Stock Market Meltdown – Watching Rome Burn

Both presidential candidates want to crucify SEC Chairman Cox for failing to
control our creative financial institutions. But rumor has it that Congress
specifically excluded the devilish derivatives from SEC purview. Let's fire the
right bunch of "poips" for a change!

Scary markets are brought about by many factors, some normal, and some not so
normal. It's often helpful to look backwards before getting too paranoid about
the present. The S & L crisis of the early 80s might be an appropriate starting
point.

Later that decade, a multi-year rally had its head lopped off by high interest
rates, high inflation, and a computer loop. Ten years later, another soaring
market was toppled by economic factors. The turn of the century witnessed the
bloody demise of the no-value-at-all dot-com illusion.

A profit taking strategy during the rally days was all that was necessary to
cash in on "The Crash of '87". In 2000, the route to immunity could be
summarized as: "no IPOs, no mutual funds, no dot-coms, no problem".

The common historical (hysterical) thread is clear. Rally begets correction;
correction spawns rally. This time around, ironically, conservative investors
had no trouble avoiding the derivatives that eventually sunk the markets. But,
the products were so "out there", and the regulators so out-flanked, that the
unwinding has unglued several investment world icons. This correction is
different--- but not in the ways you might think:

The scope of media coverage, analysis, and sensationalism; masses of
inexperienced, non-professional, speculators; and the popularity of investment
products are new phenomena. Millions of nameless non-credentialed Internet
investment experts and financial bloggers add to the pandemonium.

Similarly, the proliferation of passive investment mediums (index funds);
regulatory tolerance of speculations of all forms, shapes, and sizes; and the
relaxation of the trading safeguards that have protected investors for decades
encourage a reckless, gambling approach toward what was once investing. We've
seen what conscienceless commodity speculators have accomplished in world
markets.

We have experienced a major movement away from plain vanilla stocks and bonds,
and have popularized the thrill ride of speculative activities. 401(k) fund
selections include short-long funds, currency trading strategies, and commodity
futures. IRA investors seek out the most exotic forms of speculation, convinced
that, with a Blackberry and a lunch break, they can master the complexities of
high finance.

Regulators have allowed funds of hedge funds into small investor portfolios;
brokerage firms short shares that don't exist multiple times; the once sacred
up-tick rule has been abandoned when shorting itself should be a banned
substance; and CDOs make it difficult to determine just who owes money to whom.

Enough? There's more, but you get the idea. Today's problems are much more
visible than yesterday's. Today's worries involve bigger numbers. Tomorrow's
solutions will undoubtedly bring creative MBAs to discover new financial WMDs. 
The investment gods are angry. We need to bring back that old time rock and
roll, and an investment world content with individual stocks and bonds.

In less complicated times, the difference was in the fixing. Speculators
suffered, but safer investment styles were less vulnerable. Let's elect a
Congress that will regulate the speculations and allow us to get back to the
basic, fundamental, adventure of building and protecting our nest eggs. Think
back, just a few cycles ago--- familiar?

The Market was breezing along during the summer of '87, enjoying one of the
broadest rallies ever experienced on Wall Street. From the very start, equity
prices seemed incapable of going down. The mystical DJIA 2000 barrier was
shattered early in the year and upward the market soared.

On through 2100 it rumbled, then 2200, and 2300--- even the comic strip,
dartboard approach proved successful, and many subscribed to it. The securities
markets were simple, with fewer labyrinthine products, and only the dark cloud
of rapidly rising interest rates in an otherwise clear sky. 2400 on the DJIA by
July and on it went. No end in sight.

The institutions introduced hundreds of new mutual funds, pumped up their
marketing efforts, and pushed the rally skyward--- 2500, 2600, 2700, just
incredible. None of the salivating mutual fund unit holders saw it coming; Wall
Street didn't care. The Dow topped out at 2722 that August--- about the same
number of points involved in a swinging September 2008. Only the names and the
products have changed---

The parallels to today's markets are interesting. Value stocks and bonds were
moving lower while IPOs and other speculations were bubbling higher. As prices
weakened, analysts began to mumble. The economy certainly didn't look like a
doom and gloom scenario--- just those pesky interest rates. And then it hit the
fan.

Technology bombed the market when programmed-trading sell signals ran fast and
furious down the cables, resetting themselves lower, and lower, and lower--- but
the stock being sold actually existed! Wall Street panicked! Inflation fears,
higher interest rates, tension in Europe, foreign oil, war in The Middle East,
and so on. All of the usual suspects were touted by the media as the culprits
that caused "The Crash of '87".

It just doesn't take a whole lot of Wall Street manipulation (or arrogance) to
turn speculative greed into investment fear. The wizards had done it again,
sucking the franklins from unsuspecting individual investor portfolios, just as
they would two cycles later when their dot-coms sealed the fate of another
generation of speculators.

Yes, the similarities are striking--- one meltdown to the next. But this time is
slightly different. This time the Masters of the Universe were helped by
Congress and the SEC to pick our collective pockets, and a few of them have
actually, and appropriately, drowned in their own garbage. I'll shed no tears
for the fallen giants, but let's all cry out loudly about the problem--- a
problem that both Barack and John were a part of.

It's Congress that gets to chastise and create regulations for the bad guys.
This year, and in those that follow, let's fire the DC fat cats that caused the
problem, and find some regulators with the guts to label speculations as
thoroughly as they do medications.


Steve Selengut
http://www.sancoservices.com/
http://www.kiawahgolfinvestmentseminars.com
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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Amazon.com Investment Book Reviews: Have You Been Brainwashed?

Most popular investment books are published for the already rich and famous, by
an industry that has become just too good at the business of selling books.
Rarely will a publisher take a chance with the work of an unknown author.
Certainly, it's a no brainer to sell a Jim Cramer, Peter Lynch, Robert Kiyosaki,
or Maria Bartiromo effort while a uniquely new approach to solving the puzzles
of Wall Street, presented by an unknown writer or commentator, requires some
major financial risk.

Big publishers want to sell already big names; discovering new ones is not in
their wheelhouse. Are they responsible for the problems in the financial
markets? Of course not, but they do have a perverse, if indirect, impact. By
constantly publishing the same Wall Street friendly message, they contribute to
the brainwashing.

Without a wider distribution of new ideas based on old wisdom, Wall Street as
usual remains Wall Street as usual and the average investor remains uninformed
and ill advised about the dangers of the financial markets. The biggest
investment mistake generators are cleverly ignored by most of the books I've
read about investing--- even compounded.

The new generation focus on calendar year instead of the market cycle
performance; the worship of portfolio market value alone, for all securities,
even those purchased solely for income production; the use of gimmicks and
products instead of securities for portfolio development; the acceptance of
speculations as acceptable, "alternative" investments.

