In the last two decades, even though gold prices have dwindled from $850 to $350 an ounce, there are still market gurus who predict gold price to hit $3000 an ounce. Hecla seems to be quite bullish about the future.

With oil prices fluctuating between $40 and about $60 a barrel, the industrialized nations are totally dependent upon the foreign oil supply. The US government has a deal with the Saudis for that very purpose. The Saudis have to keep the oil flowing and we, in turn, will keep the monarchy in power. This is a healthy arrangement for both parties in the short run.

I have a serious problem with the $3000 an ounce gold price. If this prediction were to come true, what shall be the interest rate? Can someone answer it for me?

In contradiction to this Saudi deal, the Bush Administration is committed (not officially) but morally, according to the pronouncements of G.W. Bush to stabilize the entire Middle East region by establishing democratic systems of government in a decade.

We can’t have it both ways. We have not succeeded to find any viable sources of alternative energy thus far. The environmentalists won’t let us dig for oil and the car industry has invested millions in the development of better and more energy efficient cars.

At $3000 an ounce for gold, we must maintain an interest rate of at least 20% (my guess). The million dollar question is: what will happen to the mortgage business and the housing industry as a whole? The rate of inflation at present levels will not allow new home buyers to pay their mortgages. May be there will be a sudden boost in the GNP. But how? What will happen to the money supply? Are we going to keep on printing money as we do now?

This was one scenario thus far according to bulls. But the bears view the whole problem differently. The Oil Price Dilemma In 2004, we saw a big spike in the oil price. Some analysts today are even forecasting the price increases to more than $60 a barrel in 2005 or even $75 to $80 in the event of a major supply disruption.

The growing demand for oil specially from the U.S. and China underlies most of the price increases because oil is priced in dollars around the globe. A weaker dollar means less revenue for oil producers.

European Central Bank President Jean-Claude Trichet cited oil prices as one threat to economic growth. The world currently consumes more than 84 million barrels a day of oil. OPEC currently is producing 29 million barrels of oil everyday, roughly a third of world supply.

Are we going to be forced to pay $60 a barrel for oil? Does this mean that the OPEC nations can or may dominate the global economy thru oil? The banking industry has been in a state of turmoil for the last two decades. There are a few reasons for this. The illegal but quite prevalent Havala system of money exchange accounts for part of the problem. The next puzzle is the drug trade funded and operated under cover by some governments in power. The money from such trades (trillions of dollars) is laundered thru banks illegally. Civilized nations are supposed to be ethically run, but are they when it comes to large sums of money?

The rules of the banking industry are too old to fit in the fast changing climate of money transfer from the sale of oil and illegal drug sales. No one has come upon a solution thus far. The rate at which the oil and drug trade money changes hands is much faster than the rate at which the banks can successfully launder it legally. It means that trillions of dollars in cash remain unaccounted for. With that kind of cash it is not difficult to buy weapons or anything you like to topple a government with good planning.

We had hoped the Caspian Sea oil to flow to the US, but that has not happened yet. The Iraqi war and the Afghanistan situation have both tilted the balance of power in the civilized (industrialized) world. But in whose favor?

The purchasing power of the US dollar continues to decline. The global political instability continues to remain a problem to contend with.

The vast changes in the crust of the earth have caused the ocean levels to rise and fall in some places. This will bring about dramatic changes. All these factors create a very flexible environment and we will see the changing weather patterns eventually bring about changes in the climate and vegetation in many countries.

What does the wave theory say about the stock markets of the future and the world economy as a whole? The mass migration of peoples of the earth will be the next step. This can mean that certain governments will lose support of their people and thus fall from power.

We can expect the stock markets to become more volatile than they have ever been. Fortunes will be made and lost. Let me remind those who dream of a $3000 an ounce gold price that the gold smugglers can bring tons of it from the Far East and South American routes, buy the most prestigious US properties and create chaos in the world economy. If this happens, you will not care about the DJIA. Why? Because it will cease to exist. We are talking about a very different ball game.

Ninety percent members of the UN are dictatorships. And they would not like to lose power should the gold price rise to $3000 an ounce. I quite forget that the US economy is not backed by gold. How can we have a gold standard? Well, we can’t for the time being. What’s your opinion?

