather the storm of global uncertainty. 

You’ve heard all of it before.  Diversification and proper money management are the best methods of insuring that your investments will be protected from the highs and lows in the markets.  In a diversified portfolio, should a single investment react poorly to negative national or international events, you can normally count on another investment to make up the difference. 

Examine your personal investment structure on a semi-annual basis, or at the very least, annually.  Really investigate what you are invested in.  Do your holdings include stocks, what about interest rate instruments, mutual funds, real estate, commodities, the foreign exchange markets?  Choose the opportunities that give you the most comfort.  Learn as much as you can about the investments you don’t understand that could possibly help your future financial growth.  For instance, if you don’t understand REIT’s (Real Estate Investment Trusts), read about them, ask questions, study the topic before you make any monetary move.    

Once you are involved in a particular investment, make sure you follow its progress.  If you are trading stocks, always set your stops and limits to guard against losses.  If you are investing in a 401(k) plan at work, study your investment options often and rebalance, when necessary.  The key to a positive investment life is education. 

You can count on the world situation being volatile today, tomorrow, next week, and probably for the rest of your life.  The stock markets will continue to show weakness on some days and strength on others.  If you meet the challenge of creating a balanced portfolio through diversification you most likely will worry less and definitely have more time to enjoy the most important things your life has to offer, family and friends.   It really is that simple.

I guess it depends on how you look at it and who you are.  There is no doubt that many of the world’s working class feel like they have hit rock bottom – no job opportunities, continued likelihood of foreclosures, rising oil prices at the pump and a mailbox full of bills.  Then there are others, the influencers, who observe and control the global economy and hope that a bottom will soon be reached so that growth can begin and our situations just might get back to some kind of normal.

We have recently seen a number of economic reports that portray a slowing of the misery the economy has been passing along to all of us and that is a very good thing – if it’s true.  We now know that the past eight years of dramatic growth in our economy was caused by a credit bubble.  Easy credit, mainly from home equity, fueled a consumption boom which, in turn, also created a stock market boom.  The last eight years of growth, like the dot com bubble bust, was entirely make-believe.   Not until we return to 2001 values for both the housing and stock markets, will the global economy hit bottom and be able to begin a solid and believable recovery.  I personally think we’re almost there. 

Home prices in many areas of the country have lost very large percentages of their value leaving owners, in many cases, without a dime in equity but still consumers are starting to show some early signs of assurance, if even just a little.  For instance, the most recent University of Michigan consumer sentiment report showed that confidence increased to 69 from 68.7 in May.  The report said the slight growth in the confidence level was due to slowing job losses, new reports that showed housing and manufacturing stabilizing, and belief that the Obama administration’s fiscal stimulus just might help encourage consumer demand.

A “psychological” bottom will be seen when positive news begins to replace the negative news we grown accustomed to hearing every day.  We all need to hope and pray that this bottoming trend continues, barring anything in the news from changing the direction of the recent improvements in the global economic situation.  Remember what happened after the attacks of 9/11?  There’s plenty of “bad” stuff going on around the world today and let’s pray that mankind is smarter than that – but you and I know the distinct and disturbing answer to that question. 

Since economic numbers (whether from the government or corporate America) compare themselves to the same period in the year ago period, good news probably won’t start hitting the street until the end of this year; more than a year after the stock market collapse of September 2008.  And if the unemployment and weak home prices persist, that will more than likely keep us all apprehensive and it will become less probable that we will decide to get back out there and spend, at least for the rest of the year. 

Americans must start to center on the country’s economic growth rather than their personal situations or what we hear from the national media.  Once that happens we will all be more likely to pull out our wallets which will create some needed economic growth, well-being and, ultimately, global recovery. All we can do is hope the best and look for the bottom.  Remember, we’re all in this together. 

World history has shown us that many times when the norm of a particular culture drastically changes, the shape of national thoughts, mores, and governmental structures have also changed.  We just could be on the ground floor of one of these national transformations right now. 

Today our “American Dream” is at risk in every neighborhood from coast-to-coast.  It’s not just a newspaper headline anymore, it’s actually happening to us.  I have seen many communities lose their sense of identity as families watch other families they have known for years suffer foreclosure on their homes.  Vacant homes are not what we ever imagined the “American Dream” to be; it’s not how we thought this story would end.  We, as Americans, have always worked hard to obtain this “dream” but now the unemployment rate has hit 9.4 percent and so many qualified and dedicated individuals are out of work.  The “dream” seems to be slipping away from us and there’s not a thing we can do about it. 

We, the people of a “former” America used to graduate from school, go to work for a company for 40 years, retire and live the rest of their days on a corporate pension in a paid off house.  That just isn’t the case anymore.  The one thing that many elderly American’s will be bringing with them into retirement is their mortgage.  This will place a real burden on their fixed income. 

But wait just a minute….it just came to mind that the American Dream was never about greed, fortune or lofty positions.  It was always about a promise that tomorrow could be better; a thought that we could leave an even better life for our children and our grandchildren.  That’s the problem.  Hey, we need to remember that we can lose our homes and just get another one.  That’s not even an issue.  The one thing we can’t lose is our values and our sense of family and community.  That cannot happen or the dream is dead.  We are Americans; we can always turn the situation around. 

We just celebrated the 65th anniversary of D-Day.  Those were tough times.  Following a decade of depression, we were suddenly forced into a World War that took millions of our precious lives.  Those left behind willingly took jobs in aircraft manufacturing plants, grew their own gardens in the backyard in order to eat, and dealt with a rationing system that forced them to do without more than not.  Maybe it’s time for all of us, as an American population, to get tough.  You have to admit, we’ve gotten soft.  I’d rather my family not experience hard times for one moment but these are challenging times and we all need to get strong.  All I’m saying is we need to start to adapt, improvise and overcome.  That’s what I learned as a young recruit in the U.S. Marine Corps and now these attributes are making it around full circle into my personal life. 

No matter who is in control of the U.S. government, our population is in a constant state of complaint.  So, I think it’s time to shift the focus from the government to our personal lives.  Let’s all start to take more responsibility for what is happening in our lives.  If you look closely, I think you’ll find more good things happening than bad things.  Try it.  Write down three good things that happened to you today.  Stop the constant complaining and consider what is going right in life.  It will be better for you, your family, your neighborhood and your country.  We can all do this – allow history to repeat itself and allow the “tried and true” American spirit to bring us to new heights from this day forward.