Appreciating the differences between investing and speculating, and learning
what to expect from your securities in cyclical markets are things that
investors must learn about. Have you been brainwashed? These 15 Amazon.com
members are learning to think outside the Wall Street box, without any help (or
investment) from publishers:

1) Super Investing Book: I've read a bunch of books on investing and money
management, and this is the best, BY FAR!!!!! It's so good, and refreshing, that
I've read it twice. (R. Q. A., Bryan, Texas)

2) Back to Basics: This is an eye-opening and intelligent book, which at once
offers an analysis of the investment industry and a practical guide for
non-professional investors--- a clear set of economic principles mixed with
clear commonsensical advice. The author--- describes how to benefit from the ups
and downs. Great book. (Professor P. W., Jerusalem, Israel)

3) The Best Investment Book I Have Ever Read: For skittish investors such as me,
[the] unique Working Capital Model reduces the emotional factor by taking the
emphasis off market value and focusing on growth of working capital. I
implemented and followed the trading strategy myself. You would do well to buy
this book and read it two or three times. It will save you [from] a lifetime of
mistakes that come from following conventional wisdom.  (D. J. F., Peoria, IL)

4) Easy to Understand, Even for Non-Investors: This book seems to be much easier
to understand than the stock market trading systems advertised on TV. (P. L.,
Manchester, CT)

5) Happy User: You can take this system to heart--- and to the bank. It works
for me. (L. J., Phoenix, AZ)

6) Unique Advice that Stands Out From the Crowd: This is one of two [books] that
stand out. Besides being written in an entertaining and irreverent style, it has
immensely practical advice. Focus on making money on the market's inherent
volatility vs. trying to guess what's next. Saves a lot of time and appears to
work. (C. M. Rakes, Annandale, VA)

7) An Enlightened Self-Managed Investor: Not only did I identify many many
mistakes that I had made thru the years, but the logical approach outlined [in
the book] has to make sense to anybody who has tried to get meaningful portfolio
guidelines for future investments tailored to individual needs. Great Book! (A.
C., West Palm Beach, FL)

8) Right on the Money: I didn't want to put the book down until I was through.
[The] trading strategy is refreshing information that should make a lot of
people a lot of money with less risk. (D. M., SC)

9) Investing Made Successful: I heard [the Author] on a talk-radio program and
was intrigued by the premise of the book. After reading it, I'm convinced. I'm
migrating from mutual funds to individual, high quality equities. [The book] was
a slap in the face to make me stop my destructive investing habits. (G. P.,
Colorado Springs, CO)

10) What a Great Read: This is really an incredible book--- [it] has
incorporated very creative insight with some highly original thinking to produce
one of the best "investing manuals" ever written. I wholeheartedly endorse this
book! ("Jointhefreedom", NM)

11) Courage To Go Against the Pack: The [book] is written in an exciting,
enthusiastic, fast moving, style that reads like a novel. Should I ever venture
into the stock market, it will be with this book. (S. M., Virginia Beach, VA)

12) L-O-N-G Overdue Investment Strategy Advice:  I've long been skeptical of the
generic advice handed down to me by advisors over the past--- I don't know any
wealthy people who do this. Well now I have a frame of reference for my doubts
about the system and a simple plan to take control of my investments. (B. S.,
Vancouver, BC, Canada)

13) A Must Read To Save Your Money From the Sharks:  Written in a conversational
style with plenty of humor, this book gives you the questions and answers you
need to keep and increase monies that are being put away for retirement. I have
purchased three books already and am purchasing five more to give to friends and
relatives--- (R. M., San Jose, CA)

14) Brainwashing of the American Investor: Finally the truth! What an eye-opener
to see how the markets, and the people behind the markets, have manipulated the
average investor over the years. I highly recommend [this] book for your next
financial read. (A. J. L., Ft. Pierce, FL)

15) Profit Like a Trader; Sleep Like an Investor: The technique or strategy
presented is almost a "why didn't I think of that?" The idea is to run your
portfolio the same way you would run a business---not a get-rich-quick kind of
plan. You just focus on the essential measures of quality. The key is to
maintain your plan during the slow times and reign in your greed during the boom
times. (P. G., Moon Township, PA)

Please forgive the blatant self-promotion, a statement about the no-risk
attitude of the publishing industry today. Unknown authors just have to take
things into their own hands to get their titles out there. Small publishers
can't afford to promote new authors on a grand scale and some choose not to deal
with the full-return guarantee demands of the bookstores.

New authors, and non-affiliated, non-fiction writers are stuck in the middle
with no choice. We have to do it ourselves. If your book review isn't posted at
Amazon.com, please add one. If you know anyone who should read The Brainwashing
of the American Investor, send them a copy of your review.

Steve Selengut
sanserve (at) aol.com
  800-245-0494
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com



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Why 401(k) Retirement Plans Really Don't Work

The good news about the Internet is the information we can get our cursors on
instantly; the bad news is the information we can get our heads around
instantly, but without any way of gauging accuracy, relevance, or completeness.
This is particularly evident in the financial-investment-retirement world, where
thousands of websites tell us how to do things and why, and why things work the
way they do and how. Few gurus explain why and how certain concepts and plans of
action just may not work the way they are supposed to.

You don't need to read very far before the fingernail-screeching 401(k)
chalkboard becomes deafening. For example, do they provide: 1) free money from
employers, 2) lower taxable income, 3) retirement without any worries about
money, or are they, 4) one of the most popular retirement plans.

The inadequacies I'm talking about may seem nit-picky at first blush, but the
misconceptions and invalid expectations they nurture in inexperienced investors
are mind blowing. Employers are providing a valuable benefit in the form of a
defined contribution savings plan, a self-directed investment program that has
little in common with defined benefit retirement and pension plans. It's not
free money at all. It's a clever, goal-directed, business expense that is both
touchy-feely visible to you and far less expensive for your boss. It's a good
deal, but not a retirement plan.

Although it is true that you do not pay taxes on your contributions during your
earning years, you will undoubtedly pay through both nostrils when you retire.
If your karma is off, you may find yourself trying to retire at a time when the
stock market is not in a party mood and your shrinking mutual funds just don't
seem as secure as you thought they were a few months earlier. Typically, the
65-year-old retiree can expect four or five major mutual fund shrinkages during
retirement.

Similarly, more fortunate retirees (those who get the "gelt" during a rally)
generally fail to lock in a guaranteed stream of income, and find themselves in
the same cyclical conundrum as their less market-timely brethren. The money
worries continue well after retirement; the taxes become much larger than anyone
ever anticipates; the misconception that the 401(k) is a retirement plan
continues. In fact, a recent president once proposed to change the only true
retirement program that most of us belong to into a similar non-retirement
program.

No, this isn't just semantics. The differences between retirement programs and
savings programs are very real, extremely fundamental, and politically
incomprehensible to legislators--- so long as it's not their money.

Retirement programs are income machines designed to support people, not to make
them feel wealthy, investment savvy, or temporarily tax-free. Pension plans
produce fixed amounts of monthly income that don't change appreciably when
dot-coms, real estate, CDOs, or index funds (they're next) self-destruct. You
just can't buy dinner or medications with currency futures, gold bars, or
appreciated acreage.

The investments contained in a pension plan are designed to produce income, and
are managed by trustees who are experienced in constructing safe, conservative,
diversified programs that are just as boring as they can possibly be. Most
pension plan benefits are calculated as a percentage of the amount earned while
employed. The Social Security retirement/welfare plan is a tontinesque Ponzi
scheme based on the government's ability to continually abuse taxpayers. There
are no investments at all, and no trustees... just IOUs.

Defined benefit pension programs are rapidly becoming extinct--- corporate
America can no longer afford them, along with 50% of total Social Security
contributions, employee health care, and CEOs who collect $50 million per year
from their unwary shareholders. But those that have survived (notably, labor
union plans, retirement annuity contracts, and the Congressional Pension System)
produce monthly income checks without any problems whatsoever. And here we
thought our congressional leaders were incompetent--- not when it comes to their
own benefit package + COLAs.

Still, the 401(k) plan deserves to be every bit as popular as it has become. It,
and the vast array of complicated IRAs, could help save Social Security, improve
the economy, and create jobs--- all those good things that neither of the
presidential candidates have a chance of achieving. Just two simple strokes of
an Oval Office ballpoint get it done: 1) Eliminate all taxes of any kind, at any
jurisdictional level, on any form of investment and/or retirement income. 2)
Replace the failing Social Security system with a private pension system, funded
by taxpayers only and managed by the existing insurance industry infrastructure.

How do we make the 401(k) plan provide more retirement security? That's not so
difficult either. Simply dictate that all plans require participants to invest
at least 60% of their assets in individual (plain vanilla) income securities
that can be withdrawn "in kind" at retirement.

Until that happens, we just have to educate people better and make the
appropriate distinctions between an as-speculative-as-you-care-to-make-it
savings and investment plan and a pretty-much-guaranteed retirement or pension
plan. Existing 401(k) participants should contribute enough to get the matching
contribution, and start a personal tax-free income account with whatever
disposable income is left.