Ostaro is a veteran media personality and has appeared hundreds of times on television, radio and in print media. A filmmaker, he frequently appears on radio nationally. He is the Producer of "Cobra’s Wish", a digital movie - a riveting romantic mystery) (http://www.cobraswish.com). He is the host/producer of the Ostaro Show (Time Warner and RCN Cable TV every other Fri and Sun in NYC) featuring the best in celebrity horoscopes. He appeared as a Swami in Woody Allen’s ‘Stardust Memories’ and is a member of Screen Actors Guild. Listed in Who’s Who in America, he is a positive thinker and the author of the “Art & Craft of Success: 10 Steps,” published by Svarg Syndicate Inc, NYC. Mr. Ostaro is a Premier Hindu Astrologer of New York City, he is a Kentucky Colonel, a Toastmaster (ATM), and an investment adviser.

http://www.ostaro.com; ostaro@ostaro.com

There is a famous cliff on the ocean in Acapulco where experienced divers jump into the sea. It is very dangerous because the water at the base of the cliff surges from a depth of 2 feet to 12 feet. The diver must time his leap so the water is at the greatest depth when he enters or he could easily be killed as many novices before him have been. Timing is the key.

This reminds me of the stock market where timing is also the key to wealth or poverty.

The ocean waves surge in and out against the cliff in short cycles. The tide moves in and out in longer cycles and is very predictable. When you look at Nature you will see there are relatively predictable cycles everywhere. We see day become night, the changes of the seasons and birth to death of our own bodies. Some changes are so microscopically small we cannot see them and others are so long we are not aware they are taking place. Everything has a season or a cycle. It is up to us to be able recognize it and use it to our advantage.

People ask why did the stock market go up (down) today? These short moves can usually be laid to some recent event. Then there are longer surges and regressions of months or a few years. We have bull markets and bear markets that seem to have historical cycles that last decades. These latter cycles run for about 16 to 18 years and move similar to the surges of the sea against the Acapulco cliff. A knowledgeable market timer will buy when the water is out (stocks look their worst) and hit the ocean (sell) as the surge is at its highest.

The ability to do this is NOT guess work. It is an understanding that cycles apply equally as well to the stock market as they do to the forces of Nature. Unfortunately, the principles to learn this very simple technique are not taught in college. Most must learn the method in the school of hard knocks. It can be very expensive.

In our recent bull market from 1982 to 2000 we had one of the predictable long cycles. The mindset of the public has become so hardened to the bull concept that they (and almost all brokers) have forgotten that each up surge is followed by a down surge of approximate equal length. This is not very comforting to current owners of stocks and mutual funds, but once they realize it they can do the prudent thing to protect their money - sell. Then they can buy U.S. Treasury bonds and wait for the next bull market to arrive. It is not very exciting to be in cash, but it is much better than seeing your money slowly disappearing before your eyes.

You must learn entry and exit of the stock market just as the divers in Acapulco have learned the correct moment to jump off the cliff.

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

There has been much talk lately about Coca-Cola and its potential as a value stock – as it now spots a dividend yield of 2.6% (which is the highest dividend yield since the late 1980s) and a P/E or less than 21 – right at the bottom of its five-year low. Moreover, the current price of approximately $43 a share is also near the bottom of its nine-year range – (nine years ago, the last former great CEO of Coke, Roberto Goizueta, was still at the helm of the company). Sure, Coke has had its own set of problems, but it is a great company, they would argue – and heck, Warren Buffett is also an owner of Coke shares.

Don’t get me wrong. I really like Coke as a company. Its brand is as American as can be, and yet over 70% of all its sales are derived from outside of North America. The country with the highest consumption per capita of Coca-Cola is Mexico. According to Interbrand.com, the brand name of Coca-Cola is worth approximately $67 billion and is the world’s number one brand name. Who could forget the famous declaration of Coke’s patriarch, Robert Woodruff? When the United States made the decision to enter World War II, he placed his hand on his heart and famously declared that he would “see that every man in uniform gets a bottle of Coca-Cola for five cents wherever he is and whatever it costs.” Of course, it didn’t hurt that Woodruff’s friend, General Dwight Eisenhower, was a great promoter of Coke as well. By the time the war ended, hundreds of thousands of fighting men and women became a fan of Coca-Cola for the rest of their lives.

Under the leadership of Goizueta, Don Keough, and Doug Ivester, Coca-Cola emerged as a growth and must-own stock during the late 1980s and up to the mid to late 1990s. Keough was the great motivational speaker, while Goizueta was unmatched in his ability to “manage” the stock price and the Wall Street analysts who covered the non-alcoholic beverage industry and Coca-Cola. Goizueta had a habit of watching the stock price of Coca-Cola on an intraday basis on a computer in Coke’s headquarters. When Warren Buffett was buying shares of Coca-Cola back in 1988, he and Keough figured it out by watching the action of the trading and tracing those purchases to a broker based in Omaha. Ivester, a former accountant, could have been regarded as a great financial alchemist. Under the financial leadership of Ivester, Coca-Cola bought out many of its bottlers and named the entity as Coca-Cola Enterprises. The bottler went public in November 1986.

