You have decided to buy some stock or mutual funds, but wonder which one to buy. You need more information so you call your broker for advice. A so-called “full service” broker will bury you with all kinds of reports, analysis sheets and other pretty pieces of paper, but will probably try to sell you something that makes him the most commission.

Let’s see. What does Wall Street think you should know? Of course, you will want a company that is currently favorable or “hot” – like WorldCom used to be. Then you need to look at their financial statement that has been audited by a big accounting firm. – like Arthur Andersen. You really should check to see if they have any big outstanding financial obligations that have little asterisks next to them in the Annual Report – like under funded pension plans.

Of course you will want to get their financial statement to check their P/E ratio. That’s Price/ Earnings or how many years of earnings it will take to make back the price of the stock today. The lower that number the better. For many years the average has been about 14. If it is above 20 or 30, well ??? We won’t factor in the rate of inflation that will dilute the buying power year after year. And there are lots of other numbers like this Wall Street says you should be studying.

Maybe it is easier to buy a mutual fund. You can go to Morningstar for every bit of information about a fund you can think of. They will show the breakdown of the funds’ portfolio, but that can easily be 6 months old. They do have those star ratings. From one to 5 stars, but I can’t recall seeing any one star funds and hardly any 2 stars. Why? Well, I think they don’t want to offend the fund manager even though he is not making money for his clients.

In fact, they love to give 5 stars to funds that have had losing years one after another. Unfortunately some of their information is out of date. They do list all the stocks the fund owns, but the fund may have sold them so you can’t tell for certain what they are investing in.

Brokers want to send you reports, graphs, company updates, interim reports and I don’t know what all, but stop and ask yourself, “If I can get this so can everybody else so what good is it?” Now you’ve got it. None. All that information will not tell you that after you buy it it will go up – and that’s all you want to know.

Basically there are two things you want to know. 1. Is it going up? 2. If it goes down where do I sell it to protect my capital? That’s all the information you need.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

Duck! No I don’t mean a quack, quack. I meant get down, look out for a huge blob of brown stuff is heading your way.

This one is so large it is going to make Enron and Worldcom look like Boy Scouts stealing cookies at a picnic. As a result of these latest revelations we are going to have to find someone new to blame. So far the blame has been on the World Trade Center tragedy and dishonest executives at a few large corporations. These are a pittance when you see what is coming.

Does your company have a defined benefit pension plan? Did you know that 234 companies listed in the S&P500 index do? Did you also know that they owe their retirement plans $78 billion (yes, that’s a B)? Wait a minute. I thought they were supposed to put funds into it every year. They are, but they haven’t. How come these companies are showing big profits and not meeting their obligation to their employees?

It’s all legal and has the blessing of the SEC (Securities and Exchange Commission).

This is how they do it. The company says they are going to make 10% return on retirement plans, but in 2002 they lose 5%. The SEC says they are allowed to project that profit over the next 10 years. If the company has a $100 million pension fund they put in their financial statement that they made $10 million in 2002, 10%. What happens to the $5 million loss? They deduct the $5 mil from the bottom line of the financial statement that now includes the $10mil phony profit and keep the $5mil as if it was actually there which it isn’t. In reality the company now owes the pension plan $15mil which the SEC says they can amortize over the next 10 years. Talk about smoke and mirrors!

General Motors owes about $15.5 billion to its pension plan that is an amount equal to one half of the value of the entire company. Technically the employees own half the company, but my guess they will not see much, if any, of it. Do you think GM has the ability to make its current pension contribution plus another $1.5bil every year for the next 10 years? Quack, quack, quack. Not a chance. If the talking heads know about this they aren’t quacking.

Once this becomes known not just about GM, but also the other 233 companies (and maybe yours) the stock market will be taking another dump. P/E ratios are now about 30 for the S&P500. When money is taken from their bottom lines it will result in pushing those ratios much higher which will further weaken the market.

Here are 3 questions for the owner, Treasurer or Controller of your company: What is the company’s projected rate of return? Will there be funds paid into the plan this year? Does the company owe any money to the plan?