Now about that Congressional Pension Plan--- we've only our apathetic selves to
blame.


Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com/
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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Income Investing: Go Ask Alice

Jefferson Airplane has never, ever, been mistaken for a band of financial
advisors, but the White Rabbit lyrics can be incredibly instructional to the
generation of investors who experienced the classic first hand--- as a
description of their own college days' lifestyle. If only they had heeded the
dormouse's call to "feed your head." For the sake of your retirement sanity and
security, you just have to make income investing an intellectual exercise--- not
an emotional one.

The Brainwashing of the American Investor has its own tale of an Alice whose
"logic and proportion" had "fallen sloppy dead". Many years ago, when interest
rates soared into double digits, elderly Alice was well advised to invest her
stash in a portfolio of Ginnie Maes. Smiling broadly, she bragged to her friends
about the federally guaranteed 13% interest she was receiving in regular monthly
intervals--- much more than she needed to cover her living expenses.

But interest rates continued to move higher, and the decreasing market value of
her Ginnie Maes was more than she could tolerate. "If rates continue to go up,
I'll have nothing left" she cried to her White Knight financial advisor who
suggested patience and understanding. The very same pill that made her income
grow larger was also making her market value become smaller. But the income kept
rolling in, higher yielding unit trusts were purchased with the excess, and
major redemptions were nowhere to be seen. The income kept growing, the market
value kept shrinking, and Alice was seeing red from seeing red on her account
statements.

So Alice went to her local bank and traded in her absolutely government
guaranteed 13 per centers for some laddered, non-negotiable, 8.5% CDs. "No more
erosion of my nest egg", she toasted proudly with the hookah smoking bank
caterpillar who orchestrated her move to lower income levels. Within a few
months, she was liquidating CDs to pay the bills that never seemed to be a
problem with those terrible Ginnie Maes.

Don't let such uniformed thinking sabotage your retirement program; don't let
the selfish advice of a product sharpshooter send you chasing rabbits when IRE
(interest rate expectations) or other temporary market conditions shrink the
market value of your income portfolio. Feed your head; feed---your---head.
Income pays the bills, and if the income level is both steady and adequate,
there is no need to change investments. Market value should be used to determine
when to buy more (at lower prices) and when to take profits (at higher ones). It
is almost never necessary to take a loss on a high quality (government
guaranteed in Alice's case) income security.

More recent experimenters in much more sophisticated potions have addressed the
issue with similar results, reaching mind-numbing conclusions such as these: 1)
I know that my income has actually grown throughout the debacle in the financial
sector but I don't want to buy anymore of these securities until the prices go
back above what I paid for them originally. Translation: I'd rather stick with
my 4.5% tax-free yield than increase it by adding to my positions at lower
prices.

2) Sure, I understand the relationship between IRE and the prices of income CEFs
but individual bonds and Treasuries haven't suffered nearly as much. That's
where we should have been. Translation: I would be much happier with 3%
stability than with an 8% rate of realized spending money. 3) I'm tired of
seeing all the negative positions in my portfolio. Let's keep all the income we
receive in money market until we're back in positive territory. Translation: I'd
rather accept 1.5% or so than reduce my cost basis and compound my yield by
adding to my positions at lower prices.

Modern brokerage firm monthly statement "pills" were developed during the
dot-com drug era, when Wall Street was trying to emphasize the brilliance of its
speculative prescriptions by making us all feel ten feet tall, month after month
after month---. But the geniuses on the institutional chessboard produced too
many mushroom product varietals causing the red correction queen to lop off many
of their sacred heads. The papers that were designed to make our chests burst
with pride have turned on us as a haunting reminder of the reality of markets
and the cycles that push them in either direction.

It should be easy to navigate a quality income portfolio through whatever
circumstances, cycles, and scandals come at you, but a clear head and a clearer
understanding of what to expect is required. Most brokerage firm statements make
it difficult to monitor asset allocation using any methodology, including the
Working Capital Model, and I don't think that it's by chance. Most income
investors expect income securities to have stable market values. Constant
confusion breeds unhappiness, unhappiness foments change, and the masters of the
universe encourage you to fritter around from mushroom to mushroom in perpetual
emotional chaos. To who's benefit?

It would be wonderful if an investor's monthly statement would organize his
securities based on their class and purpose, but Wall Street doesn't want such
distinctions to be made easily. It would be great if the institutions would help
investors formulate reasonable expectations about what will happen to the market
values of their securities in varying market place conditions, but that's not
likely to become a reality any time soon. It would spectacular if the media
would produce information and explanation instead of news bites and
sensationalism, but you guessed it--- not much chance of that either.

Income investing should be easy. How many hookah-smoking caterpillars have given
you the how?


Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com/
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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Preventing Investment Mistakes: Ten Risk Minimizers

Most investment mistakes are caused by basic misunderstandings of the securities
markets and by invalid performance expectations. The markets move in totally
unpredictable cyclical patterns of varying duration and amplitude. Evaluating
the performance of the two major classes of investment securities needs to be
done separately because they are owned for differing purposes. Stock market
equity investments are expected to produce realized capital gains;
income-producing investments are expected to generate cash flow.

Losing money on an investment may not be the result of an investment mistake,
and not all mistakes result in monetary losses. But errors occur most frequently
when judgment is unduly influenced by emotions such as fear and greed,
hindsightful observations, and short-term market value comparisons with
unrelated numbers. Your own misconceptions about how securities react to varying
economic, political, and hysterical circumstances are your most vicious enemy.

Master these ten risk-minimizers to improve your long-term investment
performance:

1. Develop an investment plan. Identify realistic goals that include
considerations of time, risk-tolerance, and future income requirements--- think
about where you are going before you start moving in the wrong direction. A well
thought out plan will not need frequent adjustments. A well-managed plan will
not be susceptible to the addition of trendy speculations.

2. Learn to distinguish between asset allocation and diversification decisions.
Asset allocation divides the portfolio between equity and income securities.
Diversification is a strategy that limits the size of individual portfolio
holdings in at least three different ways. Neither activity is a hedge, or a
market timing devices. Neither can be done precisely with mutual funds, and both
are handled most efficiently by using a cost basis approach like the Working
Capital Model.

3. Be patient with your plan. Although investing is always referred to as long-
term, it is rarely dealt with as such by investors, the media, or financial
advisors. Never change direction frequently, and always make gradual rather than
drastic adjustments. Short-term market value movements must not be compared with
un-portfolio related indices and averages. There is no index that compares with
your portfolio, and calendar sub-divisions have no relationship whatever to
market, interest rate, or economic cycles.

4. Never fall in love with a security, particularly when the company was once
your employer. It's alarming how often accounting and other professionals refuse
to fix the resultant single-issue portfolios. Aside from the love issue, this
becomes an unwilling-to-pay-the-taxes problem that often brings the unrealized
gain to the Schedule D as a realized loss. No profit, in either class of
securities, should ever go unrealized. A target profit must be established as
part of your plan.

5. Prevent "analysis paralysis" from short-circuiting your decision-making
powers. An overdose of information will cause confusion, hindsight, and an
inability to distinguish between research and sales materials--- quite often the
same document. A somewhat narrow focus on information that supports a logical
and well-documented investment strategy will be more productive in the long run.
Avoid future predictors.

6. Burn, delete, toss out the window any short cuts or gimmicks that are
supposed to provide instant stock picking success with minimum effort. Don't
allow your portfolio to become a hodgepodge of mutual funds, index ETFs,
partnerships, pennies, hedges, shorts, strips, metals, grains, options,
currencies, etc. Consumers' obsession with products underlines how Wall Street
has made it impossible for financial professionals to survive without them.
Remember: consumers buy products; investors select securities.

