Thursday, August 29, 2013

How To Deal With Failure

Failure is something we look down upon.  It usually starts in school when we raise our hand if we say the wrong answer we feel bad and probably will hesitate to raise our hand again.  People love to hear stories of success and glory.  The media loves those who come in 1st place. Those that come in 2nd and 3rd are forgotten.  Yet success comes with a prerequisite; failure.  Great salesmen know that it takes a lot of rejection and failure to become the best.  The earlier in life we learn to deal with failure and rejection the better off we will be.

It doesn't feel good to fail that is why we must work hard and learn from the past to evade it.  There are failures that can be avoided if we have discipline, seek out good friends and mentors.  The journey is ours but getting good quality friends, acquaintances and mentors makes the trip less bumpy.  If you haven't failed much you must not be living to your full potential.  If you plan on living a life free of failure you must plan on living a very mediocre life.  It's like playing poker and expecting to have winning hands all the time. In poker it's not about having winning hands all the time but the way you play the cards you have been dealt.

If rejection bothers you then get a seasonal job in sales to overcome the problem.  This will help you learn how to deal with people turning you down.  As you gain experience rejection won't bother you as much. It will help you to overcome your fears of social interaction, this will come in handy when you need to conduct business.   Public speaking is a fear most of us have and the earlier we learn to deal with it the better. Make announcements at family gatherings, volunteer at a public event to get practice in front of small or large crowds.  Most of the time people will cheer for you or will be on your side.

Anything that will bring you wealth, success or fame will require some failure if not lots of it.  To dismiss failure will mean you won't do much in life.  The more you get out there and try the more you will become confident and learn that failure is necessary to become the person you want to be.  The lessons learned will make you better at dealing with losses and bad moments.  Don't be too hard on yourself we all make mistakes and success does not depend on making every decision perfectly.  The experiences make you and your loved ones better off as a team since you now have more ideas and knowledge to draw from.

Thursday, August 22, 2013

The Value Of Information

Growing up in the city I remember at an early age believing that money was the ultimate valuable object one could possess.  A funny thing happened as I started my quest for money I realized that information is just as valuable if not more.  The concept didn't dawn on me until I began educating myself through books, people, school and work.

A few semesters ago I had to leave early from one of my chemistry classes.  It was the first day of class so I asked a girl sitting next to me for her email address.  I emailed her to ask what I had missed. She gave me the book titles and was kind enough to share the site she was going to get them from.  The site she recommended saved me $100, she introduced me to the world of college book rentals.  We ended up helping each other out throughout the semester at that moment her information; that brief email was worth $100.  I always try to enter a friendship with the goal to help out but we don't always know what will happen.

A few years ago at a stock trading conference I approached this guy in his early thirties.  He introduced me to the world of prop trading that is where he learned some of his techniques.  I am glad I met him he gave me information I would have not found in books.  It saved me a lot of time.  He showed me a sheet of all the day trades he had done on a particular day that's how I learned how to make $200 in 2 minutes.  I had to see it to know it was possible at that moment that piece of information was worth $200 but the fact that it opened my eyes on how to make money quickly it was worth much more.  As you can see from the picture below my first attempt was with (GE) although I did not make $200 in 2 minutes It was a good try $110 in 7 minutes.

Information is all around us and easy to access yet we have to filter it to meet our needs and for it to be accurate. The beauty of information is that we can carry it with us and at the right time convert it into money or anything else of value to us.

Friday, August 16, 2013

How I Could Go A Year Without Cash

It all starts with a plan whether the goal is to become wealthy or to live cashless.  Anything is possible you just have to learn to be resourceful and creative.  My first step to live a cash free life for a year would be to get a job as a building superintendent this would allow me to live rent free; I'm not afraid to get my hands a little dirty.  I could also become a professor in the city and live on campus.  To get my desired job I would talk to people in person as well as online.  To get food I would get a part time job at a supermarket where I could get food in exchange for labor.  For transportation I would get a bike, a ride from a friend or plain old walking.

In regards to utilities I could go extreme and use candles, public outlets to charge my laptop and no need for a NYSE company owned gas; I would not be heating any meals.  I could also move to Utah County which has some of the lowest utility costs in the nation.  If I do decide to get light I would barter a service in exchange the person would pay the bill for me. The service could be walking a dog, administrative duties such as editing papers, freelance writing for a company or providing personal training to someone wanting to transform their body.  This is all possible you can read about Kyle who ended up trading one red paperclip on Craigslist for a house.

In regards to clothes I could barter with friends as I do for movies and video games.  I could also write to a company and offer to advertise in exchange for clothes.  As I did some time ago with a supplement company by the name of Cytodyne Technologies.  I used to work at a gym and while doing my extreme workouts I decided to take some meal replacement shakes and vitamins to get enough protein and save time with preparing meals.  I wrote to the company and let them know that I liked the product and that I saw some nice shirts with their logo if I could have one to advertise.  I sent them a picture of myself to let them know my progress.  I got the shakes through a magazine by the name of ProSource. I sent the letter to the magazine company. They forwarded the letter to Cytodyne and in a few weeks I got a six month supply of meal replacements, vitamins, protein bars and shirts not only was it more than I expected ProSource ended up sending me shirts and products with their logo as well.

Now for entertainment I would borrow books and movies from the library or get all my entertainment online for free.  I could also go to friends' houses for dinner in exchange I would create a board game so we could all play which I have done in the past, it is a lot of fun.  When you care for people they open their doors for you, its a win-win situation.

