Here are the actual numbers:
If you contribute $4000 every year and borrow 60% from margin your account balance will be about $3,791,185.15 after 30 years.
Amount you actaully put in: $176,000.00
Thats right… You put in a little under 200k and you make a little under 4 million.
Still don’t have $4000 a year? Thats only $333 a month.
key point that many often times dont’ get: Save your money earlier.. so its worth more later.
Josh
How to make a million dollars –
Oh, I am not joking. People are constantly looking for ways to make money, to become the overnight millionaire, to be the next You Tube, My space, EBay, etc. Face it; we all want to make it big, and quick. The fact that you are even reading this now proves your ambition to peruse such riches. I’m very happy for you, you can do that on your own time, not here. Because what I’m about to show you, will not make you the next Ebay, it will not make you a millionaire overnight either – rather in time.
Time is money; you have heard that expression before so many times, and I bet you are wondering, is it really true? Is my time really worth money? Am I, a college student, a 9-5 slave, a jobless person worth any money? The answer no. (at least in this case) It’s not you that’s worth money, but it’s your money that is worth money. Your money, based on time is worth more in value. $1 today can be $1.01 tomorrow. Your investment today, can be worth 10 times tomorrow.
Two of the most important lessons I’ve learned in life is about risk and money management. “No risk no gain”, “No pain no gain”, “No time no dime”. If you want to be an old sucker driving a cadilac at 80 years old, go visit your local investment branch and have them make a “portfolio” for you. If you want to make it big (not overnight of course) lets follow these steps.
Ok so now how do we do it? Let us take the average American. 9-5 schedule, works for a decent company, on salary, gets the same lousy paycheck every month to pay his bills, go out, etc etc etc. lets name him Mike. Mike, age 25, building his career, trying to make himself someone, trying to make a foundation, has a degree in business management, but never uses it.. typical average American.
Here’s what needs to be done! 80% of Americans today do not know how to save money, out of the 20% that save money, 50% of those take it to ‘retirement specialists’ such as Schwab, Morgan Stanley, yada yada yada… They will setup an account for you and charge you commission every year, you may have some money when you are 65, well certainly more than you would putting it in a CD, that’s fine. However, what about the other 50% of the savers? What do they do? They invest. They invest strategically, they take risk. Risk is a HUGE factor. When you are young, it is important to take risk, because you have your entire life to make it back, don’t worry 9-5 is always there, its not leaving. What if we were able to play with this 9-5 job a little and risk some of our money so we can potentially double triple or quadruple it? Well let’s take a look at what I mean by risk.
Many people ask me what an IRA is, of course IRA’s are great, but what risk really does an IRA have? I mean, look it takes 40 years for you to touch your money, which in some ways are great, but on the other hand I think IRAs limit you to what you can do. When you contribute $4000 a year to your IRA account, your $4000 is only worth $4000 or whatever the market does with it. But think about what I was saying before, not only is it true that TIME is money, but MONEY is more money… how? Two words, remember it, live by it, and play by it…. Buying Power. Yes, money is power. Your money is worth sometimes more than you think it is, your money, let’s say $100 is worth $120 to someone else, you can sell this to him. Why? Because cash is king. Always. No matter what anyone says, cash is power. So now that you have understood that money is power, where am I going? Lets see.
Suppose we open an individual account to invest. And we deposit $10,000. Right now, your broker says, hey thanks for the deposit you have $10,000 buying power. Great! You have 10k to play around with.. but what if we told our broker, hey mr. broker, why not let me have 15k buying power? You have my 10k as collateral, I have good credit.. please? Mr. broker will typically say sure! We’re lend you $5000, not a problem.. but with premium of course. What the premium? You guessed it, interest. Interest rates, what this US economy literally moves with. The broker will charge you a certain % for borrowing money, you don’t have to pay them back the full principle, as long as you are paying them the interest. This is called a Margin Account. If you have never heard of this term before, I would suggest you read a little bit about it, its fairly simple, you borrow money – you pay interest on that. Simple as that.