Don’t let him give you a quack, quack.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

In today’s volatile and confusing stock markets everyone is searching for a guru who knows which way the market is going and when. Ask any economist and he will have an answer. Ask 2 economists and you will have 2 answers. Ask 3 economists - ad infinitum.

At the Federal Reserve Board we have Mr. Greenspan and all his economist Governors talking at each other about how to best micromanage the U.S. economy. Notice I said talking at and not talking with. Each one of them thinks he has the Holy Grail and knows exactly what to do. It has not occurred to any of them that doing nothing might be the best for everyone.

On April 27 there was an important economic statistic released. The Employment Cost Index gain was 1.4% which was more than expected by the investment community. This was considered to be negative for the stock market because the Fed is considered to be "anti-prosperity". This number shows more people are being paid more money. Mr. G. thinks this is inflationary. It is a theory he has dreamed up. Going back in history there is no actual correlation showing wage increases cause inflation. This is one of his own pet theories.

When you consider the fact that worker productivity has increased 4 times more than wages have risen it means more to the bottom line profits of corporations. The logic here is very simple. The companies are making more money even though they are paying higher wages and therefore do not have to raise prices on their merchandise. Maybe this is too simple for an economist. If I could make up a really complex formula I might be able to get his attention. Probably not.

This is just one statistic and I know Mr. G. and his money puppets look at hundreds of statistics, but please do not lay inflation on the justifiable wage increases of the workingman.

The base cause of inflation is too much money chasing too few goods. Today we have so much so much competition (goods) it is extremely difficult for almost any company to raise prices. Since profits are increasing 4 times faster than wages most companies will shave profits before they raise prices to their consumers because they do not want to lose their market share.

Large corporations usually have debt. In almost all cases this was money borrowed for plant and equipment. When interest rates rise there is nowhere to offset this cost as there is with wage productivity. This is a cost that ultimately must be passed along. As long as the company has room at the bottom line it can do so. Right now money is expensive, not tight. The Fed wants to slow the economy and it can do it this way because companies will cut back their borrowing for expansion. The economy will slow, but if they keep on doing it they stop everything and that means recession. Their thinking is backwards.

If you want advice on the stock market do not ask an economist.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

Did you run out to buy that duct tape yet? Don’t forget the plastic sheeting, bottles of water, canned food and a couple of books to read. What are you waiting for? I know - things to get better so you can resume your normal life style.

While you were waiting did you happen to notice what is happening to your investment portfolio, your retirement account? For the past 3 years it has needed duct tape and plastic sheeting to protect it from the poison gas coming from Wall Street. The gases, otherwise known as hot air, are the news flashes the brokers have been telling you. Surely you have heard - "the market always comes back", "hang in there", "you are in for the long term" and other such noxious odors have paralyzed investors to keep them from selling. There was one breath of fresh air you have not heard from your broker and is the one bit of pure oxygen that could have saved your account. Listen carefully and you might hear - "SELL".

It is a word hardly ever uttered on Wall Street, but one which you should add to your vocabulary if you ever plan to make a profit in the stock market. Brokerage companies don’t want you to sell because they don’t make any money with your account if you are in a money market fund. When your stock or mutual fund started down did you get a call? Even when a stock loses 80% or more of its value they then change their recommendation from Buy to Hold - and you know where you are holding it.

Any fool can buy, but it takes a wise man to sell. Bernard Baruch, one of the most famous traders of all time, said, "I always sell too soon". He was enjoying himself reading a paper on a park bench while stocks were crashing in 1929. The DOW lost 89% of it value. We have not been that unfortunate - yet. However, the NASDAQ has dropped almost 80%. If you owned any of those tech stocks and did not have a trailing stop-loss order you have given back all your profit.

It takes more than duct tape to protect yourself from death and destruction and that goes double for the information from brokers and financial planners. If they have kept you in the market these past 3 years with the Buy and Hold mantra don’t you think it is time you plastered some duct tape on them so you can escape that bad gaseous advice? You might not think yourself to be knowledgeable about investing, but surely you would have had enough sense to sell when a stock or fund loses 20, 30, 40% or more of its value. At 50% loss it means it has to go up 100% to get to "even". You don’t want to get even; you want to get rich.

