We do have a small portion of our portfolio in spicier positions that use the basic portfolio to gain leverage. These shares may be traded in a few months (or years). If this sounds boring, think again and look at three reasons why good. Most of us should trade the shares in our basic portfolio as little as possible.
First, the human makeup is designed to avoid pain more than it seeks pleasure. This causes us to make exactly the wrong trades. One study by Bloomberg of nearly 100,000 investors found that people are one-and-a-half times more likely to sell a winning stock than a losing stock. Another study at the University of California found that investors repeatedly keep losing investments too long and sell winning investments too soon.
Second trading is expensive. There is no universal system regarding trading commissions and costs charged by brokers. Some charge steep fees for each trade. Others offer discounts, but the reality is that commissions are just a part of your trading costs.
There are other more significant costs that outweigh commissions such as the bid and ask spread, the difference between buying and selling price can be higher than expected and is not seen.
Take this example from Optionistics.com
A trade of 1000 shares of a stock with a bid of 19.90 and an ask of 20 will incur a typical commission fee of $14.95 at your discount broker and cost 20,014.95 to execute. But turn around and try to sell that stock right away, and you’ll only get the bid price of 19.90. Add another commission to sell the stock and a Securities an Exchange Commission fee of .00307% on the principal amount of the sale, and the cost to trade in and out of the stock just jumped to $130.51. So much for low commissions.
The bid and ask are hard to see and change continually. Bid and ask quotes are limited to specific numbers of shares. Orders can be (and often are) filled at a worse price than quoted.
Order delays also add expense when orders are not executed in a timely fashion. Orders that don’t reach the market immediately are subject to price swings, which can add to the cost of the transaction. Stock orders are not normally executed by your broker, they are forwarded to an Electronic Communication Network (ECN) or directly to an exchange. This routing can add to the delay. Your order will be routed in a way that’s best for your broker, not you. Brokers often get paid to route your order to an ECN. The ECN in turn uses proprietary algorithms to check bid or asks. The ECN will route to the destination that benefits them. These electronic decisions can be delayed, even by microseconds, and result in a poor execution price.
Third, the companies executing your trades are known to cheat. A recent Wall Street Journal article gives just one example telling how the former HSBC European head of currency trading, was recently arrested on charges of fraudulently front-running a $3.5 billion currency trade for a client. The cheating netted millions in profits for the trader and the bank to the detriment of the client.
HSBC bank has already paid $614 million in fines and compensation to settle allegations it rigged currency rates. The allegations is that the trade executioner was front running, which is taking advantage of advance knowledge of an order to buy or sell a stock or bond.
The laws aimed at stopping front running have led to a new form of cheating called backloading. The trade executioner waits for the order to be almost complete. After the trade causes the share price to rise, the executioner shorts the order for its own account at the top and then buys it back over the next hour. This inside advantage is easy to accomplish with equities, since the executioner knows about how much a stock will move. This is totally legal. It is against the rules to front-run clients orders, but unfairly moving the market by selling after the security has moved is quite legal today. Usually the backload only moves the market one or two cents a share, but this is done several hundred times per day and is legal. If the executioner buys the shares before the clients order moved the market it was deemed against the law. Selling after the order still increases costs but is legal.
Moving from one unethical action to the next is nothing new. The entire history of stock markets are littered with scandals of brokers and big investors cheating or using loopholes to rip off traders. Every systemic injustice arose from some loophole created to correct a prior injustice. No matter what regulators do, insiders who control trading will find a way to take advantage of traders. Our chances of knowing what really goes on with our stock buy and sell orders are pretty slim.
When we trade shares regularly, our chances of losing money are as easy as 1-2-3. Our human emotions, the costs of trading and the conflict of interest we have with the trade executioners who have inside knowledge reduces our odds of making a good profit.
Creating an equally weighted portfolio of good value shares, that are rarely traded increases our odds of profit. This form of investing is not exciting, but requires little time, so we can do more to earn added income beyond the market and enjoy the many activities in life beyond the computer screen.
We’ll look at how to create a low cost value investing system at our International Club Retreat August 12-13-14. There is one space left, so don’t delay making this reservation.
