Note: My Rules don't address specific sectors, because sectors that are in favor one decade won’t be the next. This is a template for investing in any market sector in any market environment.
Protect the cash: That’s how fortunes are made.
Depending on the market environment, there are times when I make five trades in a day. But there are also times when there’s no investment to make. I’ve gone days, weeks, even months without deploying investment capital...
But when I’m ready, I have a nice big bankroll to use. So be patient.
You need to take 100% control.
You need to have 100% control of your financial destiny.
If your broker or money manager dismisses your concerns, questions, or objections, fire him immediately.
Make sure the investments you are in are liquid. If you get stuck in an investment that goes “no bid,” you could be in an investment (housing, for example) for months — even years — with no way out.
Trust your instincts.
If something doesn’t feel right, chances are it’s not.
This is why investment newsletters like Wealth Daily exist. The editors at Wealth Daily do not get paid by pitching funds (like money managers) or stocks. We get paid by the success of our investment ideas.
If you make money from our ideas, you stay with us. If you lose money, you leave us. Pure and simple.
If you’re going to speculate, go where the boom is.
This one really is simple.
As you know, we’ve been following the boom in the Bakken oil shale and the boom in theMarcellus for years. In fact, we were one of the first investment newsletters to bring this to your attention.
Companies heavily involved in the Bakken are making money hand over fist. And so are the shareholders of those respective companies.
Take Continental Resources, the biggest driller in the Bakken in North Dakota...
Continental’s stock is up about 8% for the year — and has outperformed the Dow year to date.
Or take Brigham Exploration, which announced a couple months ago that it was being acquired by Statoil.
It’s up more than 30% for the year.
If you follow these Five Rules, I guarantee you’ll be a more successful investor...
While Wall Street hangs on every quarterly GDP report, monthly jobs number, and weekly jobless claims tally (all of which get revised significantly later on anyways), there are much bigger trends that reveal a lot more about the economy and the markets.
One of the most important is disposable income.
If 70% of the economy is consumer spending, you can bet how much money consumers have to spend is extremely important.
Doug Short from Dshort.com shows why the current economic situation feels far worse than all of the official “recovery” and all the positive economic “surprises” in the news:
Real disposable personal is at the same level it was five years ago. Consumers’ ability to shop has been essentially unchanged for five years.
That’s not good from a macro perspective. And it gets worse when you look at the micro level...
Consumers who have worked for six years naturally expect their disposable income to rise. They expect to be able to upgrade cars, vacations, houses, and still have more left over to save and invest after years of advancement and achievement.
Flatlining real disposable income doesn’t allow for any of that. And it’s one of the major reasons most people don’t feel any better off than they were five years ago: on average, they aren’t.
But all that could be starting to change in 2012..
The Good Side of the Bubble's Going Bust
Keeping the focus on consumers, there is some good news for them in real estate.
While housing’s collapse has been at the center of the ongoing recession, there are many benefits from the drop in real estate prices. The biggest is freeing up more money to be spent elsewhere.
The chart below shows mortgage payments now make up the smallest percentage (by far) of income they have in 25 years:
This is a great thing for the economy as a whole.
The house-as-an-ATM lifestyle may be over for good.
However, mortgage payments now taking up half the level of consumers’ income as they did in 2005 is a strong growth factor in every other sector of the economy.
It’s not just housing prices: Consumers could be getting even more of their income freed up in 2012 as another costly bubble show signs of deflating.
Grocery bills could be headed for a sharp drop in 2012 as well.
Last week we noted how a farm in Iowa recently sold for $20,000 an acre — more than 10 times the average price for Iowa farmland a decade ago.
The extreme high for farmland is an indicator that the agriculture sector may have run up too far, too fast once again.
The chart below tracks the prices of a wide variety of food prices over the past 15 years:
The 10% correction in food and agriculture prices is likely going to put even more money back into consumers’ pockets.
The Bureau of Labor Statistics estimates the average consumer has spent more than $6,000 a year on food since 2008.
So a 10% decline in food prices will add a few hundred dollars a year to consumers’ disposable income. Multiply that a few million times over, and it creates an increase of billions of dollars in disposable income to be spent elsewhere...
That money is going to help pick up a lot of the slack in non-agriculture sectors.
The “Real” Economy Indicator
All of this is already starting to show up in consumer consumption activity.
I’m not talking about GDP numbers, which are artificially inflated because of manipulated inflation numbers and other factors.
I’m talking about consumption of real stuff.
The best way to track real consumption activity is through rail traffic. It measures the number of rail cars and physical volume of stuff transported from producers to consumers. In other words, it’s a great indicator of the real economy and real wealth creation.
The following chart, put together by the Pragmatic Capitalist, shows rail traffic continues to add to the previous recovery:
Although the growth rates are nothing like the post-credit crisis rebound, they are still positive.
That shows consumption of more stuff is still on the rise.
Better yet, as more disposable income rises, rail traffic will increase even more.
