Black Monday Memories & More.

 

Markets will fall again. Live with it.

Black Monday 1987 should remind investors that markets are people, people are irrational and “crashes” are part of the territory, unless you listen to Modern Portfolio Theory loons who believe market derails can only occur every 4,000 years.

Thanks Tom Zizka for the Fox interview.

 

One of the best interviews regarding the conditions high-frequency traders create:

http://www.moneyscience.com/pg/newsfeeds/Admin/item/380964/mark-cuban-highfrequency-traders-are-the-ultimate-hackers

Random Thought:

Happy Saturday!

What the Wasp & Butterfly can Teach you About Money.

The Wasp and the Butterfly…

When you think of a butterfly and a wasp, two very different visions come to mind.  At first glance, one looks beautiful and alluring, while the other inspires fear. However, it’s important not to let first impressions deceive you. Visuals like this can help you to remain vigilant as you weather the financial climate and manage your own investor emotions in the face of a market environment dominated by “program” traders who are able to push and pull millions in and out of markets with a single mouse click.
Here are a few rules to consider when (if) the market is “bugging” you. And it bothers many individual investors today as money has been bleeding from stock mutual funds for years now.
Random Thoughts:
 *DON’T BE FOOLED BY THE BUTTERFLY  – In the short term, market is psychology-driven and moved by mood. A  series of days or weeks in the green can be very alluring and make you feel like you’re watching a beautiful butterfly soar to new heights.
You could get seduced by this flying beauty to indulge more in stocks,  discard your strategy and throw risk management out the window.
So, how do you prevent this from happening?
Be skeptical and  slightly fearful of the butterfly. When the market is happy and ignoring the bad news, it’s time to examine your plan and see if you should be      trimming your overheated stocks or overweighted asset-class exposure based on a rebalancing plan
For example, this year the U.S. stock market specifically has been the most beautiful and soaring of butterflies. If you were a  it skeptical, then you might have trimmed your exposure from areas like high-yield bonds and utility stocks(clipped the butterfly wings a bit).
 *EMBRACE THE WASP – Just the thought of this is scary enough. When the market is looking ugliest and most ominous, it’s an opportune time to stay focused, and see the beauty in the sting of it all. Discover the beauty in buying low. Eventually, the sting of a down market will dissipate and you’ll be glad you didn’t  panic.
*CONSIDER THE FATE OF THE ANT – According to National Geographic Magazine, ants are sometimes caught in  the crossfire between larval butterflies and wasps. During an attack, ants, manipulated by chemicals, are driven to fight each other, turning them into incidental casualties.
Don’t be fooled by the wasp or the butterfly or get caught between them.
Create and follow a personalized  plan based on your goals and attitude for risk. Having clear, written investment buy and sell rules will allow you to command the wasp and the butterfly to  your advantage.
*IT’S NOT ALL BUGS   – When gathering information you’ll see, hear and read opinions that will make you feel more tempted to side with the wasp or the butterfly. In other words, you will notice more headlines designed to validate the current “mood” of the market. Fear begets fear and euphoria begets euphoria. Remain guarded with your written plan and don’t be dissuaded by captivating headlines and the media in general.
Stick to your disciplines! What the hell are they? Do you know?
Using the wasp and the butterfly as visual motivation can help you control your actions in the face of an emotional and volatile stock market — you’ll never look at them the same way again!

I want you.

What a Princess Taught Me About Money. And she Ain’t No Dog, Neither.

I hold a great affinity for animals, especially dogs and specifically my Princess. There’s a primal beauty to them-and us. Our instinct keeps us alive; it’s imbedded in our internal code to protect. We are hard-wired to survive at all costs. Unfortunately, the skill set required to protect ourselves from predators is not exactly proper to employ when making investment or overall financial decisions.

I’m not exactly sure her name fits her either since Princess is far from graceful but I can tell she knows it and she’s certain I’m going to love her anyway – As I watch her behaviors I see many similarities and differences we can learn from  when it comes to managing finances. Here are a few lessons I’ve learned.

1). Occasionally we believe ourselves to be something we’re not – It’s human nature to be overconfident in our personal investing abilities. Numerous academic studies prove that over 80% of investors who deem themselves to be “successful,” or have achieved better results than the overall stock market actually experienced extremely poor overall returns. When examined closely, taking into account several variables including taxes and commissions, the majority of investors turned out to suffer from below-average return rates. It’s best to be yourself and understand how markets are humbling mechanisms. Create rules and disciplines that make sense to you and stick with them.

2). Sometimes we lose control – When Princess gets excited she has a tough time controlling her bladder. When we get excited we have a tough time making a decision and that will usually lead to a mistake. Those who make investment or financial decisions in the heat of fear or euphoria will most likely wind up in worse shape longer term.