Going without cash for a year is possible it just takes some strong networking and adapting to a new lifestyle.  Sure it would be hard work but it could also be liberating.  I probably could go cashless for life. Anything is possible and as long as we challenge ourselves daily we will grow and surprise our own selves. Why don't you try going cashless for a few days see what creative ways you find to evade cash.

Friday, August 9, 2013

Shorting Stocks

When you buy a stock it is called going long which is what most people are familiar with, buying and holding stocks for the long run.  There is another side to trading stocks and it is called short selling or going short.  Most investors that are starting out seem to have a hard time understanding the concept or may not feel comfortable shorting a stock.  When you go long or buy a stock you anticipate that it will go up in value and that at some point you will be able to sell it and make some money.  When you short a stock you anticipate that the stock will drop in value.  You enter the position by selling, in other words you borrow the stock from the broker since you do not own the stock and then buy to cover to close your position.

Let's look at this trade I did below back when (GE) was trading at $16.55.  I entered a limit order to short 1000 shares (9:37am) of the stock at $16.55.  At this point I did not own those shares so my broker let me borrow them.  Since I was correct and the price dropped I went ahead and bought the shares back by entering a buy to cover limit order for 1000 shares at $16.40 (9:42 am).  This was a $150 profit in 5 minutes ($16,550 - $16,400 = $150) you make money by selling at a higher price and buying back at a lower price.  It's like borrowing your friend's printer that costs $100 and selling it to your neighbor for the same price.  You then buy that same model printer back for $90 and give it back to your friend to make a $10 profit.

On the other hand if the stock rises it can get ugly.  Technically the stock could go to the moon or at least very high and the longer you let it rise without closing the position, the more money you can lose. Let's say that GE had risen to $20.55 instead, I would've lost $4,000 plus interest based on the amount of days I kept the stock with a margin account.  Most of the time you may hold the short position for as long as you want. There are times when a broker may force you to close your position.  If during the time you shorted the stock there were dividends payed out, you will have to pay them back to the lender.  Shorting stock is another good tool to add to your trading but before you do so make sure you understand the risks involved in the art of short selling.

Sunday, August 4, 2013

Was Babe Ruth Richer Than You?

During The Great Depression George Herman "Babe" Ruth, Jr. was making a yearly salary of $80,000. In the early 1930s a reporter asked Babe Ruth if he thought it was right that he made more money than the president. The Great Depression was a troubled time for the world but let's give Babe some credit he had a tough upbringing and came from a rough neighborhood in Baltimore, Maryland. Babe played for the Yankees from 1920-1935 but was he really that rich? Even now a days an $80,000 yearly salary is considered pretty good.

Let us convert his 1931 salary into 2013 dollars using the CPI Inflation Calculator Babe was making the equivalent of $1,228,968.42 in today's dollars. Compared to Derek Jeter who according to Forbes makes about $16.4 million a year (not including $9 million from endorsements) Babe doesn't really seem that well off. Babe was known for his hitting, he set records for home runs during his time which still stand. Jeter is the Yankees' all-time career leader in hits. Should Derek make 13 times more money than Babe? Entertainment pays what can I say? We all like the guy.

Whether we take the $80,000 salary or his inflation adjusted $1.2 million yearly salary and compare it to our own it is fair to say that he had more money than us common folk. But was he really richer? We have seen that baseball players in our time are better off than "the Bambino" but how about you and I? Did Babe Ruth have access to the internet? Could he warm up before a game using an Apple iPod to play his favorite songs? Could he watch movies online and take them anywhere he wanted? Could he have access to the world and access to just about any piece of information in seconds via Google? Could he text, email or IM his buddies? He had no tablet and could not open his own online business if he wanted.

Would you be willing to give up all the luxuries, advantages and technological advances we enjoy today for $1.2 million? Before you answer there is one more thing to consider; in 1946 Babe started to experience pain over his left eye and had trouble swallowing it was found that he had an inoperable malignant tumor at the base of his skull and in his neck. His fame gave him access to experimental treatments he became one of the first cancer patients to receive both drugs and radiation treatment simultaneously. Would he give up some of that salary if not all of it to enjoy the things you and I have access to that we sometimes take for granted? I believe he would.

Inflation does eat up the value of money over time but quality of life, medical advancement and technology is something we may fail to take into consideration when we measure how well off we are.

Friday, August 2, 2013

Should You Worry About Inflation?

Although inflation rates have been rather low people should not put down their guard. The inflation rate for last month was 1.8%.  In 2012 the average inflation rate was 2.1% and in 2011 we saw an average rate of 3.2%.  Modest rates make people less worried yet leaving your money idle for too long is dangerous.  The 10 Year Bond is currently at 2.62% and stocks have been on an upward trend since the beginning of the year.

Now let's imagine that you had retired 20 years ago and had a mixture of stocks and bonds that paid you a fixed income of $10,000 a year to use towards paying for your living expenses.  Although we are at a time that Americans are living much longer we will assume that the money will only need to last you for 20 years. If inflation in those 20 years had averaged a high of 10% your $10,000 would only be worth $1,486 in 2012 dollars, much less purchasing power as we can see.

A 10% inflation rate over a long term is not too likely but it could happen.  Now let's consider inflation at 3% which is likely to happen and yet in the short term does not seem too threatening.  With the same $10,000 payout in the past 20 years your purchasing power would have dropped to $5,536 in 2012 dollars.

Inflation is a part of life we can't afford to ignore, shop around for investments that will allow you to stay above inflation.  Allocate a percentage of your savings into securities an amount that will make you feel comfortable even if we see a drop in stocks.  In other years when interest rates were higher CDs have been good to fight inflation but do take into consideration the taxes you will pay on the yield come tax season.