7. Attend a workshop on interest rate expectation (IRE) sensitive securities and
learn how to deal appropriately with changes in their market value--- in either
direction. The income portion of your portfolio must be looked at separately
from the growth portion. Bottom line market value changes must be expected and
understood, not reacted to with either fear or greed. Fixed income does not mean
fixed price. Few investors ever realize (in either sense) the full power of this
portion of their portfolio.

8. Ignore Mother Nature's evil twin daughters, speculation and pessimism.
They'll con you into buying at market peaks and panicking when prices fall,
ignoring the cyclical opportunities provided by Momma. Never buy at all time
high prices or overload the portfolio with current story stocks. Buy good
companies, little by little, at lower prices and avoid the typical investor's
buy high, sell low frustration.

9. Step away from calendar year, market value thinking. Most investment errors
involve unrealistic time horizon, and/or "apples to oranges" performance
comparisons. The get rich slowly path is a more reliable investment road that
Wall Street has allowed to become overgrown, if not abandoned. Portfolio growth
is rarely a straight-up arrow and short-term comparisons with unrelated indices,
averages or strategies simply produce detours that speed progress away from
original portfolio goals.

10. Avoid the cheap, the easy, the confusing, the most popular, the future
knowing, and the one-size-fits-all. There are no freebies or sure things on Wall
Street, and the further you stray from conventional stocks and bonds, the more
risk you are adding to your portfolio. When cheap is an investor's primary
concern, what he gets will generally be worth the price.

Compounding the problems that investors face managing their investment
portfolios is the sensationalism that the media brings to the process. Step away
from calendar year, market value thinking. Investing is a personal project where
individual/family goals and objectives must dictate portfolio structure,
management strategy, and performance evaluation techniques.

Do most individual investors have difficulty in an environment that encourages
instant gratification, supports all forms of speculation, and gets off on
shortsighted reports, reactions, and achievements? Yup.

Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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Good News For Income Investors

Looking for good news in today's markets is like searching for the proverbial
needle in a haystack. Needless to say, practically all investment grade equities
and nearly all closed end funds that specialize in providing regular recurring
monthly income have been reduced in market value by this prolonged correction.
The quake has spread in all directions form its financial epicenter, and the
mounting doom and gloom has taken its toll on even the most rational investment
decision makers. Try to keep in mind that the purpose of income investing is the
income that your portfolio produces not an increase in the securities' market
values---

So here's the good news (and for anyone with a 40% or higher income asset
allocation, or an income portfolio being used for living expenses), it really is
very good news. Base income levels, from the beginning of the stock market
correction in June '07 until mid-July '08, have barely changed at all. In fact,
they have probably risen in properly asset allocated portfolios. I have examined
the regular recurring monthly income distributed by 56 taxable income CEFs and
61 tax-free income CEFs, and the conclusions are pretty remarkable.

In spite of the fact that the vast majority of my favorite monthly income
producers are lower in market value than I would like, the amount of income they
are distributing to shareholders has not moved lower meaningfully--- even though
the Federal Reserve has reduced interest rates by approximately 60% during the
past twelve months. Here are the numbers: (1) 48% of the taxable-income CEFs are
distributing precisely the same amount per share as they did a year ago.
Fourteen issues have increased their payouts and fifteen have reduced them.

The net result is a decrease of just fourteen cents (2.5% of the total monthly
payout). The average current yield on the portfolio, as of mid July '07, is
9.86% without considering any capital gains distributions. Additionally, the
group is selling at market prices that reflect an average discount of nearly 11%
from NAV. Is that special or what? The bonds, preferred stocks, government
securities are priced 11% below their current market values.

(2) The numbers are similar with regard to the 61 tax-free income CEFs: 46% have
not altered their payout over the past twelve months; eighteen have reduced
their payout slightly, and 15 have increased the monthly dole. The net
difference for the group over the past year is less than one cent, or a
percentage change of two-tenths of one percent. Remarkable. This group is
selling at an average discount from NAV of 9.1% and has a current tax-free yield
of 5.51%.

(3) Of 117 individual issues, about half have produced stable income. The others
have accounted for a total payout reduction of less than 15 cents--- a measly
1.7%.  Why is this amount of little consequence? Two reasons really.

First of all, a properly asset-allocated income portfolio does not disburse all
of the base income it receives, so there is income available to reinvest in more
shares of income producing securities. This process assures a growing cash flow
to calm your fear of rising prices. The other reason is a bit more hypothetical.
The Fed has lowered rates significantly, a process that normally produces higher
prices for income securities. Eventually, those lower interest rates (even if
global pressures convince politicians to take back some of the reductions)
should produce higher prices (i.e., profit taking opportunities) in these
securities.

Admittedly, even if your asset allocation has been fine tuned for years, lower
portfolio market values in this area make stock market valuation shrinkage feel
even worse. But the value of stable cash flow becomes painfully clear for
investors who misguidedly depend on capital gains for their spending money.
Properly asset allocated portfolios contain enough base income generators to pay
the bills. The purpose of capital gains is to produce proportionately more base
income generators.

The purpose of this email is simply to bring some needed sunlight into an
investment environment that is far gloomier than I think it needs to be. If you
want the details, you'll have to request them personally.


Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com/
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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The McCain Tax Reform Plan For Long Term Economic Growth?

The writing is on the wall (street, that is), and it is telling us that we need
to reaffirm the United States as the dominant force in the global economy, and
that we have to do more to protect our citizens' retirement and investment
programs.

Most economic research suggests that tax code replacement surgery is essential
for long-term economic progress. The goal of my plan is to make sure that you
are not grumbling ten years from now about the same things that trouble you
today. Here's a fifteen-point plan to end the cycles of economic frustration and
global disrespect during this administration:

One. Take Social Security out of the public sector and replace it with a
mandatory, deferred, fixed benefit, single-life-annuity program managed by
existing annuity providers. Employee contributions would be reduced nearly 50%
and employer contributions eliminated over a five-year implementation period---
immediately for the self-employed. Participants would have no investment
discretion or access to funds until retirement.

Two. Mandate that no less than 50% of all self-directed benefit plan Working
Capital be invested in government securities, and not qualified for withdrawal
until retirement. Bring all alternative investments (options commodities,
futures, hedge funds, etc.) under the purview of the SEC, and subject to the
same suitability standards as RIA's recommendations.

Three. Institute a 3% Federal sales tax on all goods and services purchased by
end consumers, but not a VAT. Subsidize a universal basic health care insurance
system and public education expenses from sales tax proceeds plus a 5% tax on
personal annual income, of any kind, in excess of $5 million dollars. Cap State
and Local Sales Taxes at 3%. Eliminate all nuisance taxes in utility bills,
hotel room charges, gas prices, etc.

Four. Reform Tort Law at every level, and protect both businesses and
individuals from frivolous lawsuits. Adopt a rule of personal responsibility for
one's own stupidity and clumsiness. Submit all product liability, medical
malpractice claims, and personal liability lawsuits to qualified arbitration
panels instead of juries. Ban class action suits of all kinds and cap jury
awards and lawyer compensation at 50% lower average levels.

Five. Eliminate all Estate and Gift Taxes.

Six. Mandate a ten-year term limitation on all members of congress,
retroactively, and impose a mandatory retirement age on Supreme Court Justices.
Reduce taxpayer compensated congressional staff by 50%.

Seven. Simplify the Internal Revenue Code by adopting a Fair Tax of 10% for all
persons with annual employment income above $40,000. Eliminate all forms of tax
deferral and stock option programs that are not available proportionately to
every company employee. State and local income taxes would be capped at a flat
4% for family incomes above $80,000. Individual tax avoidance schemes would also
be banned--- 10 years retroactively.

Eight. Abolish all taxation on any form of retirement income.

Nine. Abolish all taxation on any form of investment income, including rents,
royalties, interest, dividends, and capital gains. Increase the federal sales
tax by 2% once numbers 8 and 9 have been implemented.

