Tuesday, July 31, 2012

It's just free money

A true investor purchases shares in a fund/stock for the long haul (10, 20, 30 or more years). If you can't commit cash for such a time period, it shouldn't be in the market in the first place. If you can commit cash for such a time period, all this nonsense really becomes meaningless. Just make sure you have 6 to 12 months worth of cash on hand in a money market account. And, make sure you have additional free money on hand for things you know will take place within the next 5 or so years - such as a child going to college, new car, down-payment needed for a home, etc. After that, just pump free money into the stock market and relax and don't listen to all the nonsense in the media. And... this part is important... LIVE FRUGALLY!  Another point for consideration... Do you need money now? The Dow closed at 11,578 at 12/31/2010. The Dow closed at 11,143 on 8/11/2011. That's a 435 point (4%) drop over a 7 1/2 month period. Let me translate that. A hypothetical $100 investment at 1/1/2011 experiencing a similar drop would be worth $96 today. Sure, it would be better to turn $100 to $104 but $100 turning into $96 should not be anything to lose sleep over (UNLESS YOU'VE OVEREXTENDED YOURSELF INTO THE MARKET WITHOUT AN ADEQUATE CASH CUSHION ON HAND). Think of items in terms of the time it takes to earn the money to buy them. Time is a scarcer commodity than money for many of us. A thousand dollars is abstract, for example, but imagining a week at work is not.
It's just free money!

Monday, July 23, 2012

How to achieve growth?

However the sense of entitlement in the statement above is breathtaking. When people lend a country money they are not giving charity, instead they expect it back with interest. It is their free money (the lenders'). Taking your neighbors money is usually called theft.
The fact that Portuguese citizens suffer in doing so is besides the point. Plenty of people suffer paying back their student loans, their mortgages and their credit card accounts. Does Mr Lains believe that such people should withhold repayment when doing so is challenging?
Portugal is not a child under 18. It is a western European and democratic country. It has qualified economists and a civil service who can advise the government. It is true that joining the Euro absent a federal government was foolish. It chose to act thus and should now suffer the consequences of its actions.
And it is rather peculiar that when individuals make similar calamitous mistakes we have little or no sympathy. When a country does (one that should know better) many shed crocodile tears....

We definitely should change this situation

I have an advice for all the people concerned and critical of Europe's austerity-obsessed cures for the current crisis: Let us find something else to care about.
It has been proven to us beyond limit that enough evidence and reasons has been repetitively unearthed right out of this crisis that has proven the Europeans' policy of austerity to be doomed. They simply don't care, and we can't do anything about it. Maybe a full-throat melt-down is the only thing that may awaken them.