Before that poison gas from Wall Street completely kills your account get some fresh air - SELL.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

I’ll bet with almost anyone that has stocks or mutual funds in his portfolio that he has losers, but he won’t sell them because he "likes them" or some similar excuse. This is the philosophy of a loser.

You cannot become emotionally involved with anything you have bought whether it is stocks, mutual funds, collectibles, real estate, etc. etc. When you see the value of these things heading down it is time to try to salvage some of your money even if you have to take a loss.

I have seen people hang on to a piece of land (or a stock) for years just so they could get out "even". Believe me "even" is not even. Suppose you paid $20,000 for the land and it took you 8 years to find someone willing to buy it for $20,000. If you could have sold it for $15,000 and put the money in a money market account at 6% for 8 years you would now have more than the original $20,000 ($20,495). When you invest money in anything you cannot afford to have emotional ties to it. You must be willing to sell when the time comes. Most people don’t want to sell for two reasons. They won’t take a loss; however, the main reason is psychological - they don’t want to admit they were wrong. When I was a broker I would watch people trade. Almost none of them were trading to make money although that was what they said. They were trading to find out how much pain they could stand from losing. They were trading for emotional reasons.

The difference between professional traders and a non-professional investor is the ability to divorce themselves from the emotions of the trade. Win, lose or draw the pro knows the risk and is willing to take that loss quickly if it should occur.

Emotional involvement in investing is one of the best ways I know of to lose money. You must be able to look dispassionately at your stocks, bonds and mutual funds and be able to sell them when they turn negative. Negative does not mean go to a loss. It may mean they are no longer making a good return every year with your money and it is time to move to some other stock or fund. You might have a stock that has doubled since you bought it, but that was 2 years ago and it has done nothing since then. Time to sell. Look at your annual ROI (return on investment) of each individual issue to determine if your money is doing better than the overall market or whatever your personal criteria might be.

Many years ago I heard how they caught monkeys. The hunters would drill a hole in a coconut shell just small enough so the monkey could fit his open hand through the hole. It was tied to a tree with a strong cord. Inside there was fruit and sugar. The monkey put his hand in, grasped the goodies, but could not get his closed fist out. He would not even let go when the hunter came to capture him. Unfortunately, there are many investors grasping at losing positions. Isn’t time to let go of some of those stocks you have been holding because you "like" them?

Let go of those emotional ties. You will make more money.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

I know there are a lot of you out there who would like to "get even" with the stock market. Many are on the diet of "I hope, I hope". As a professional trader I can tell you that diet will make you very sick.

If you play any game of chance like poker you know you are not going to win every hand. In fact you are going to lose more hands than you win, but at the end of the evening you can still come out ahead if you know how and when to bet and when to fold because it is not always in the cards that you have been dealt.

The same applies to gambling in the stock market. Oh, did I say a bad thing? Al, go wash your mouth out with soap. My broker says buying stocks is "investing", not gambling. And pigs can fly. Wall Street is just Las Vegas East and like poker you can be cleaned out. Oh, you already know that - in spades!

The teachings of Maul Street are that you buy a good stock or fund and hold it forever. They did not tell you that you may have drawn a 2, 6, 10 off suit and there is no way it will be a winner. They never tell you to fold your hand (sell). At least you are not losing money every time a card is dealt. With stocks they deal a new card every day called a price change. If the stock, fund or index you own goes steadily down over a period of time don’t you think it would be wise to fold your hand and sit with your chips?

No, your broker will never recommend this because he gets paid every year you have your money "invested" in something, anything except a money market. It may only be one percent, but the brokerage company can live off that even if you can’t.