Don’t Bet Against the Trend
Finally, there is one trend that has been alarmingly consistent over the past two centuries.
It’s driven by basic human nature — that is, to get wealthier and improve one’s living conditions.
The chart below shows U.S. GDP has consistently grown for nearly two centuries:
Even the Great Depression was nothing more than a minor blip on the long-run growth, innovation, and productivity of a free people.
This is one trend not to bet against next year — or over the long-run, either.
When it comes to looking ahead in 2012, there’s a lot to look forward to...
The bubbly boom times may be a long ways away, but the near-term trends affecting disposable income are laying the foundation for an improved recovery and more growth.
Any further corrections next year (because there will be corrections) should be seen as an opportunity rather than another cause for exiting the markets altogether.
Bank Negara Malaysia has commenced investigations into Genneva Sdn Bhd and Etika Emas Estet Sdn Bhd under suspicion of conducting illegal deposit taking activities in breach of Section 25(1) Banking and Financial Institutions Act 1989 (BAFIA) and Section 4(1) of Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (AMLATFA). Section 25(1) of BAFIA 1989 prohibits any person from receiving, taking, or accepting deposits without having a valid license, whereas Section 4(1) of AMLATFA 2001 prohibits any person from engaging in, or attempting to engage in, or abetting the commission of money laundering activities.
The raids on Genneva Sdn Bhd and Etika Emas Estet Sdn Bhd were conducted today at their premises in Klang Valley following information received from members of the public. Relevant assets and documents of the company were seized for the purpose of investigation.
Members of the public are reminded to be cautious of deposit taking schemes and investment schemes offered through various channels such as the internet, phone calls, or seminars conducted by individuals or companies that are not licensed or approved by the relevant authorities.
Members of the public may refer to the list of licensed institutions authorized to accept deposits which is available on Bank Negara Malaysia's website ( www.bnm.gov.my).
For further enquiries, members of the public can contact Bank Negara Malaysia at the following contact points:
Yahya meriwayatkan daripada Malik daripada Abdullah ibn Dinar daripada Abdullah ibn Umar yang Umar ibn al-Khattab menyatakan, ” Jangan kamu menjual emas untuk emas kecuali sama untuk yang sama. Tidak meningkatkan sebahagiannya atas sebahagian yang lain. Jangan kamu menjual perak untuk perak kecuali sama untuk yang sama, dan tidak meningkatkan sebahagiannya atas sebahagian yang lain. Jangan kamu jual dari barang yang ada keatas barang yang tiada. Jika seseorang meminta anda menunggu untuk pembayaran sehingga dia pergi ke rumahnya, jangan kamu meninggalkannya. Saya takut rama keatas kamu.” Rama ialah riba.
Yahya meriwayatkan daripada Malik yang Abu’z-Zinad mendengar Said ibn al-Musayyab berkata, “Riba hanya terdapat di dalam emas atau perak atau apa ditimbang atau diukur daripada apa yang dimakan atau minum.”
Yahya meriwayatkan daripada Malik yang Yahya ibn Said mendengar Said ibn al-Musayyab berkata, “Menyembunyikan emas dan perak daripada pengedaran adalah sebahagian daripada daripada kerja fasad/kemusnahan diatas muka bumi.”
Apa yang dapat kita faham dari apa yang diperkatakan oleh Saidina Umar Al khatab r.a. dan Tabiin seperti Said ibn al Mussayab bahawa :
Pertukaran EMAS dengan EMAS, dan PERAK dengan PERAK mestilah:
i)Mutamathilan – mesti sama berat timbangannya. Jika tidak berlaku riba tafadhul (melibatkan penambahan berat).
ii)Mesti ‘Taqabud fil hal au majlis’ ( diserah dan terima dalam satu masa). Jika tidak berlaku riba an nasiah.(melibatkan penangguhan).
Masalah yang kita hadapi sekarang ialah ulamak moden telah mengqiaskan hukum wang kertas bersamaan dengan hukum emas. Oleh sebab demikian mereka mengatakan hukum membeli emas dengan wang kertas secara ansuran adalah riba an nasiah kerana melibatkan penangguhan. Sila rujuk Ust. Zaharuddin dalam website beliau.
Bagi yang memahami asal usul wang kertas , tak mungkin wang kertas diqiaskan dengan emas kerana ia akan merosakkan seluruh hukum – hakam berkaitan riba seperti yang dijelaskan oleh ulamak – ulamak terdahulu. Bahkan dengan mengqiaskan wang kertas sama dengan emas menyebabkan orang awam tidak perlu lagi pada dinar dan dirham kerana sudah ada pengganti pada emas iaitu wang kertas.
Wang kertas bukan emas , jadi harus menukarkannya dengan emas secara ansuran.
Kuliah Muamalat : Dinar dan dirham dalam muaalat Islam 21 November 2009 (Sabtu ) Lepas solat Maghrib Masjid Sg. Ular, Kulim , Kedah