The Economy

[Jay Markanich]

Just some thoughts to share with you regarding the economy:

-- This is the kind of environment in which fortunes are made.
-- Wait until the current emotional contagion is finished before you decide how to get in.
-- Possibly late this afternoon, but likely not until early next week, is the time to buy.
-- What you are looking to buy are companies with good dividend histories, good earnings histories and a historically respected name.

     The current economic climate is an emotional one, driven by weaknesses that were built into the financial sector.  These weaknesses were built in during the 70's and exacerbated in the 90's.  The piper is being paid now for the idiocy of those decisions (inspected any foreclosures lately?).  But those things are happening now, hitting the fan now, and not indicative of our strong economy.  The financial sector is driving down the economy generally due to psychology, NOT fundamentals. 

Credit is certainly the issue.  And this spreads throughout the economy.  But the fundamentals of the economy are strong.  Fundamentals are defined as:  freedom of exchange, goods and services produced, diversity of product, the ability to offer services and the skills of people like you and me.  As long as we are allowed to function unfettered in what we do best (see my previous post about socialism creeping into the inspection industry...) we will do it.  So will other service companies.  Our service is one of billions of things that drive this economy.  Are you trying to drum up business?  Are you trying to improve your product?  Are you trying to improve your skills?  That is a fundamental!  If you hear anyone say that the fundamentals of our economy are not strong, they are playing on ignorance.  Ignorance is the biggest problem our country faces.  And ignorant people vote...

Don't listen to the media.  They are a part of the problem, with the intent of driving things down further because they think that will benefit a certain candidate.  They play on and drive the emotions of the ignorant.  They want you to think that all is lost.   

It is not.

What SMART investors look to do is buy low and sell high.  Notice how they say on the news that people are buying gold.  People are doing that because they think it is a safe hedge against future economic disruption.  But gold is historically high right now.  I bought a boat load of gold in 1997 - 98.  Do you think I should buy now or sell?  I have made so much profit, on paper, from my gold, I am going to sell off about 10% of it, probably Monday or Tuesday.  That gets me back my original investment, maybe more.  The 90% that is left will remain the nest egg I bought it to be, and it has cost me nothing!  No matter what happens to the price of gold from then on, my nest egg is pure profit.  Can you say Bingo?   

But look at how emotions are driving people to sell low and buy high?!  The market is driven by one of two things - greed and fear.  I hear them on CNBC say how stock holders are running for the door to sell.  Why?  Their stocks are low!  Selling is the opposite of what they should do...  They are selling low, and driving stock prices down further.  Then, THEN!, it is time for you to buy.

You will see that when the market comes back, it will come back big.  Buy in the trough... 

[John Adrian Sopher]

Man you hit the nail on the head.  First thing I hear come out of my cousins mouth was "maybe I should sell".  I told him now is the time to buy buy buy!!!  I then proceeded to explain the "buy low sell high" philosophy.  You know, the one everyone has heard a hundred times.  I think I even saw his eyes glaze over as the words went in one ear and out the other.  lol  I just tell myself not everyone is meant to be a millionaire and I go to sleep at night. 

[Dominic Maricic]

I've been buying all week!

[Jay Markanich]

Is good all this...

By the by - buy!

Or is it buy the buy - bye!

Anyway you look at it, buy!!

[John Adrian Sopher]

Speaking of buy, Jay what is your thoughts on nanotechnology?  Ive been thinking that this is going to be a great tech in the future and have pondered researching and buying into some co's that focus on it.  I think it would be kinda like digging for diamonds right now.

Problem is, what do you research this early on in such a new technology?

[Jay Markanich]

I have a trading software system that I utilize to evaluate stocks and stock trends.  I have many nano stocks that I have looked at, but the there are few companies really popular enough to generate demand for the stocks.  You are right, it is new and right now like digging for diamonds.  When something hits you will know it, but the technology is coming!

[John Adrian Sopher]

lol Ya but I want it before it hits!!!  lol

[Jay Markanich]

It's not too late to get in!

But my timing was uncanny...

[Dominic Maricic]

Jay, what software do you use? I've started using etrade a few weeks ago and their online site is ok, but leaves a lot to be desired.

[John Adrian Sopher]

I've bee thinking of trying etrade or some other online stock co.  I was with Edward Jones and I didn't have one good experience with them.  Not to mention I probably knew more about the stock market than they did.  Only thing they could do that I couldn't was keep up with day to day activity.

[Jay Markanich]

Wizetrade, but...

I studied economics and still read extensively and I do my own research of such things as leading and lagging indicators.  I'm not as ga-ga of all the indicators the media focuses on...  for instance, I think that employment and paper taken together is a strong leading indicator (you won't hear that one on CNBC).  If employment is 95% and office paper, for example, is being sold in increasing quantities, there is no recession on the horizon because business is being conducted.  Lots of paper means trucking is active, printing companies are busy, etc.  This has continued as businesses have gone increasingly "paperless."  So I have followed it.  That's Markanich Doctrine, not anything I have learned in classes.  I'm a real rebel, but a thinking rebel...