The Essence of Real Security
Regain Real Security
There is a path to true security.
I was reminded of this once when I made a horrible mistake. Almost!
The supposed error? Letting my mind wander six decades back to an hour I spent with a girl.
Learn from this near disaster, seven most powerful sources of wealth, health, security and fulfillment in this era.
The girl was pretty and blond. Terry was her name. My imagination spanned decades returning to my Oregon roots seeing her as if she were there.
We were 11 or 12 and had known each other since we started Rockwood grade school. Just buddies, our non-romantic friendship lasted 12 years, from first grade till high school’s end. Then she went off to Pepperdine College in California. I started traveling the world. Never saw her again. I hope her life has gone well. But until that reflection I’d never thought much of Terry in so many years.
What could have been the tragic error was letting that memory touch my heart. Two kids, walking on a crisp, Pacific Northwest autumnal afternoon.
We walked down a sun filled, pine needle covered, dirt path. Huge, fat, green Douglas firs lined the road. Traffic was no problem, not many cars. Crossing Stark Street we turned left, hiking three blocks to 182nd. There we passed an old clapboard candy store. I can still hear the wooden sidewalk of that store slap beneath my feet, felt the soggy planks sag and smelled astringent pitch from the fir trees. Then we turned right, up 182nd for about a mile. There was Terry’s house.
I carried on, walking through a big field, waist high grass turned straw brown by an early frost. There were dozens of paths made by who knows what. Animals perhaps or countless generations of other kids walking home alone from school. I chose one following it to another wood of tall, rough-barked fir. Crossing one more field, I climbed a rock wall, struggled through a barbed wire fence (my Mom hated that fence ripping my jeans). I was home!
Sweet simplicity, that dream. Two kids holding hands, walking on a dirt trail under a crisp, but blue, sunny sky. Pure innocence.
My tragic error was looking back. I returned to Rockwood, Oregon with Merri and my kids to show them this part of their roots. Following the route, Terry and I had walked were the candy store, grange hall, old wooden buildings and their home spun honesty and charm.
Instead we found six lanes of fast, frantic traffic and road rage. McDonalds, KFC, strip shopping centers. The car radio blared warnings of local gangs and drive-by-shootings. Beauty, innocence, sweet simplicity, replaced by drive ins and drive bys. Gangs and drive-by shootings replacing a tender walk in the sun. Good bye memories, good bye.
How can our kids walk in places like this? How can we return to those old feeling of security and comfort?
How can any of us possibly keep pace in this world that’s moving so fast? Then something inside snapped. “There has to be an answer for honest, hard working folks to enjoy the wonderful opportunities of today and regain what we’ve lost over the past forty years”, I swore to myself.
How can we keep up, without having such a fast paced life we turn into machines? Where do we find time for God, family, charity, and our friends? How can we rediscover those sun filled, pine needle covered, dirt paths we want to walk?
“There has to be places that are still innocent and pure”, I thought. “There has to be a way of life that does not pound us with stress”.
This thinking led me to begin reviewing the thousands of economic and business experiences I have shared with readers over the decades. This started a search for a simpler way of life and a better place to earn and protect our wealth.
By digging, asking and observing, traveling and talking to investors and investment managers all over the world I found that there are true paths to real security in the here and now. That knowledge helped me develop courses on how to have natural health, everlasting wealth and purposeful investments.
This knowledge helped Merri and me invest in stocks and real estate all over the world. It helped us find and develop Merrily Farms into a sanctuary here on Little Horse Creek.
That almost error led us to create an entire portfolio of information on how to keep pace, get ahead, enjoy our modern society but, to enjoy life wherever you choose without having to move too fast.
I want to share this information with a special few in our summer course in the Blue Ridge Mountains where the air is dry, crisp, with a bright sparkling sun. Our North Carolina woods is a place where we can once again walk down sun filled, pine needle covered, dirt paths beneath huge, fat, green fir and hemlock.
We start the course with this question that can help us get our lives back.
“What would you think in the last 30 seconds of your life if you were the richest man in the world but were unhappy?”