I know, you are telling me you are "in for the long haul". What Wall Street genius thought up that one? In this high stakes game you must remember it was to leave with more money than you started and not to go broke or stay even. When the market is going down you want to be OUT, not sitting there every day hoping (and praying) your shares will go up. They won’t. Like poker you have to take a small loss and wait for a better hand which may be quite a while. YOU DON’T HAVE TO BE INVESTED ALL THE TIME. Many times cash or bonds will make more money than owning stocks.

When the market is going down even the best stocks will fall. Understand you are not going to win every pot. Small losses will not hurt you. It is the big ones that can wipe you out. Know the amount you are willing to risk when you buy any stock and fold when that loss limit is hit.

You are not investing to "get even".

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

Let’s hope you did not have any of the Enron stock. Maybe you know someone who did and lost everything, but you certainly might know several people who owned stock that lost almost everything. They probably aren’t talking about it.

According to Investor’s Business Daily newspaper there are 1,387 companies that lost more than 90% of their value from the highest point during the last 5 years. That is almost as bad as Enron except the folks that own this junk have hopes that someday their stock will go back up. And pigs can fly.

Do you realize that if a stock loses 50% from its high it must gain 100% to get back to the old high? And there are literally thousands of stocks that fall into that category. The people that own these dogs are waiting for them to rally so they can get out "even". What this means is that the stock has an effective cap or ceiling on it’s price. Each time it sticks its head up it will meet with thousands of folks who will sell. The chance of it ever getting back to the old high is almost nil, never, nada, zip. From my experience as a professional floor trader on the exchange I can tell you it will take a minimum of 5 years of repeated rallies before the investors who are waiting to get out are finally exhausted.

There is a better plan. Why would anyone buy something and let it go against them 60 or 80%? Why do investors believe the greatest Wall Street lie of Buy and Hold? Psychologically people don’t want to admit they are wrong. Your broker tells you you don’t have a loss until you sell. Believe that and I have a nice bridge in Brooklyn I will sell you.

If you consider yourself a conservative investor then you must set limits on how much you are willing to lose if the stock you buy does not go up and instead goes down. One of the best rules of thumb is about 10% either from where you bought it or from its most recent high. That 90 dollar Enron stock would have been sold at about $80 and you would have a nice profit instead of a loss.

Your broker will discourage you from putting in a loss limit order called a stop-loss because then he will have to watch it which he won’t. You see, and I know you know this, there is only one person who cares about your money and that is you.

Setting small loss limits when you buy something and following up a winner with a stop-loss so you won’t give back profits you have made are the way to guarantee that your investments will grow every year.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

If you are going to be a winner in the stock market you must have emotional maturity. I did not say you had to be smart or know how to pick stocks and mutual funds.

Once someone buys a stock or mutual fund he immediately seems to have a love affair with it. It can become a fatal attraction that can lead to disaster.

All brokers and financial planners are taught to buy and hold no matter what happens to the price of an equity. They get married to it and hope that it will treat them well while they are together. Today about 50% of all marriages end in divorce yet people will hold on to a stock forever that has gone down waiting for it to come back so they can get out "even". In a bad marriage you never get out even.

Any time you buy a stock or mutual fund you must have an exit strategy in place or face dire consequences meaning loss of your investment. When I was a floor trader on the exchange I would buy various equities, but before I made my purchase I always knew in advance how much risk I was willing to take. My prenuptial was in place.

Here is the greatest secret to making money in the stock market. It is knowing when to sell. Always figure you will have a loss until you see it go up and from then on your primary purpose is to keep the profit you have made. Never give back profits. If you become emotionally tied to any stock or fund it will definitely come back to bite you.

In 1998 you could have bought Janus 20, one of the largest and best known mutual funds, for $40 per share and gleefully watched it go up to $93. Today it is selling for $35. That love affair has cost someone money. If the investor had looked at that mutual fund as just another piece of paper to hold as long as the principal was appreciating he would have been dollars ahead. Brokers and financial planners foster this kind of immature thinking because they know they might upset the client if they told him to sell his dearly beloved shares.

Every professional trader I know would not subscribe to the long haul theory. That is the death of a retirement account. So many people buy a stock and refuse to sell it for less than they paid for it. Would it not have been better to have taken a small loss and had that money to invest in a better situation?