Economics is the study systems, and particularly of the entire system in a free market.  That's why diverting resources into something like ethanol causes price increases in pizzas and bottled water. People generally don't make those connections and don't understand it.  Dislocations follow which cause seemingly unrelated problems - but they are NOT unrelated.

To determine when to buy and sell I use Wizetrade nearly every day.  It is a predictive software using many algorithms to predict buying and selling pressure in the short, medium and long runs. Demand, or the lack of it, is a huge stock movement indicator.  E-trade looks at business info, which is okay, but not always what drives a move.  Business info can't be ignored, but trends are really relevant, and there are many, many factors that go into trends (not fads).  That's where Wizetrade comes in, and its algorithms.  I have used the software for 6 or 7 years.  It wasn't cheap, and my wife made me promise we would make our money back in the first year.  While I told her I couldn't do that, I felt good about what it was doing.  We made our money back in 2 months...

I have a Series 6 and 7 license and have been trading stocks (for myself) for 22 years, so there is familiarity with the process and market research.  But I think buying demand, not market fads or accounting "stuff," like acid ratios and so forth, is more of a predictor of stock movement.

Some stocks I buy to take advantage of a swift move, but for the most part I invest.  The Berkshire Hathaway model is a good one to study.  And I got into that stock a long time ago.  The BRKB series is still affordable, about $3400 per share, though I haven't checked recently.  You might not be able to afford the A series.  But what happens in the A series is good for the B series as the people who have big money are smart and take advantage of the things that will pressure moves in both series.

So, any more questions lemmino!

[John Adrian Sopher]

Damn you so smart... I gota go finish up my finance degree. 

[Jay Markanich]

I had two classes of finance in college and two in grad school.  HATED them!

[John Adrian Sopher]

LOL I think many would say the same about economic.  Me, I like just about everything there is to do with business.  Except maybe accounting and taxes.  lol 

[John Adrian Sopher]

Hey Jay was getting your series 6 & 7 license difficult? Scale of 1-10.  10 being CPA test difficult and 1 being able to sleep to pass it.

[Jay Markanich]

I took a class designed to help you cram for the test.  I had studied for some time, but the class really makes the test easier.  The Series 6 is a single exam, not like the CPA or actuarial tests.  As a single exam it was hard.  Many fail it a number of times.  Takes all day, at least it did then.  We had to go to a central place with lots of people in the bull pen.  Now they probably do it online.

As a single exam and given the preparation to take it, I would rank it 8.13529.  The Series 7 is based on the state(s) you want to sell in, if you are to do it professionally or manage other people's accounts.  I never did that, though I took the test to have the ability.

Just getting the literature to prepare for the test, and studying it, would be a great help if you wanted to become more market and trade aware.

[John Adrian Sopher]

I'm always interested in learning something new.  I think I should probably finish up my degree before I try that.  I only have about 1 1/2 years left.  An 8.13529 sounds pretty difficult given your MBA background.  Sounds like it would be 11.56289 for me since I would only have my bachelors.

[Jay Markanich]

John - I thought it was hard.  But that does not mean it might be for you.  I didn't like finance, accounting, etc., but did enjoy economics and organizational development.  We are all different.  My difficulty with the information may have been my mental bias.  YOU could do great!  I remember needing a 70 to pass and they don't give you your score, only if you made it.  You likely would do great!

[John Adrian Sopher]

Oh by the way, I wanted to say I like your idea about watching employment and paper.  It sounds like it would be a good indicator. 

In your experience of watching these two items, how good of a predictive indicator is it?  I would think paper would be more of a volatile lag indicator.  You know, say like the housing market crashes and everyone stops getting loans, so loan companies stop buying paper....  I would think that indicator would show more of an immediate economic conditions (and for everyone else that reads this, its good to know your current financial and economic situations).  And the employment would show a longer more subtle trend.  Is that your experience with these two indicators?  Is it good at predicting future market conditions?  Predicting the future is worth its weight in gold my good man!  lol

[Jay Markanich]

I don't know how "predictive" it is.  It is probably more a current than lagging indicator.  I just look at it to see what is going on at the moment.  Trucking, along with them, says a lot too.

I noticed over the weekend that they interviewed Warren Buffet.  He said pretty much what I said in the first post - that greed and fear run the market.  He is as contrarian as I was suggesting we should be.  His quote, pretty close, "When the market is  greedy I am fearful and when the market is fearful I am greedy."  That pretty much says it all!   I noticed he buys when things are going down (bargain shopping) and the other day, when the market soared for one day, he absolutely stopped.

Like was said before, buy in the trough...  it's not too late to get in!  It might go down further too!  Keep a sharp eye!