For example, those who sold off all their stock positions in March 2009 or purchased tech stocks in the heat of the moment back in 1999, fared worst than most. Unlike Princess who can’t control her excitement, you need to step back, consult with an objective third party and create a strategy first before taking dramatic financial actions. Those individuals who make large purchases impulsively, especially on credit cards are paying dearly for their impetuous nature as the average credit card interest rate currently hovers around 15%.

3). Biting off more than you can chew is a bad, bad thing – Princess loves her toys; she also finds a way to destroy them in record time and her “daddy” keeps purchasing her new ones. Not a good financial decision overall on my part but she appears conditioned to continue since there’s always a new toy on the way.

Over the last 20 years, many bit off more debt than their households can service because of the assumption that asset prices, especially house prices would continue to increase. Households, saddled with historically large debt loads, stagnant asset prices and little increase in wages are now working slowly through household balance sheet repair. This is a long, arduous process which will take many years. It’s best now to watch spending, aggressively pay down debts and not take on any excessive debt going forward.

Princess may certainly get a new toy very soon; we don’t appear to be receiving any relief from the fiscal side (Washington & congress) or rising house prices anytime soon (at least the heated prices you remember), so it’s up to us to take responsibility now and get through an anemic economic cycle on our own.

4). When you’re done, you’re done – There are some dogs and people Princess simply does not care for and I can sense when her triggers have been hit. Recent studies show that as a generous people, we will continue to give money to family members and friends with established track records of spotty financial behavior. To preserve your own situation, it may be best to draw the line and say no.

There’s nothing wrong with encouraging others to seek different avenues for loans and gifts, especially if your current household debt levels are unsustainably high. It doesn’t make you a bad person. It doesn’t make Princess a bad dog either if she feels she doesn’t “like” certain people or dogs.

Some dogs are more fashionable than you are.

Princess knows what her boundaries are.

Do you?

What the Dead Taught Me – Lessons from an Urban Cemetery.

It was out of place then. It’s out of place now. Hundreds of years ago-perfect. And when I climbed the fence or dug a hole underneath to enter this hallowed wedge almost directly underneath the elevated “F” Subway line, I felt at home. Calm. An oasis of rest. There was nothing to fear, no one to judge. Just whatever is left after bodies move beyond the rot and weathered gravestones, some with captivating epitaphs.

First time I saw the sign was 1970. It’s timeless.

Hey, the cemetery was founded by a babe (lady). A plus.

There was a rumor that a tunnel existed underneath the caretaker’s abode; allegedly, this channel lead to the back of the cemetery, up through an unmarked grave to daylight. It was an escape route/hiding place during the Revolutionary War. I never had the guts to investigate the validity of this tale, although at times I was tempted. A couple of nights a week, especially during the summer, I’d find myself waking up early morning behind a grave marker. I felt a very live affinity for the dead.

The infamous caretaker cottage. Sealed for decades.

I’m not so macabre. You’ve been there. Many of the living hold a fascination with graveyards and tombstones. My connection, however seemed deeper. As I sat on lumpy ground deep inside iron gates, I’d close my eyes and attempt to cast out a spiritual thread. I was desperately seeking answers. Hoping for a visceral spiritual pull. Once, at 1AM through an August late night that turned to early morning, I felt a tug on the other end of the ethereal thread. It woke me. A voice.

I was startled. Awoke with a rapid heartbeat. It was so strong, I recall my ears closing up to any external sounds. The voice was inner and soothing. He said his name was William. Who the hell was William. I didn’t know a William, or a Bill. The words filled my ears-I live by them 40 years later (or at least by my interpretation of them):

                                                      “We are all the same.”

Underneath the surface not much different.

Random Thoughts:

1). Deep Down We All Seek. Love, good health for us, friends and family, success, fortune. Our paths to what we seek are different. Could be life experience, frames of reference, luck. Yet, no matter what, there is a measure of peace we all wish to discover. You wouldn’t know it based on the day-to-day surface noise we encounter which keeps us divided-class warfare, politics, work, the kids, constipation. Remember though we all share a spiritual thread. The key to reward is to cast it willingly and see what happens. Deep down we are all the same.

2). Empathy/Fairness Strengthens your Signal. If you learn (not easy) to set aside the divisions and truly connect with the very human elements of others, then you will learn something that will make you a well-rounded individual surrounded by friend with rich experiences. Empathy or fairness provides mental fuel for the adventure. Regardless of who you decide to vote for in November, we are all the same.

3). Stock Markets are Fear & Greed Machines. It’s helpful to understand beyond the sophisticated math formulas and technology, financial markets are people. Irrational people. Fear & greed cycles through all of us therefore it flows through markets. It’s not different this time. Far from it. It’s always been this way and always will be unless the dead create a stock exchange. It’s best to understand and work within this framework. You’ll sleep better and deal with the fact that “it is what it is.” The thread that winds through markets is  all the same.