Ok now enough with the boring stuff. Lets get to the point and cut to the chase.
Through out US history, I mean from the start of the stock market, the US economy has averaged a yearly return rate of 10%. Meaning, for every $100 you put in the market for and averaged returned rate of the market, it would turn into $110. Cool huh? The average savings account would maybe give you $103. Here is a graph.
Since, the early 70’s, the stock market (Dow, Nasdaq, S&P) have averaged about 10% a year. Of course there have be bumps along the road, but the market has always found its way home. This is one rule I stick by, look at the timeline on the graph, 1973-1975, also known as the great depression era.. market did recover… There will always be a year or two where the market dumps everything, for example 9-11, a disastrous event.. market recovered.
Here, take a look at 9-11
I have this belief, I have this 1 rule that I stick by. Many 9-5 guys don’t, because of fear of the market.. whenever they hear “stock market” its like an automatic “oh no! stay away! The market!” type of thing. The market will always follow the economy. If your $1 is not worth $1, the stock market will deflate, if your $1 is worth $2, the stock market will inflate. Simple rules to obey. Do not worry too much about your money, you’ve got time.
Looks promising doesn’t it?
It really is. There is no catch.
So where’s the risk? I mean, I’ve got 40 years no? By then I’m sure my money will inflate!
So here is where we get tricky but smart. You ever wonder why a bank is willing to give you 3% yield when you put your money in a CD? I bet 85% of the people who do it don’t. I bet they have no damn clue. Well, they do what we are going to do.
Rip you off.
If I was Bank Of America, I’d be more than happy to say, “Hey! Mike, give me your $10,000, for 1 year, in a CD (that you can’t touch of course) and I will give you 4%-5% return a year. Hows that sound?” Mike says, woah, what a deal! Free money!
Mike does not realize, what bank of America does is invest his money, and makes 10% on HIS money and gives mike a kickback of 5%. So basically, the bank said mike give me your money and lets be partners.. no worries, I’ll give you 5%.
Don’t you want to kill your bank now?
But what if we could do that.. what if we were able to say.. hey lets borrow money, invest and get paid on an almost guaranteed investment! Now, of course NOTHING is guaranteed but looking at those graphs you can see that your chances of losing all your money is if Iran successfully drops a nuke on the US, which by then who even care about the dollar anymore..
Good news is, we can do it – Using a margin account. Now, there are some good brokers out there that can lend you money cheap, say around 5%-6%. I recommend a company called Interactive Brokers www.interactivebrokers.com (“What’s your excuse?™”). Depending what interest rates are at in the economy (read up on interest rate cycles and dollar cost averaging I can’t get into that its too lengthy, but it will give you an idea on when to borrow the most, and when to be careful).
Be careful though, because margin is RISKY!!!!!!
MARGIN IS RISKY!
However, if you plan it out right, you should be able to survive a catastrophe.
My recommendation?
I’d start off slow, borrow 40% of your total cash. So if you deposit $10,000, I’d borrow $4000. Invest that. Let it ride. Watch your gains. You will see that every year you borrow for 5%-6%, you will make 10% and have made money on OTHER peoples money. Doing exactly what the bank does, with less risk (because your broker will never say, hey! I need my money back!) and you have all the time you need.
Remember, timing and strategy is key. Read up on dollar cost averaging, and how interest rate cycles work.
So what do you invest in huh?
Well there are many funds, ETFs that you can pick. You can get even riskier by picking some foreign funds like ASIA, Europe, these markets can serve as a hedge on the US market.. which will probably make you more than 10% a year.. and as for your broker – yep still only gets 5%-6% no matter how much you make.
So I’ve taught you really basically what should be done. Before I could show you the actual money that can be made. (mainly cause im not a crooked broker who wants to charge you a commission for every word that comes out of my mouth)
Lets use a basic IRA calculator to see what potential we have.