The immature investor is willing to take a big loss rather than a small one. It takes fortitude to be able to sell out of a losing position. When you learn this lesson you will become wealthy.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

An insane person cannot evaluate an insane evaluation system.

As you know I have been trying to restore sanity to the insane premises Wall Street has been teaching its brokers and you for all these years. Their insanity has become so pervasive that it has become conventional wisdom. The brokerage houses have taught everyone to act insanely and to think that what they are doing is sane.

Wall Street has taught you the insanity of doing research, dollar cost averaging and buying and holding. Anyone who can rub two braincells together can figure out that all these are lies. A book written 40 years ago by Nicholas Darvas called "How I Made $2,000,000 in the Stock Market" came to the same conclusions I have, namely, brokers don’t know anything and research is worthless. He gives a good explanation as to why he came to those conclusions. You might still be able to get the book at the library as it is out of print.

Why is research worthless? There is one good source of information about almost any listed company as well as many unlisted companies from Morningstar. They are the nexus for stock market information. You can find out more things about a company than you will ever need to or want to know. You will be inundated with information, but there is one thing they do not know. Will the stock go up after you buy it? And that is the only thing that counts.

When you ask your broker about a stock he will go to the company file that has all the statistical information about almost any company. He thinks that stuff is good. If it is so good why doesn’t he buy it? Because down deep he knows it is worthless, but he can’t admit that to you or even to himself.

His company has taught that you must do research. In his defense he does not realize he has been a good student, but has had a bad teacher. You would think that after doing this nonsense all those years he would catch on, but he doesn’t because everyone around believes it is true. He is in an insane asylum. Everyone looks normal.

You cannot evaluate an insane evaluation system with insane evaluation. Once you realize it is insane you must leave it. Don’t argue with the insane person. Now you have shaken lose from that weird thinking you will be able to look back on it to wonder why it took you so long to come to your senses.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

Even if you don’t own any of their stock or any stock at all you will want to read this.

What Enron corporate officers did with their accounting firm is nothing new. It has been going on for years, but recently has become more egregious. Hiding facts from stockholders by showing Annual Reports with tiny footnotes has been happening for years. Even experienced accountants have trouble understanding what various financial statements mean. What chance does the little investor have? And that is the whole idea. The insiders don’t want the outsiders to know what they are doing with the company money.

You have been told by your broker and by brokerage company advertising that you should do your research before you buy. You can research until you are blue in the face and still not know. For years I have been preaching that research is worthless.

You can go to nexus of all research companies – Morningstar – and still the report they give you will not tell you the whole true story. I have recently been told that Morningstar is about 6 months behind in the posting of their material. Maybe and maybe not, but it doesn’t make any difference if the facts they are reporting are lies. This not to fault Morningstar as they are merely a conduit of information.

There should be a lot of good things happen as a result of the bankruptcy of Enron. The duplicity of Arthur Andersen is despicable. They were acting both as consultants and auditors. The consultants were telling the company what to do and how to get away with it and the auditors were rubber stamping their actions. It’s like have the fox guard the hen house.

For some time the Securities and Exchange Commission (SEC) has been looking into recommendations by in-house analysts of brokerage firms who have made Initial Public Offerings. These analysts should keep their mouths shut. Can you imagine any analyst keeping his job if he should happen to tell the truth about a stock his company was pushing? Those beautiful full color reports from your broker belong in the wastebasket.

It is about time that the SEC cracks down on both these types of scams. And that is what they are. Anything to get the investor (you) to part with his money.

For the next year we are going to see more Enron-type accounting scandals. These will cause the investor to become very wary about what to buy so he won’t buy anything. This will cause the stock market to be weak. Each time another one hits the fan there will be additional selling. The basic confidence of the investor has been shaken and it will be a long time before it returns.

I do sympathize with those who lost their money in Enron, but I do hope it will have the effect of activating some of the Washington beaurocrats to act to protect the millions who have not yet been victimized.

Al Thomas’ book, "If It Doesn’t Go Up, Don’t Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870