Ten. Eliminate the Corporate Income Tax and create auditing entities to assure
that the savings translate into new jobs, higher salaries for non minimum wage
employees, lower product prices, and higher shareholder dividends.

Eleven. Appoint federal supervisors to the Board of Directors of public
corporations paying annual salaries in excess of $3 million. Board members,
corporate attorneys, and financial officers would be required to allocate any
performance incentive compensation on a dollar-for-dollar basis to all
employees, including part timers but excluding minimum wage recipients.

Twelve. Examine the economic impact of Government Regulation and oversight in
many industries, particularly small business practitioners in personal services
fields. Provide an arbitration and review system to identify and control abuses
of regulatory power and a separate department within each agency to deal with
small businesses.

Thirteen. Reduce government staff in all departments and at all levels by at
least 10% per year for the next three to five years. Reduce by 50% the number of
Government jobs filled by presidential appointment.

Fourteen. Reduce all import tariffs to zero for countries that reciprocate and
who insure the quality of their exports.

Fifteen. Establish a catastrophic relief fund for victims of all forms of
natural disaster throughout the USA.

In all instances, regulatory services will be needed to assure implementation
consistent with the intent of the new code. Any person or entity that takes
advantage of loopholes in the new rules, or manipulates normal operations to
match new definitions will be fined. Their legal and tax advisors, if involved,
will be responsible for 60% of the fine.

The plan outlined here is investor and economy friendly. Where jobs are lost,
new entities will be needed, based on the premise that regulated capitalism can
work well. As shoppers and homeowners, as retirees and employees, as business
owners and investors, this is the reform plan we need.

Is for real? It could be. Investors represent the biggest voting block in the
country. We could elect the next president, change the tax code, fix Social
Security, and strengthen the economy. If only we weren't the most apathetic
group of people on the planet. As investors, we want less government, lower
taxes, and purposeful regulation. We want laws that aid economic freedoms, and
lawmakers and judges who facilitate it.

Survey Question: Would you vote for the person with the guts to propose this
plan?

Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com/
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"


The writing is on the wall (street, that is), and it is telling us that we need
to reaffirm the United States as the dominant force in the global economy, and
that we have to do more to protect our citizens' retirement and investment
programs.

Most economic research suggests that tax code replacement surgery is essential
for long-term economic progress. The goal of my plan is to make sure that you
are not grumbling ten years from now about the same things that trouble you
today. Here's a fifteen-point plan to end the cycles of economic frustration and
global disrespect during this administration:

One. Take Social Security out of the public sector and replace it with a
mandatory, deferred, fixed benefit, single-life-annuity program managed by
existing annuity providers. Employee contributions would be reduced nearly 50%
and employer contributions eliminated over a five-year implementation period---
immediately for the self-employed. Participants would have no investment
discretion or access to funds until retirement.

Two. Mandate that no less than 50% of all self-directed benefit plan Working
Capital be invested in government securities, and not qualified for withdrawal
until retirement. Bring all alternative investments (options commodities,
futures, hedge funds, etc.) under the purview of the SEC, and subject to the
same suitability standards as RIA's recommendations.

Three. Institute a 3% Federal sales tax on all goods and services purchased by
end consumers, but not a VAT. Subsidize a universal basic health care insurance
system and public education expenses from sales tax proceeds plus a 5% tax on
personal annual income, of any kind, in excess of $5 million dollars. Cap State
and Local Sales Taxes at 3%. Eliminate all nuisance taxes in utility bills,
hotel room charges, gas prices, etc.

Four. Reform Tort Law at every level, and protect both businesses and
individuals from frivolous lawsuits. Adopt a rule of personal responsibility for
one's own stupidity and clumsiness. Submit all product liability, medical
malpractice claims, and personal liability lawsuits to qualified arbitration
panels instead of juries. Ban class action suits of all kinds and cap jury
awards and lawyer compensation at 50% lower average levels.

Five. Eliminate all Estate and Gift Taxes.

Six. Mandate a ten-year term limitation on all members of congress,
retroactively, and impose a mandatory retirement age on Supreme Court Justices.
Reduce taxpayer compensated congressional staff by 50%.

Seven. Simplify the Internal Revenue Code by adopting a Fair Tax of 10% for all
persons with annual employment income above $40,000. Eliminate all forms of tax
deferral and stock option programs that are not available proportionately to
every company employee. State and local income taxes would be capped at a flat
4% for family incomes above $80,000. Individual tax avoidance schemes would also
be banned--- 10 years retroactively.

Eight. Abolish all taxation on any form of retirement income.

Nine. Abolish all taxation on any form of investment income, including rents,
royalties, interest, dividends, and capital gains. Increase the federal sales
tax by 2% once numbers 8 and 9 have been implemented.

Ten. Eliminate the Corporate Income Tax and create auditing entities to assure
that the savings translate into new jobs, higher salaries for non minimum wage
employees, lower product prices, and higher shareholder dividends.

Eleven. Appoint federal supervisors to the Board of Directors of public
corporations paying annual salaries in excess of $3 million. Board members,
corporate attorneys, and financial officers would be required to allocate any
performance incentive compensation on a dollar-for-dollar basis to all
employees, including part timers but excluding minimum wage recipients.

Twelve. Examine the economic impact of Government Regulation and oversight in
many industries, particularly small business practitioners in personal services
fields. Provide an arbitration and review system to identify and control abuses
of regulatory power and a separate department within each agency to deal with
small businesses.

Thirteen. Reduce government staff in all departments and at all levels by at
least 10% per year for the next three to five years. Reduce by 50% the number of
Government jobs filled by presidential appointment.

Fourteen. Reduce all import tariffs to zero for countries that reciprocate and
who insure the quality of their exports.

Fifteen. Establish a catastrophic relief fund for victims of all forms of
natural disaster throughout the USA.

In all instances, regulatory services will be needed to assure implementation
consistent with the intent of the new code. Any person or entity that takes
advantage of loopholes in the new rules, or manipulates normal operations to
match new definitions will be fined. Their legal and tax advisors, if involved,
will be responsible for 60% of the fine.

The plan outlined here is investor and economy friendly. Where jobs are lost,
new entities will be needed, based on the premise that regulated capitalism can
work well. As shoppers and homeowners, as retirees and employees, as business
owners and investors, this is the reform plan we need.

Is for real? It could be. Investors represent the biggest voting block in the
country. We could elect the next president, change the tax code, fix Social
Security, and strengthen the economy. If only we weren't the most apathetic
group of people on the planet. As investors, we want less government, lower
taxes, and purposeful regulation. We want laws that aid economic freedoms, and
lawmakers and judges who facilitate it.

Survey Question: Would you vote for the person with the guts to propose this
plan?

Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com/
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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Investor Politics - Corporate Income Tax Reform

The investor's eye view of politics is a simplistic, practical, dot-connecting
approach to sorting things out so that win/win change can be considered. Real
world politics is not concerned with such things, and that is one of the most
serious problems facing investors today. There are at least ten issues that
require government action if we are to maintain our competitive position in the
world economy. Most of these are interrelated and need to be acted upon
simultaneously--- thus causing a major political dilemma.

Politicians are much more interested in talking about change than they are in
actually legislating it; they prefer to champion just one specific issue at a
time so as not to appear too independent; and they can't keep themselves from
back sliding into the now archaic distinction between investors and poor people.
Rich or poor, most Americans have investments. For the small investor to become
wealthier his or her efforts must be encouraged by the tax code-- the wealthy
will become wealthier in spite of the tax code. And, believe it or don't, the
vast majority of the wealthy (even corporate executives) are good, productive,
caring-about-the-environment, people.

At the root of the problem is the tremendous investment the major parties have
in nurturing divisiveness, jealousy, and misunderstanding in the electorate. The
Republicans or Democrats in power are always ruining the country and, of course,
the guys who are seeking power, will undoubtedly do the same. Perhaps the most
obvious example of misguided political handiwork is the negative attitude of
most individuals toward corporations, big business, and international economic
collaboration.