Lets say you were to invest $4000 a year. And borrow 40% each year. With a average interest rate of 5% (very fair). And an average return of 10% (fair fair fair! When I say fair it means you can do WAY better than 10% if you put a little bit of your mind to it, 10% is if you just pick a fund and let it ride.)
After 30 years, your account should be worth around 5 million. Calculating it on a spreadsheet isn’t that easy.. do it yourself. But you get the idea.
Remember – Using debt as leverage to purchase investments can magnify your return!
Did I mention the tax savings?
Mike, age 25, single.. Contributes to a 401k, pays his medical insurance pre tax dollars, and even donates money to his local charity and still gets taxed heavily by Uncle Sam! What if I told you, Mike, you were able to deduct that interest from your margin account from your taxes? Oh yes, 5% cut right off! The bank doesn’t do that!
You get the point, use other peoples money to make your own. That’s how all the millionaires do it, why shouldn’t you?
Congratulations, you are a bit smarter now.
Josh
Take a look at this chart, and you will so how bearish oil is when winter time comes around. Take this as a buying opportunity to get into oil commodities to create a large gain on your portfolio.
Like i’ve said in the past, oil is not going anywhere, for a while. I don’t care who’s in the office, we won’t wake up one day and fill our tanks with water, its just NOT happening. So until then, take advantage.
Here is a chart of the bear and bull cycles, just like any other stock oil is cyclical. You need to buy when its ugly and sell when its nice.
Not the best editing skills, frankly cause i don’t care. But you get the point. oil is a buy! DONT BE FOOLED by the “girly men” democrats pushing for alternative energy, or big oil taxes, makes no difference. Without oil, we cannot function. take advantage.
I have been getting so many questions repeatedly about oil, and how to play it. I am going to briefly show you how I do it so you can get a hang of it and do the same. It is pretty simple.
Find a stock/ETF that is tied to oil services or owns oil fields. When the price of oil goes up, the stock or ETF will go up as well.
Here is the problem. Some people are too cheap to understand that 0.80% management fees on an ETF is NOT expensive. Looks at it as insurance rather than an expense. The problem with investing in a single company or something like XLE is that if any of the companies miss earnings, or have any sort of bad news, the stock will drop WAY more than it will go up. You will lose 10% in minutes. Oil is very very volatile. This is why I stay with USO. I know it doesn’t sound the best, but I’ve made a killing on USO.
Here is why:
With USO, you pay them 0.80% (a year) to manage oil futures for you. So instead of actually trading stocks or options or features, USO will do everything for you, all you have to do is invest into USO. Just think of USO as the barrel of oil, it goes up.. you make money, it goes down you lose. That’s all. No expiration dates, no earnings, no PE, no EPS, I cannot seem to stress this enough.
So, how do I do it?
Here is an example of my recent trades. Lets start from the top. Oil is now around $60 a barrel. I anticipate that it can go either way.. Which is FINE.
So I start of slow… buy some shares (enough that if it goes up you can make a little) don’t buy too much. And don’t buy too little, because if it goes up you will hit yourself why you didn’t buy enough.
So I start buying…. Here is my trade history:
10/30/2006 10:09:24 Bought 45 USO @ 52.91
I make a starting position. And I HOPE that oil will go lower.
10/30/2006 14:05:18 Bought 90 USO @ 52
After 4 hours, oil goes lower so I rebuy
10/31/2006 11:21:49 Bought 150 USO @ 51.41
The next day, I’m all in RED.. it looks so ugly.. but be strong and buy some more.
Now your average cost is going lower and lower
10/31/2006 11:54:15 Bought 320 USO @ 50.98
Oil is still tanking, I still buy more. Why? Because oil is going to $100!!!!!!!!! (read my post about that)
11/08/2006 10:37:31 Sold 605 USO @ 54.5736
I sold.. Because I liked my return. And I anticipate for it to fall again, so I will restart my position all over again.
Transaction amount: $31,086.05
My average cost: $51.38
My sale: $54.57
Return Rate: 6.21%
Profit: $1,930
Cheers!
