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I know it’s hard for income investors to resist stocks with high dividend yield but if it’s true good to be true it usually is.  The typical income investor might feel happy in the current market because there are so many stocks that has taken huge hits and their dividends are high compared to to their stock prices. This is particulary true for REITs, many REITs have high dividend right now because they have been hit very severly by the financial crisis. 

The million dollar question: Will the dividend get slashed? Investing in a REIT looks very tempting but beware that real estate slumps usually are slow and painful, they can last for years. Many REITs that seems stable and etc might have to write down their book values. It’s possible to indirectly buy real estate worth $1000 through a REIT but pay $1200 or more for it. Companies with real estate holdings will most likely write down their book values the coming months and maybe years. I am avoiding real estate as I’ve mentioned earlier.

A majority of gold investors are doomsday preachers. That is why I consider investing in paper gold to be a bit paradoxal. The reason why many buy paper gold is because buying physical gold can lead to headache. First of all you need a safe place to store it. You can store it safely in a bank but then you have to pay a montly/year fee. Just storing it costs. A problem most investors face when investing in physical gold is the spot price. You won’t get a market spot price for gold when buying gold unless you buy in big volumes. Buying alot of gold isn’t exactly easy for the small time investor. You might be looking at spending 100, 000 $ to get a fair market spot price.  Selling your physical gold can be harder than you think, you have to find a seller willing to buy at a market price.

GLD might sound like a blessing. It’s easy to buy and sell, just as simple as trading a regular stock. You can find buyers easily in the market and buy easily at market price. You avoid all the difficulties that physical gold has.  But it’s still just paper gold. If the economy would crash do you really expect GLD to back up your paper certificates with actual physical gold? Yes I didn’t think so either.

Investing capital in capital trust has been a disaster investment so far, the company doesn’t really live up to its name. The current price is $1.25. It feels like yesterday when the stock was trading between $25-30 and the dividend was “awesome”. Bulls defended the stock even though this was after all the news about the economy going downhill. Apparently all the insider buying and the genius managment made CT look like an obvious buy. I didn’t short or went long on this stock, I was simply neutral and avoided it. So this isn’t a “I told you so” post, I’m just pointing out the danger with being overly optimistic when insider buying occurs.

I have no idea how Capital Trust will perform from now on, it might be a brilliant investment to buy it today. So you bulls don’t need to flame me, I’m not saying CT is going bankrupt.

And yes, I felt like I had to make a wise joke about “not trusting capital trust”

I never cared much for wrestling but even I know the golden years are long gone. The days with The Rock, old Kane, Stone Cold, Mankind, Undertaker were the days wrestling was watchable. Now several years later WWE has turned in to… excuse my language, CRAP!

I never watched wrestling but I have buddies who did and even they are sick of it. They keep telling me the new storyline/wrestlers is torture to the viewers. A big ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ

If you ask me, WWE shares are close to worthless. It’s a miracle WWE is still trading at $12.37, it should be a low one digit price stock.  I guess this was the most biased post I have ever made. But I am so bearish on that company I can’t hide my feelings.

Don’t jump on the foreclosure fest yet. Many buyers are looking for bargains in the slammed real estate market in Las Vegas, but are you really bargaining in the nevada desert?

Technically, Las Vegas is still expensive if you look at historical prices ( inflation adjusted ). I wouldn’t personally invest in US real estate at the moment, maybe in 2010-2011. If the real estate crash is only half as bad as the Japan crisis was, we still have at least 8-12 years of declining or stagnating prices. So don’t be in a hurry to “bargain”.

It’s interesting how everyone became self proclaimed experts when oil passed $100, pretty much everyone said “here we come $200 a barrel!”. The reason oil was even priced above $100 a barrel because everyone was so freakishly bullish on oil, the oil price was mainly driven by speculation. When you buy something the crowd likes you will have to pay above supply-demand price. When that happens there is little room for mistakes, the slightest hint of bad news will cause the price to tumble. Generally speaking, prices driven by an bullish crowd is rarely a good investment.

What has happened now? Oil below $50 a barrel, standing exactly at $49.62 as I write this. Take a coin and flip it, it has higher expected value than a crowd that lacks critical thinking. 

Last note: I’m long term bullish on oil, but even I disagreed when the price was above $100.

Numerous studies, year after year have shown that the majority of mutual fund managers can’t beat index. Before I start going on a rant saying that they should be unemployed. I would like to find out why this is the case.

1. Fees + return exactly as the general market will perform sligthly worse than index becase of the fees. If the index goes up 10% and the fund also goes up 10% and the fee is 1% the return is 9%.

2. Mutual funds generally invests in what? Big Corporations. If you have read some basic economy and statistics you’re probably familiar with the Efficient Market Hypothesis. Big Corporations tend to be more “effectively” priced than smaller companies thus making it very hard for fund managers to beat index based on skills and not luck.

I will talk more about EMH later but for now I would like to share a theory with you! I’m no licensed economist but I sure would like to know what would be the most beneficient for the GDP and IRS ( tax revenue ) if all the mutual funds were closed over night and all investors would place their money in individual stocks proportionally so their portfolios would exactly follow the Dow Jones or S&P 500. They would on average make more wealth and make the country more wealth by taxes. I’ve over simplified it, I have to calculate how much the fund industry contributes obviously and what would be the most economic wise move for the country.

In my opinion the mutual fund industry is an money for nothing industry. It consists of 80%+ of over paid “financial experts” that can’t beat a monkey picking stocks by throwing dart.

Yes, $700 billion is alot of money. But I get the feeling that’s now enough. I wouldn’t be suprised if the total amount goes over $1 trillion to save Wall Street. After all $700 billion is ony $2300 for every american, that’s not really that much if you can think about it. It’s definately “doable”.

According to George Soros we’re heading into the storm not out of it. That sounds really bad, and that guy usually doesn’t get things wrong.
Let’s review what happened so far:

 The drop in prices started in 2007, Mortgage Companies fell like a stone. Talk about “liquid assets” puts insane fear in American Home Mortgage shareholders. AHM goes almost bankrupt, but bounces a couple times before it drops well below $1 a share.

Later in 2007, numerous real estate agents still denies the housebubble.

2008:

There has been a drop in real estae prices in most us cities. Las Vegas’ Real Estate market is in very bad shape. Major financials like Bear Stearns, AIG and Fanny Mae are bailed out by the U.S government. Corporate Socialism peaks in 2008.

Russian Stock market falls, falls, falls and then the Russian government decides to stop market trading for two days. When it’s opened again there is a huge spike in the russian market. Both Russia and US is pumping money in the to the financial system, they manage to convince the public since pretty much the entire world’s financial stocks soar on the news.

Is this a dead cat bouncing or are we going up?
Only time will tell, but personally I would say the market will become cheaper.

What I personally don’t get is why media sympatize so much with homeowners. All the blame is put on the banks and real estate agents. If you weren’t able to make the payments why get the loan in the first place? That’s the reality for millions of homeowners. They were simply irresponsible and plain dumb. Sure, it’s easy to say greedy wall street bankers are to blame, but the root of the subprime mortgage crisis is the owners themselves. The final decisions was still taken by homeowners.

They wanted to risk everything to live the american dream. It might sound like I’m only blaming homeowners but I’m not. I’m also against Corporate Socialism, the U.S government has already bailed out Bear Stearns and Fanny Mae. But two wrongs doesn’t equal one right. That’s how the current government works: Don’t educate or regulate, give them fish instead of learning them how to fish.