As non-voting but taxable entities, corporations are easy to blame for all that
is wrong in society, easy to sue frivolously with no remorse or control, and
popular to tax--- by both parties. The sad thing is that most people don't take
the time to appreciate just how important business success and profitability are
to their own financial interests, short and long term. Mutual funds, for
example, perform better when businesses, large and small, prosper. Profitable
businesses produce jobs, provide higher salaries, and (once all the extra fees,
mandates, taxes, and handouts are eliminated) lower prices.

Politicians have never been shy about dictating proper behavior to individuals
or hesitant in shamelessly picking the pockets of businesses to fund their
projects. Self-employed business owners, for example, pay a minimum 35% Federal
Income Tax, state and local taxes of various kinds, and the usual Workers
Compensation, Medicare, and double Social Security Taxes. It adds up to better
than 50% quickly, and, at every level, all taxes, fees, subsidies, assessments,
withholdings, compliance costs, etc. are:

(1) Added to the price of goods and services, (2) considered in hiring decisions
at all levels in all business entities, and (3) factored into decisions
regarding new plant locations and service function outsourcing. Businesses will
only produce jobs in an environment that recognizes the importance of the
contributions they make. Meaningful tax reform needs to begin where the jobs
begin. Reforms to the Individual Tax Code and the Social Security/Retirement
System can then be integrated into the business framework.

Just as Congress picks corporate pockets, corporations pick those of their
shareholders. The compensation of corporate officers is a clear example of how
this has gone totally out of control, even if it is understandable under
existing tax codes--- both corporate and individual. Multi-million dollar
salaries, bonuses, deferred compensation and option packages are all designed to
avoid and/or to defer taxes while, at the same time, they are deductible on a
dollar for dollar basis from business taxes.

Changes on the personal side could clean this up quickly but, for now,
politicians need to focus more on protecting shareholders from these creative,
and excessive, compensation schemes.  Eliminating the Corporate Income Tax, and
all tax deferral/option/bonus mechanisms that are not available to all employees
at all levels, would be an excellent start. Then cap total compensation packages
at a specific number--- any excess being paid only in the form of dividends to
all shareholders.

The Corporate Income Tax is a non-productive weight on business decision makers,
causing expenditures that would not be considered were they not tax deductible.
Ironically, jobs are not created to reduce the tax bite because every dollar of
salary brings with it an additional 40% or so in overhead. All the actual costs
of doing business (and all the perceived risks associated with doing business)
wind up in the price of goods and services. The fact that governments can raise
corporate costs so much more easily than they can raise individual's taxes is
perhaps the biggest shell game threatening our economic well being today.

If instead of taxing them into leaving the country, Congress would cultivate the
profitability of corporations, while focusing regulatory efforts on the economic
abuses of shareholders, employees, and consumers, a whole new era of economic
expansion and productivity growth would ensue--- and we're just getting started.
Investors need to impress upon candidates that they expect meaningful change
throughout the tax code, and that a second term just won't happen without it.

After the Corporate Tax environment changes, politicians will be able to devote
their energies to defining "proper corporate and non-corporate business
behavior", and monitoring compliance with a whole new set of rules and
regulations. Converting the United States into a Free Trade Zone, by eliminating
all nuisance assessments from all levels of government, would: increase
employment, reduce prices, and multiply distributable dividends. Making it
happen should not be that difficult, particularly with the growing outrage
concerning the obscene compensation of high level corporate executives, and
considering how successful the FTZs have been on the local level.

Managers will make these changes work because the incentives are where they
belong--- on the bottom line instead of the tax return. Small businesses would
benefit from the reduction in taxation, and fees, and would be less constrained
in their efforts to grow. If they don't do the right thing, they will become
less competitive in the marketplace, and that is the way capitalism is supposed
to work. But, don't be naive. Publicly held companies will need direction,
guidance, and policing--- an excellent new career for displaced accountants and
lobbyists.


Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com/
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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When All Stocks Are Value Stocks - Think QDI

Value stocks are those that tend to trade at lower prices relative to their
fundamental characteristics than their more speculative cousins, the growth
stocks; they have higher than usual dividend yields and lower P/E and P/B
ratios. So when all stock prices are down significantly, have they all become
value stocks? Or, based on the panicky fear that tends to overwhelm media and
financial experts alike, haven't they all taken on the speculative
characteristics of growth stocks?

Well, to a certain extent they have, because the lower value stock prices go,
the more likely it is that they will eventually experience the 15% ROE that
typifies the classic growth stock. Interestingly, by definition, growth stocks
are expected to be associated with profitable companies, a fact that speculators
often lose site of. There are three features that separate value stocks from
growth stocks and two that separate Investment Grade Value (IGV) stocks from the
average, run-of-the-mill, variety.

Value stocks pay dividends, and have lower ratios than growth stocks. IGV stock
companies also have long-term histories of profitability and an S & P rating of
B+ or higher. Would you be surprised to learn that neither the DJIA nor the S &
P 500 contains particularly high numbers of IGV stocks? Still, since 1982, value
stocks have outperformed growth stocks 62% of the time. So when an ugly
correction has a makeover, it's likely that all value stocks transform
themselves into growth stocks, at least temporarily.

Will Rogers summed up the stock selection quandary nicely with: "Only buy stocks
that go up. If they aren't going to go up, don't buy them." Many have
misunderstood this tongue-in-cheek observation and joined the buy-anything-high
investment club. You need dig no further than the current lists (June '08) of
"most advancing issues" to see how investors are buying commodity companies and
financial futures at the highest prices in the history of mankind.

This while they are shunning IGVSI (Investment Grade Value Stock Index)
companies that have plummeted to their most attractive price levels in three to
five years. Many of the very best multinational companies in the world are at
historically low prices. Wall Street smiles knowingly (and greedily) as Main
Street hucksters tout gold, currencies, and oil futures as retirement plan
safety nets. Regulatory agencies look the other way as speculations worm their
way into qualified plans of all varieties. Surely those markets will be
regulated some day--- after the next Bazooka-pink, gooey mess becomes history.

How much financial bloodshed is necessary before we realize that there is no
safe and easy shortcut to investment success? When do we learn that most of our
mistakes involve greed, fear, or unrealistic expectations about what we own?
Eventually, successful investors begin to allocate assets in a goal directed
manner by adopting a more realistic investment strategy--- one with security
selection guidelines and realistic performance definitions and expectations.

If you are thinking of trying a strategy for a year to see if it works, you're
being too short-term sighted--- the investment markets operate in cycles. If you
insist on comparing your performance with indices and averages, you'll rarely be
satisfied. A viable investment strategy will be a three-dimensional decision
model, and all three decisions are equally important. Few strategies include a
targeted profit taking discipline--- dimension two. The first dimension involves
the selection of securities. The third?

How should an investor determine what stocks to buy, and when to buy them? We've
discussed the features of value and growth stocks and seen how any number of
companies can qualify as either dependent upon where we are in terms of the
market cycle or where they are in terms of their own industry, sector, or
business cycles. Value stocks (and the debt securities of value stock companies)
tend to be safer than growth stocks. But IGVSI stocks are super-screened by a
unique rating system that is based on company survival statistics--- very
important stuff.

In the late 90's, it was rumored that a well-known value fund manager was asked
why he wasn't buying dot-coms, IPOs, etc. When he said that they didn't qualify
as value stocks, he was told to change his definition--- or else. IGV stocks
include a quality element that minimizes the risk of loss and normally smoothes
the angles in the market cycle. The market value highs are typically not as
high, but the market value lows are most often not as low as they are with
either growth or Wall Street definition value stocks. They work best in
conjunction with portfolios that have an income allocation of at least 30%---
you need to know why.