Recently, Brian Hunter, who we all must know by now, bet on a huge gain on natural gas, and ended losing 6 billion dollars in just 1 week. I want you to do the same, except don’t lose it. The 32 year old hedge fund manager bet that there will be a huge rally in natural gas, his reasoning i don’t know, but i think his timing was just a wee bit off.
I’ve been watching NG (Natural Gas) for a little while now, and have the technicals to show to you on the buying power everyone has. These Billions of dollars that were lost in the hedge funds are giving people and trust more of a reason to sell and short. This is driving NG prices down to lows we haven’t seen for a while.
I have reason to believe that NG has been oversold. So now its time to get in, while everyone is shorting it, while everyone is bashing it and saying “oh the NG & Oil boom is over, etc etc etc”. Remember: you buy into shorts and sell into Rallys. You buy when its ugly and sell when its nice. DONT buy when its infalted and sell when it deflates, like our friend Brian Hunter.
Check this technical analsys out.
In 2003, when summer came around.. The natural gas inventories were builing up higher and higher because a lack of demand, people do not need natural gas to heat their homes because it’s summer. So what happens?
Lets take a look..
Actually as i write this post i cannot even start to tell how you how late you will be to the game if you don’t get off your seat and buy some ECA APC AND CHK. I personally like all 3, but right now ECA is SO UNDERVALUED.
real quickly, look at the charts of the past years of Natural gas and figure out why we should remember september. I don’t have much time on my hands to explain why but Ntural Gas is a GREAT bet, and even a better bet because of the hedge fund incident. do not get scared BUU AND BUY!
2003 Data
2004 Data
2005 Data
EVERY YEAR, WINTER provided us that rally . Brian Hunter, SAME EXACT STRATEGY but the moron bought RISKY contracts and futures. Don’t let his mistakes fool you, do it the right way. Get some ECA then some APC and/or CHK both are great, but ECA will do GREAT!
Cheers
Josh
I haven’t posted anything recently, due to the fact that i’ve been on a short term break from the market. It worked out perfectly for the slump in the market and all the inflation worries that came about and had the Dow drop below 11k.
But I’m back now, ready to make the turn-around i did a few months ago. For those of you wondering, the last post i had suggested to buy the best of breed at the ugliest timing. Here were the results:
VZ +9.81%
TM: +8.05%
MSFT +14.14%
C +3.47%
PG +7.95%
PFE +21.67%
CMCSA +9.19%
UST +23.39%
Total Return: 12.20% note: the Dow is not even back where it’s going to be after September.
Today, i’m looking at our fellow friend and buddy Ford. Here’s a fine example of our “best of breed” pick. Now, you may be thinking, “best of breed? it’s a horrible company!” and you see, that is where you are partially mistaken. Here is a little background information about Ford.
Henry Ford (July 30, 2003 – April 7, 1947) was the founder of the Ford Motor Company and father of the modern assembly line used in mass production. His introduction of the Model T automobile revolutionized transportation and American industry…..
However arch-rival General Motors jumped ahead in the 1920s by offering far more options to consumers in terms of power, prestige, styling, and convenient financing plans.
Basically, what I am trying to say here is the type of company Ford is. It’s been around forever. Heck, they were the ones to make cars. Those F-150’s, Mustangs, those are not going anywhere it is best selling American car year over year. So what will happen now that ford is losing so much money? Reconstruction.
Reconstruction is one of the best things that an investor can take advantage of. The company is trying to tell you “we are here by letting all investors know that our stock is going to get SUPER cheap, but once we fire all our employees and close all our plants and move them to a super cheap location and reconstruct our business, the stock will return to life.” how could you possibly say no?
Here is my analyses: Ford will die, Ford will be bashed, Ford will drop to $6.50 areas. That’s when we will start the buying process. The stock market will never tell you where the foundation of support is, but with earnings and actual postings of losses, you can do the basic math you were taught in elementary and figure where that support is. Start with a buy back process. Buy a little of Ford slowly, wait till it goes down and buy some more. BE AWARE: When it goes down this is an opportunity! DO NO PANIC. Each time it goes down, think of it as a time to refinance your stock for a better interest rate, or here a better rate of return.