4). Better Them than Me. Recently I watched (50th time) the latest movie remake of “Dawn of the Dead.” When asked to say a kind word over the bodies of the dead (and dead again) Ving Rhames’ character blurts out candidly: “Better them than me.” Yes, better them than you. If you’re alive, keep an open mind. Rise above petty politics and trivial distractions of the day. Get acquainted or possibly connected with other breathing souls. Because when you cut through all the shit realize we are all the same.

And being alive and all the same is better than being dead and all the same.

Ok, Ving R. is a badass. Maybe a bit different? No. Just an actor.

The voice was gone. Heartbeat normal. The streetlight above was bright. I was able to read the gravestone.

Asleep in Jesus. W. Williams. We are all the same.

I went back to sleep. I was no longer the kid with the crazy mom. I was the same. I fit in.

Thanks for the lesson, William.

Home Base – 4 Ways to Rediscover Where You Belong.

“You can’t stay here anymore, son. We lock the gates at dusk.”

“Really, sir?” I asked. I stretched out my voice. The politeness from him, from me, was painful. Sarcasm seeping through.

He stared at me. I returned the stare. Didn’t blink. He turned and walked.

I won again. Or did I?

The neighborhood park, an oasis almost directly underneath the rusted steel of the elevated “F” Subway line, was home away from home. For months. And now this prick was laying down some form of superficial martial law to prove he actually worked that day; like anyone I knew couldn’t find a way in to this park at night. Remnants of used condoms on the swings, discarded clothing told the real story. On the weekends, this park was teeming with people. Summer nights the same. Made sleeping on a park bench less sleep and more adventure.

park bench homeless

In Gravesend, Brooklyn. A lower-middle class pool of tepid toilet water. Swirling personalities. Harsh realities. Old-school foundations lost to a new generation.

During a summer when innocent people died.

When my father was almost shot by serial killer Son of Sam.

Four parked cars close. But far enough. He almost was called home. His ears were ringing from the gun exploding, creating death.

son of sam

Where home was. And hope wasn’t lost. Not yet.

Twelve-years old. Kicked out. Well, I left. Left a home that wasn’t a home. Too many strange men, too many strange drugs, too much nudity, too much of too much. And home wasn’t home anymore. And Dad was gone. Making out with women within the Son of Sam target zone; I was afraid of losing him. Like I lost my mother. Not to death. Just lost. She was in the dark. Couldn’t find home anymore.

She was..

Where home wasn’t. And hope was lost. Forever.

lose our way

Author Thomas Wolfe wrote “You Can’t Go Home Again.” It was published after his death. I disagree.

But.

There’s that recurring dream some of us have. We leave a home, a comfort, turn around, find ourselves in the middle of nowhere. In darkness. Panicked. Alone. Afraid. Disappointed. Saddened. Most of us eventually find our center again – the way back. Some don’t. Some stay lost. They’re alive, but restless. Can’t get comfortable. In their sleep they’re walking, searching. Awake they do the same. They try to find what’s lost. The home long gone.  A torturous circle. A path with no end. Just a beginning. Over and over, again.

Until. It ends. On occasion, it concludes badly. Home burns down. Nothing left.

A few get shot in the head. Self inflict damage. Blood, spirits 100 proof, substances more evil.

Not you, though.

Time to rebuild.

Random Thoughts:

1). Who or What is Home? Where’s your hearth? Who or what adds kindle to your fire? I’ve learned it’s ok if a person provides the fuel. Until that person is gone. And the bad dream returns. The door is closed. You look back. Dark. Learn to re-establish home base. Begin from the foundation. Understand what is home to you. Live it again. Feel the shelter form around you again. Rejuvenation.

2). Define or Re-establish  your Home Base. It’s there. Just hidden. It’ll take some deep reflection to establish a new home base because each time you seek home center, the structure you build grows weaker, more frail. Until you stop. Stop building. You stop. The end. Don’t stop.

3). Understand your Financial Home Base. And work back to it regularly. If you’ve stopped saving, start again. If you haven’t examined your portfolio allocation, it’s time to do it with stock markets hitting post financial-crisis highs. Time to get your financial home back in shape. It’s never too late. You can go home again.

4). Know When it’s Time to Demolish. Start again. There will be times you’ll build a home base that never really was. In your mind you thought it was standing. Because what your mind feels will always be real to you. But it’s not. It’s a mirage. You find that out once the hearth grows cold. You’ll find building a new hearth is tougher than building the home itself. But it can be done. With time. As long as you stay focused. Have a plan, a blueprint to rebuild.

You’ll rediscover.

Where home is. Who and what the real hearth is.

And this time you may. Just may.

Die happy.

With a home around you.

home hearth

 

Before you’re called to.

Another.