How do we create a confidence building IGV stock selection universe without
getting bogged down in endless research? Here are five filters you can use to
come up with a listing of higher quality companies: (1) An S & P rating of B+ or
better. Standard & Poor's combines many fundamental and qualitative factors into
a letter ranking that speaks only to the financial viability of the companies.
Anything rated lower adds more risk to your portfolio.

(2) A history of profitability. Although it should seem obvious, buying stock in
a company that has a history of profitable operations is inherently less risky.
Profitable operations adapt more readily to changes in markets, economies, and
business growth opportunities. (3) A history of regular, even increasing,
dividend payments. Companies will go to great lengths, and endure great
hardships, before electing either to cut or to omit a dividend. Dividend changes
are important, absolute size is not.

(4) A Reasonable Price Range. Most Investment Grade stocks are priced above $10
per share and only a few trade at levels above $100. An unusually high price may
be caused by higher sector or company-specific speculation while an inordinately
low price may be a good warning signal. (5) An NYSE listing--- just because it's
easier.

Your selection universe will become the backbone of your equity asset
allocation, so there is no room for creative adjustments to the rules and
guidelines you've established--- no matter how strongly you feel about recent
news or rumor. There are approximately 450 IGV stocks to choose from--- and
you'll find the name recognition comforting. Additionally, as these companies
gyrate above and below your purchase price (as they absolutely will), you can be
more confident that it is merely the nature of the stock market and not an
imminent financial disaster.

The QDI? Quality, diversification, and income.


Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com/
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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Quarterly Window Dressing - A Recurrent Wall Street Scam

"The time has come the walrus said, to talk of many things": Of
corrections--portfolios--- and window dressing--- of market cycles--- wizards---
and reality.

Quarterly portfolio window dressing is one of many immortal Jaberwock-like
creatures that roam the granite canyons of the Manhattan triangle, sending
inappropriate signals to unwary investors and media spokespersons.  Many of you,
like the unsuspecting young oysters in the Lewis Carroll classic, are responding
to the daily news nonsense with fear instead of embracing the new opportunities
that are surely right there, cloaked, just beyond your short-term vision field.

Older and wiser mollusks who have experienced the cyclical realities of the
markets tend to stick with proven strategies that are based on a solid
foundation of QDI (quality, diversification, and income production). They know
that corrections lead to rallies, and that rallies always give way to
corrections. If only the corrections could elicit patience instead of fear; if
only rallies didn't produce greed and excess. There's a lot of confusion in a
world that considers commodities safer instruments than corporate bonds.

Long lasting investment portfolios are consciously asset allocated between high
quality income and equity securities. Each class of securities is then
diversified properly to mitigate the risk that the failure of a single security
issuer will bring down the entire enterprise. Simply put, a portfolio with 100%
invested in the absolute, hands-down, best company on the planet is a high-risk
portfolio. There is no cure for cyclical changes in security market values---
diversified portfolios thrive on it, in the long run.

The differences between a correction in either a market (equity or debt) or a
market sector (financials, drugs, transportation, etc.), and a fall from grace
in a specific company are important to appreciate. Corrections are broad
downward movements that affect nearly all securities in a specific market. This
particular one has impacted prices in both investment markets, while creating
rallies in more speculative arenas. Ten years ago, the dot-com bubble began
under very similar circumstances. Ten years earlier, it was interest rates---
and on, and on. When all prices are down, opportunity is at hand.

There are approximately 450 Investment Grade Value Stocks, and at least half are
down significantly from their 52-week highs; fewer than ten per cent were in
this condition just over a year ago. But very few companies have thrown in the
towel, or even cut their dividends. Closed end income fund prices are still well
below the levels they commanded when interest rates were much higher, yet they
provide the same cash flow as before the financial crises. The economy and the
markets have been through much worse.

Why aren't the wizards of Wall Street assuaging our nerves by explaining the
cyclical nature of the markets and pointing out that similar crises have always
preceded the attainment of new all time highs? Right, because the unhappy
investor is Wall Street's best friend.  Why can't politicians address economic
problems with capitalist-economic solutions? Fear, and the panic it evokes,
creates an easy market for walruses, oyster knives in hand.

Wall Street plays to the operative emotion of the day--- greed in the
commodities markets and fear in the others. Once per quarter, they trim their
holdings in unpopular sectors and add to their positions in areas that have
strengthened. Under current conditions in the traditional investment arena,
don't be surprised by larger than usual cash holdings (certainly not "Smart
Cash"). Window dressing pushes the prices of your holdings lower, in spite of
their continued income production and sustained quality ratings.

How have the wizards managed to re-define the long-term investment process as a
quarterly horse race against indices and averages that have no relationship to
investor goals, objectives, or portfolio content? Why do these proponents of
long-term investment planning and thinking religiously conspire to make
short-term decisions that prey upon the emotional weaknesses of their clients?
The "art of looking smart" window-dressing exercise accomplishes several things
in correcting markets:

The things you own are artificially manipulated lower in price to make you even
more uncomfortable with them, while the things you don't have positions in
stabilize or move higher. The glossies from the new fund family your advisor is
talking about show no holdings in any of the current areas of weakness. It's
easy to make fearful investors change positions and/or strategies. Sic 'em boys.
Brilliant!

Value investors (those who invest in IGVSI stocks, and income securities with an
unbroken cash flow track record) may lapse into fearful thinking as well, and
this is where the Working Capital Model comes to the rescue. By focusing on the
purpose of the securities you own, their enhanced attractiveness at lower prices
becomes obvious. Higher yields at lower market valuations and more shares at
lower prices equal faster realized profits as the numbers move higher during the
next upward movement of the cycle. That's just the way it is. A reality you can
count on.

Surprisingly few investors have the courage to take advantage of market
corrections. Even more surprising is how reluctant the most respected
institutional walruses are to suggest buying when prices are low. The instant
gratification expectation of investors combined with the infallibility expected
of professionals, by both the media and their employers, is the cause. Gurus are
expected to know what, when, and how much. Consequently, they prefer to
manipulate their portfolios to create an illusion of past brilliance, rather
than taking the chance that they may actually be in the right position a few
quarters down the road. There is no know in investing.

The stock market yard sale is in full swing--- add to your retirement accounts,
buy more of IGVSI stocks at bargain prices, increase your dependable income and
increase current yields at the same time. Apply patience, and vote for economic
solutions to economic problems.

Perge'

Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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Guaranteed Social Security Benefits: Make It So

The comically complicated PSA (Personal Savings Account) legislation bouncing
around Congress will raise taxes, increase investment risk, and expand the size
of government. Let's stop applying Band-Aids to spouting arteries. We are
looking for a guaranteed retirement benefit program, and organizations capable
of providing one. Additionally, we want the new program to reduce taxes, create
jobs, boost the economy, cut prices, and increase salaries. Difficult? Not
really.

This is the conceptual outline of a five-year implantation plan, a starting
point for the brainstorming needed to develop the nitty-gritty details, rules,
regulations, laws, and agencies. All that is needed is the will to change things
productively. Politicians like to debate changes to determine why new ideas
can't be implemented. Here's a plan that must be implemented. Have a listen,
throw out an incumbent, and protect your future.

Guaranteed benefit programs have been around for over 100 years, and millions of
people throughout the world enjoy the benefits they provide. Here's how they do
it. Every month, they deposit money into a trustee-managed investment account.
The money avoids the stock market (for the most part), index funds, commodities,
or MLM-like derivatives and is carefully invested in high quality debt
securities, many privately placed for better yields.

All earnings are reinvested in similar securities, and the fund eventually
produces more in earnings than the participating investors contribute; the
trustee manages the portfolio. At retirement, the deposits stop and the
guaranteed benefits begin. The benefit is guaranteed for life--- extraordinary
concept, older and wiser than any living congressman or presidential candidate.