What may end up happening at worst or even best:
GM will say, “Hey, we’ve been in a huge fight with our rivalry Ford forever, and now it looks like this thing is getting kind of cheap, why don’t we try to make an offer.” You think thats impossible?
What about At&T & SBC? Whirlpool & Maytag? And the many big multi million/billion dollar companies who have already done it. Nothing is impossible. If this happens, the demand of the stock will go up, and prices will been driven up, Ford may be too much pride fixed to say “yes” to the offer so GM will try to offer again, or buy into their stock. And that’s exactly what we want. Ford is too big of a company for it to be gone. It is way too large for it to say “OK we’re done”. I compare the Auto companies to the telephone companies sometimes because of the nature of the market.. IT SUCKS. Everything is so dependent of consumers and world matters, i hate that. But when AT&T dropped to an all time low, SBC came out and said, “Oh my! AT&T our biggest competitor has become so damned cheap!” And what they did made some investors millions.
Lets not slip away from this opportunity.
Cheers!
Josh
Here’s something interesting I noticed in most investors; they cannot take pain. Whenever anything looks red, they sell. It’s almost like a hinged instinct wall street has on these so called ‘big players’. So I’ve come up with some simple strategies to try to train and discipline you on how to make money when the market looks ugly. However, you need to learn a concept that has been taught countless of times in the real game secrets: Do not panic sell!!
Say, we have company ABC on board with us today. Company ABC has been in the business for years; perfecting management, continuing growth for the company and for the employees, keeping investors happy (look at the history), has a good SOLID EPS and compares very well to its competitors. Company ABC has announced surprises, they are the leading company in its sector, they’re doing great as a company, however, the market is not rewarding them.
Let’s analyze this closely: Think of Company ABC as a student and Wall Street as a teacher. The teacher sends the child’s report card saying “Your child has been trying to excel and grow and has been doing a great job, keep it up!” The quarter comes around, and the child gets straight A’s as expected; kept up the same strength and worked hard to get those A’s. Shouldn’t we reward him? Think of how odd and wrong it would be for that teacher to say “hey child, why did you only get an A?” wouldn’t that be a horrible teacher? Wouldn’t you expect the teacher to reward the child and congratulate the child on passing and perfecting the class? I would. As I would with any company that has continuously showed me that they are ready to keep they’re report card on a high level. This is the case with Wall Street; sometimes Wall Street turns its head and becomes an unfair teacher. Even though company ABC has continued to show the hard working grades that they have (fundamentals) they are getting punished by Wall Street for being a good company.
What’s my point?
My point is to show you that stocks that have been ‘great students’ are being tortured and punished for what they’ve done. We use this as a buying opportunity. We buy our small chunks at a time and buy again when it’s punished again. When the reward day comes around, when it’s time for the child to get his ice cream or new bike you will be very pleased to see the correction of the real company with strong earnings that you believed in. I have a list of these companies that I’ve seen and I’ll list very few of the many great companies out there. I think in a bear market like this it’s just not wise to bet on only small cap (even though that is the most rewarding in this market at the moment) I believe that you should diversify yourself between large and small cap. That way you will be covered on the small cap’s losses and can continue to buy what you think has the growth potential and earnings in the future. You will be covered by your “hard working child” in the large cap sector and need not to worry. When the corrections come around both your large cap and small cap will flourish.
Take a look at this chart I want you to pay attention to the Dow’s support levels. The punishment is brutal but there is always a reward as you can see. Just look at the bounces that it’s made when it was crushed. Investor’s & Wall Street both realized “Hey I can’t sell that, that’s a great company I’m going to buy” and that’s what happened and that’s what will always happen.
Before I start this post, I want to Cleary make sure you understand that I am in no such way a capitalist when it comes to lives of other people. Hurricane season will hopefully not cause any damage to businesses and residence & most importantly people's lives and families. However, at the same time I believe I have the right to hedge myself higher costs of energy and gas prices that our projected 'major' hurricane season 2006 will cause.
