JUNE THOUGHTS III

1. Stock Market Insanity

Stock market investing takes rich people and makes them wealthier. This is rule number one. Rule number two is that wealthy people let us play in their “sandbox” but we will never “own” it.
The small investor, with limited exceptions, will not earn spectacular short-term results. The stock market rewards the long-term small investor with steady returns over 20 to 30 years (this is the “sandbox”). For the majority of people in the stock market, this is your objective, not the insanity of daily and weekly speculation.
Remember when the market was “crashing” a few years ago? Wall Street brokers and pundits wondered when the Fed, then headed by Alan Greenspan, would take action and lower interest rates. Money managers fretted about when he was going to act; then he did. Managers were satisfied, temporarily, and the stock market began its slow climb back. Then the question became when will the Fed stop lowering rates? Every meeting was fronted with the concerns if it doesn’t stop soon the economy may “overheat.” Finally, the rates bottomed out at 1 percent and then the opposite arguments began. When will the Fed start raising rates? Eventually, the rates started to go up; that concern was followed by when will it end? That worry continues through today. This sequence represents the whimsy of money managers to tempt the small investor to make irrational decisions and investments. Remember: your buying and selling makes money managers rich.
There is rarely a timeframe when money mangers are happy. Why? The stock market is fueled by emotions. If various economic factors stabilize, the market settles into a trench and flattens out. This leaves pundits with little to talk about on their daily radio and TV shows. That is why you see “major” reports released every week (reports that tend to be contradicted the next week or corrected the next month).
Speaking of pundits: the financial section of a major newspapers feature the “pundit of the day,” spewing his or her advice. The majority of the time their comments are negative. It is easier for them to cover their tracks by stating the negative because if the worst case scenario doesn’t happen no one will care and their credibility is not compromised. Plus, negativity sells advertising space on TV, radio or in the newspaper. Don’t expect “rosy” comments from pundits.
The advice from this small investor is not to panic and only read the pundits for amusement. Invest for the long term and your patience will be rewarded. Just look at the stock market since the modern era began after the 1929 crash. The line steadily moves upward.
If you are not a rich person, don’t invest like one. Day trading will make your broker richer and you will be “broker.” Buying “options” sounds tempting but it is too hard to “time the market” in order to make a financial killing. That means you need to have the financial resources to invest and wait. If you have minimum resources, you will be forced out before the rewards materialize.
Remember the volatility of May 2006, and how there were 4 days of triple digit market corrections? Wealthy people made money during those corrections because they had options that “shorted the market” (meaning they “gambled” that prices would go down). Rich people have the resources to make money regardless of the market goes up or down. For the rest of us, we need the “tried and true” investing of buy low and sell high.
The first day you enter the market with a mutual fund or an indexed fund purchase, you bought “low.” Ten years from now, you’ll understand what I mean.

2. What About the American Tech Worker?

Every week you will read that another company has terminated several thousand high-tech and other workers in an effort to increase profits. These highly trained and “mobile” workers will spend the next year or more looking for work that compensates them at a level near their previous job. Most people are disappointed.
These high-tech workers don’t realize that the US Government has a program (H1-B) that allows companies to import highly trained tech workers at a fraction of the costs for a comparable American worker. Companies pay no benefits and lower wages; wages that seem like a fortune for people from a third-world country. All the talk about US Immigration reform and how Mexican workers are taking away jobs that Americans want is merely a “smoke-screen.” Americans go to college to learn to work in high-tech companies. To be replaced by a low-cost H1-B worker is the ultimate legal immigration insult.
But, that’s just the beginning. Companies are upset that the limits for H1-B visas are not being increased! For the time period beginning July 1, 2006 to June 30, 2007, the maximum number of H1-B visas has been allotted. That’s 65,000 foreign workers taking away jobs once held by under-employed and uninsured Americans.
Meanwhile, America builds fences along the Rio Grande and creates legislation that will try to eliminate the few dollars a day a Mexican worker may make picking produce.
Why hasn’t any action been taken to stop the H1-B high-tech program? It’s doubling insulting to know that tech jobs have been outsourced to other countries plus those that remain are being filled imported tech workers.
Colleges produce sufficient high-tech workers to meet American companies’ needs. Less than half of this year’s graduates will find jobs in high-tech fields. Next year, a comparable number will graduate, possibly with the prospect that even fewer jobs will be available. Colleges won’t take any accountability for this; many of these high-tech programs take 5 to 6 years to complete and have the most expensive tuitions on campus. Basically, colleges produce ready and willing workers; it’s not their problem there are no jobs.
This is America: big companies dictating who works and who doesn’t based on Wall Street earning expectations. Add to that the fantasy colleges provide that a good education yields a high paying job and you have a recipe for poverty.
The H1-B program needs to be terminated until there is sufficient evidence that American trained people have been absorbed into every possible opening and there are no more to be hired.

3. Quote

To think is to differ. ---Clarence Darrow

GROWTH <> LEADERSHIP <> EXCELLENCE