What if, instead of donating 7.6% of your salary (15.3% if you are self
employed) to support the war de jour: (a) you could choose to deposit from 3% to
5% of your salary in a guaranteed retirement program maturing anytime after age
60, (b) the lifetime benefit is totally income tax free, and (c) your employer
uses his savings to either create jobs, raise non-executive salaries, reduce
prices, or increase shareholder dividends. Interested?

The SSRIA (Social Security Retirement Income Annuity) is a new and improved
version of the ancient Deferred Fixed Annuity--- a boring but guaranteed
fixed-amount-only retirement vehicle. (Wrong, I don't sell annuities--- they
just happen to be the perfect Social Security problem solver.) There are a bunch
of new wrinkles: (1) The minimum contribution is mandated for all employed
persons, but anyone with a Social Security number can have a SSRIA.

(2) Qualified (15 years of Fixed Annuity experience) SSRIA providors are
assigned to participants randomly by SS#--- only one per participant, per
lifetime, please. Since the "qualified-by-qualified-people" providor companies
have no acquisition, retention, or advertising expenses, there are no sales
commissions; administrative expenses and investment management fees are capped
at .5% of the total fund Working Capital.

(3) All SSRIA contracts, regardless of provider, will contain the same terms,
interest guarantees, retirement benefit choices, and pre-retirement death
benefits, thus eliminating any incentives for internal fraud and manipulation of
statistics.

(4) Qualified providers will establish separate tax exempt, "mutual"
subsidiaries to manage and control operations, assuring that profits are
distributed to contract holders. Profits are allocated 50% to active contract
holders and 50% to a health insurance trust fund for retired participants
(HITF). (5) All providers will use the same mortality, investment earnings, and
expense assumptions in their annuity benefit calculations, and only Life and
Life + One Annuities are available. (6) Benefit payments will be jointly
guaranteed by the parent companies and the Federal Pension Benefit Guarantee
Corporation. Parent Company income taxes would be reduced by 50%.

Implementation would be completed over a five-year period, and interpreted with
an "intent of the law" bias:

In Year One, the Federal Government would purchase single premium SSRIAs for all
active Social Security recipients--- hey, they squandered the money. Also in
year one: (1) all employee and employer contributions would be cut by 25% (the
first of four such annual cuts) and deposited to individual SSRIAs. (2) All
Federal, State and Local income taxes on SSRIA payments would be declared
illegal and forever prohibited. (3) A private company would be chartered to
audit the disposition of corporate tax savings within all public companies and
private companies employing 10 or more persons 18 months before enactment.

In Years Two through whenever, the Federal Government would add to retiring
persons SSRIAs to bring the annuity benefit to the level guaranteed by the OASI
plus COLAs. Once an equalization level is achieved, federal responsibility would
cease for that retiree.

In Years Three through Five, all Federal, State and Local Income taxes on all
forms of private retirement accounts (IRA, 401(k), 403(b), etc.) would be
reduced by one third per year, and would be declared forever illegal at the end
of year Five. A Federal Sales Tax of 1% or 2% (on all final-product-sales, not a
VAT) could be enacted after the second year's cut. From Year Three forward,
SSRIA holders would be able to view their projected monthly benefit at various
retirement ages, based on contract provisions and their deposit and earnings
history.

By the end of the Year Five: (1) Employers would have no Social Security tax
responsibilities, but would be responsible for either employing more people,
reducing their product prices, raising non-executive salaries not subject to the
minimum wage, or paying higher dividends to shareholders. Any manipulations of
their operations or executive compensation packages clearly intended to
circumvent the intent of these reforms would be fined appropriately within the
Board of Directors, senior officers, and legal council of the Company---
personally, and in each capacity.

That's right, if a senior officer is also on the Board, and responsible for
controlling jobs, product prices, or dividends, he or she would be personally
responsible for three separate fines. (2) Employees would select their level of
salary deduction for year six; the election can be changed once in any
twelve-month period. No employee can contribute more than the maximum 5% of
salary to an SSRIA.

Of course there are a lot of ifs, ands, and buts in here, but it is a clearly
doable program within an established professional infrastructure. It will
increase jobs, reduce taxes, boost the economy and reduce the role of
government--- in 50,000 less words and 25 fewer years than any approach even
being considered in Congress.

Make it so--- yeah, you!


Steve Selengut
http://www.sancoservices.com
http://www.kiawahgolfinvestmentseminars.com
Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"



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unsubscribe from this mailing list please click here
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ups&Email=Market_Toolbox@yahoogroups.com .

Hi

Plan your Stock/Commodity trade after checking out the opinion of
India's leading market analysts who write on www.3paisa.com.

Market opinion is updated realtime and hence one can access the
opinion of tomorrows trade by today late afternoon itself.


Regards
Ms Susha
3paisa Team

The Yalicoo stock simulator
(http://www.yalicoo.com/default.aspx?utm_source=1002) allows you
to trade stocks in real time quotes. As I understood, you get an
initial $100K to build your portfolio and the idea is to have the
highest return at the end of the competition (they have daily, weekly,
monthly and quarterly competitions), and the winners receive cash
prizes. I also saw that you can view all the other competitors' picks
in real time.

It seems that they are in beta, so there are not too many competitors.
Thus, it's easy to win the competitions (I already won $1250…)

Does anyone else already use this site?

"Yes, there are more derivatives than there are people...but no, they
are not supposed to pose a threat to the world economy. Why not?
Because there is always someone on the other side of the trade, say the
experts...

http://investing-software.com/commentary/articles.html?next=3782

ih

Colin Cody is a CPA and the owner of TraderStatus.com. Here we talk
about who qualifies for trader status with the IRS, what it means in
terms of deducting losses and expenses, how it differs from trading
through an LLC or corporation, and what you need to do to elect
the "mark-to-market" strategy on your taxes. A great primer for those
traders who want to learn more about writing off losses and trading
expenses without having to actually sell your positions...

http://investing-software.com/commentary/articles.html?next=3705

ih

"As an investment theory, behavioral finance turns out to be a
full-dress version of the familiar truism about the fool and his money.
What worries the behaviorists is the way investors make mistakes by
following their impulses...with nary a sign of rational profit
maximizing...

http://investing-software.com/commentary/articles.html?next=2214

ih

Price Headley instructs us, "Most traders put their emphasis on
determining the best entry and exit points, but smart traders also
consider how their money management rules will affect their
performance...

http://investing-software.com/commentary/articles.html?next=1907

ih

Date: Wed, 26 Jul 2006 20:52:38 -0700 (PDT)
From: trav 4FairTax <travllr@...>
Subject: Tom Wright of FairTax.org live on WJR 760 AM Thursday July 27th
To: ih <investorshelper@...>

This 10:00 AM broadcast is also available over the internet at:

http://wjr.com/article.asp?id=142275 

(click above link, then click "CLICK HERE TO LISTEN")

 

Enjoy, trav

Julie <julie.malick@...> wrote:

Date: Wed, 26 Jul 2006 14:37:40 -0400
From: Julie <julie.malick@...>
Subject: Tom Wright of FairTax.org live on WJR 760 AM Thursday July 27th
To: travllr 4FairTax <travllr@...>

Learn the truth about the FairTax and how it will affect you!

 

If you haven't yet gotten the opportunity to hear Tom Wright, Executive Director of FairTax.org on one of his many radio interviews this week on Michigan radio, you'll have another chance tomorrow morning, July 27th, on WJR 760 AM Radio Detroit.  He'll be on with Frank Beckman, beginning at 10:00am EDT for a full hour. 

 

Tune in and find out how the FairTax will help you keep your entire paycheck and put your finances back in your control, where they belong!

Very best regards,


Julie Malick
Assistant to Thomas A. Wright
Executive Director
Americans For Fair Taxation
(727) 793-9080 direct
(727) 712-3784 fax
(800) FAIRTAX main
www.fairtax.org

"It does not take a majority to prevail . . . but rather an irate tireless minority, keen on setting brushfires of freedom in the minds of men."
--Founding Patriot Samuel Adams

"We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."
--Winston Churchill