To start off, I’m sure you have all listened to me regarding Iran and its oil powers. If you did, you should be in a very nice gain. For those of you who are eating themselves, you may have not missed the boat yet as I still firmly stand behind my predictions that oil will be $100 / barrel. I'm not going to go into all the details now, but rather show 1 of the 2 factors that will bring up those prices in the barrel and the pump. (If you want to know the first factor, read my 2nd post about Iran).
Here are my thoughts:
June 1st, 2006
"The Season Ahead"
NOAA PREDICTS VERY ACTIVE 2006 NORTH ATLANTIC HURRICANE SEASON
Residents in Hurricane Prone Areas Urged to Make Preparations
"Experts say the 2006 season could be another very active one. The latest forecast from the National Oceanic and Atmospheric Administration (NOAA) calls for 13-16 total storms, 8-10 hurricanes, and 4-6 major hurricanes (Category 3 or higher). NOAA is predicting 13 to 16 named storms, with eight to 10 becoming hurricanes, of which four to six could become 'major' hurricanes of Category 3 strength or higher," added retired Navy Vice Adm. Conrad C. Lautenbacher, Ph.D., undersecretary of commerce for oceans and atmosphere and NOAA administrator."
If you ask me, that’s ugly.
So what am I going to do?
Invest in oil.
Why?
Well let us take a closer look:
With this picture, you can see where most US oil refineries are located (shame isn't it?) right next to the gulf of Mexico where hurricane's Alberto Beryl Chris Debby Ernesto Florence Gordon Helene Isaac Joyce Kirk Leslie Michael Nadine Oscar Patty Rafael Sandy Tony Valerie William all with form (For more info on hurricane names check this out – http://www.weather.com/newscenter/tropical/?from=wxcenter_news) This particular hurricane that you see on the picture was Hurricane Rita, which damaged a lot of refineries as you can see it travel through the North-Western territory.
Most of the refineries in that map are located in the North & North-Western area of the gulf.
Here's a closer look:
Look at this picture closely. Louisiana is the biggest refinery state we've got out there. If a hurricane hits that area, I think we should see at least $80 a barrel of oil. In today’s news, Iran has "accepted" the White House’s "package" and seem like they want to cool and negotiate nuclear talks. In the news today as well, we've started to see our first hurricane form today in the Gulf of Mexico but luckily, the projected path is not going anywhere near our oil refineries.
Here's a picture of the projected path Hurricane Alberta is believed to take.
Now from this early projected path (which is just predictions based on some theory and fact) it seems that Alberta will have no affect on oil refineries in the North. From here, this looks like it is traveling towards the east over to Florida.
let me remind you – Hurricanes have a mind of their own, I’ve seen some wild things last year in hurricane season, I’m not saying that this will turn around suddenly at head north but keep in mind, if this does go north we're in trouble. This is why I stress that if you want to hedge yourself against the high oil prices (or just want to make money) you should use this week as oil prices SHOULD drop on Iran nuclear treaty & Hurricane Alberta heading away from the North.
Hope that all made sense in some way
Cheers
Josh
Now let me tell you something about OXY, it's great! it's earned me a nice 17% in only 2 months and im not ready to sell yet. If you just compare OXY to its competitors you'll notice such a great difference; whatever they are doing there they're doing great! Go bullish on OXY!
Wow i cannot begin to tell you how excited i am about my predictions of the energy hype! As i predicted in late 2005, oil is going to be the #1 concern in 2006 with runner up "Mr. Defense". So go on, keep looking at the barrel of oil rise while I smile.
Here is an article to read..
http://biz.yahoo.com/ap/060503/oil_prices.html?.v=2
After you are done with that, read my 1st post on this blog.
Then make your wise decision on how to get in on the fun, guys im calling this an easy $100 barrel oil game ONLY on tensions; just wait till the hurricanes hit, and wait till Iran cuts output!
Cheers
Josh
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