This quote is from the opening slide of our Value Investing Seminar, “How to Secure Your Future With a Value Breakout Plan”. This a vital question because few investors think about the value of comfort and happiness. Yet the truth is, those who are comfortable and happy with their investments are likely to make good investment decisions. If not, no matter how much money an investors has, changes are, they’ll lose.
Bring Value and Purposeful Investing Together
Join us to learn how to make safety and profit easier and less time consuming so we can focus on our individual purposes in life.
Become an International Club member and join like-minded souls, who take a positive view and think outside the box for better health, greater income and safer, more profitable investments. Share ideas on how to add value to everything and make 2016 -2017 your best years yet.
In 2016 Merri’s, David’s and my mission is to share our 50 years of experience in international business, investing and living to make ourselves happier, healthier and wealthier.
To reach a wider audience we have shifted our seminars online including the seminar “How to Secure Your Future With a Value Breakout Plan”.
Here is a partial syllabus of this seminar.
- Three common sense ideas: Avoid lines. Go where you are a name not a number. Decide who you are and what matters to you.
- Why three economic trends that have make smart investors rich every 30 years are ready for cashing in now.
- How to look for short term problems that create long term value.
- Update on the best ten markets for safety and profit.
- How to diversify in value with Country ETFs.
- The value of time in investing and life.
- The economics in cyber wars. How to look back at the economics of war to see ahead.
- Great new innovations that will ignite a 16 year bull market from 2016 to 2032.
- The next great fuel.
- Timing long cycles, economic cycles and seasonality.
- Investing in Demographics.
- Trading Down, the biggest global trend ahead.
- Hidden Inflation .
- How to protect against pension loss.
- The Silver Dip 2016. When and how to invest in gold and silver . How to double your position with loans.
- How to spot currency distortions and borrow low to deposit high.
- How, Why When & Where to bank abroad.
Club membership is for an entire year and the recorded seminar is just one high point.
In 2016 and 2017 we are conducting online seminars about value investing, natural health and how to write to sell.
International Club members receive all the online seminars free.
In addition club membership includes:
- Personal investing Course (Pi), normally $297, FREE
- Self Fulfilled How to be a Self Publisher, normally $299, FREE
- Eventful Business, normally $349, FREE
- International Business Made EZ, normally $299, FREE
- Report “Three Economic Conditions for 50% or More Profit,” normally $29.95, FREE
- Report “Silver Dip 2015” normally $27, FREE
- Three online Value Investing Seminars, normally $477, FREE
- One online Natural Health Seminar, normally $119, FREE
- One online Writers Camp, normally $299, FREE
Merri and I have been organizing courses, seminars and newsletters about international and Super Thinking lifestyles for over 30 years. The importance of this sharing… by like minded souls… was reinforced when a delegate from a course sent an email that said:
My Dearest Merri and Gary, Thank you for your most gracious hospitality last weekend. I am just thrilled at being a part of your group. You and Gary were exactly as I imagined you to be, warm friendly, kind, considerate, genuine, helpful, fun, sincere, what else can I say……I felt so comfortable in your presence and learned so much in your course. I was sad to leave the farm that Sunday afternoon. You made us all feel so welcome and cared about. You were so kind to make arrangements for a ride with the other delegates from the Charlotte Airport. They were so nice to me and so helpful, by the time the weekend was over I felt like they were my long lost brothers. Monday morning we all had breakfast at the airport together and I was so sad to see them go, I was sad the weekend was over, perhaps sad is not the right word for how I was feeling perhaps Gratitude is a better way to describe it. Grateful for having the opportunity to share the weekend with such wonderful, like minded Human Beings, in the beautiful mountains of North Carolina. Thank you Merri and Gary. Thanks to you I now have new hope and a new direction to move forward in my life. I know by attending your classes and conferences that through education and due diligence I will make the right choices.
I invite you to be a member of the International Club.
Let’s prosper in these times of change. Won’t you join us in this exciting club and share Merri’s and my lifestyle for the next year? Join us online.
Club members receive everything we offer in 2016 and 2017.