When Coca-Cola Enterprises (CCE) went public, Coca-Cola (the company) owned 49% of its outstanding shares. Because of this, Coca-Cola had the ability to raise syrup prices at will (the former agreement mandated that Coca-Cola only adjusted its price to match inflation for its syrup in the North American market) – thus squeezing the profit margins of the bottler but increasing its own revenues and profits. The stroke of genius was this: Because of the fact that Coca-Cola only owned 49% of CCE, it did not have to consolidate any of its financial statements with CCE. At the time, not one single analyst totally understood this relationship. Year-after-year, the company delivered. Goizueta carefully (personally) managed all the information that came out of Coca-Cola. He would personally call Wall Street analysts. Any analyst that dared to question him openly or disagree with Coca-Cola’s earnings projections would be rebuffed. One such analyst was Allan Kaplan from Merrill Lynch, who at one point wrote a note to his clients observing that Coca-Cola may be depending on Japan for too much of its profits. When Goizueta found out about the note, he responded angrily with letters to both Kaplan and his bosses at Merrill Lynch. Kaplan was banned from attending analyst meetings at Coca-Cola for more than a year. From that point on, analysts knew not to mess with Goizueta and Coca-Cola.

Keough officially retired in 1993 while Goizueta passed away in October 1997 – succumbing to lung cancer. Ivester succeeded as CEO but behind the scenes, the company was in disarrays. People loyal to Keough and to Ivester clashed – with the former group bearing the brunt of the hardship. The current CEO, Neville Isdell (who was loyal to Keough and the only true competitor for the top job back then) was sent into “exile” to Great Britain to head up a bottler. According to a recent Fortune article, “The biggest problem [with Ivester], though, was his tin ear. Ivester was high in IQ but terribly short on EQ. A self-made, stubborn, very shy son of North Georgia millworkers, he had gotten where he was through brains and hard work. He resented Keough’s grandstanding, say people who knew him well, and never fully appreciated the importance of Goizueta’s almost daily chats with directors. (Ivester declined to comment.) Before long, head-down and full tilt in a turbulent market, Ivester had alienated European regulators, executives at big customers like Wal-Mart and Disney, and some big bottlers, including Coca-Cola Enterprises (on whose board sat Warren Buffett’s son Howard). As he raced to put out fires, he became increasingly isolated from his own board of directors. One person was keeping in touch with them, though, even in his retirement—Don Keough.”

By December 1999, Ivester was out as CEO, after board members Warren Buffett and Herbert Allen told him that they have lost confidence in his leadership. If anything, the next CEO Doug Daft fared even worse than Ivester. Daft, an Australian and who ran Coke’s Japanese operations, did not have a clue about the culture in Atlanta. In a sort of retaliation for Ivester’s handling of Keough’s loyalists, he also made many of Ivester’s favorite executives leave the company. He also looked for quick fixes – for example, by trying to boost Coca-Cola’s profitability by simply reducing headcount. By May of last year, Daft was out as CEO, and Neville Isdell – a former darling of Keough – came out of retirement to run Coca-Cola.

Described as “charismatic,” Isdell may be the best man for the job, but it is still too early to see what he can do at this stage to revitalize the brand. Under the leadership of the trio of Goizueta, Keough, and Ivester in the 1980s and much of the 1990s, the shares of Coca-Cola were a must-have and Coca-Cola was regarded as a growth stock. Please also keep in mind, however, that the run of KO during that time also occurred in the midst of the greatest bull market in U.S. stock market history.

Again, readers should recall that I have always contended that we are still in a secular bear market – a bear market not unsimilar to the 1966 to 1974 secular bear market. While indices such as the Dow Industrials, Transports, the S&P 400 and S&P 600 have recovered nicely since the cyclical bear market bottom in October 2002, large caps such as Coca-Cola, Microsoft, or even GE have never really covered, and it is my belief that large caps will continue to underperform once the bear reasserts itself sometime this year. The dividend yield of 2.6% may or may not help, but who would want to hold a “value stock” once the Fed Funds rate is greater than its dividend yield (as of right now, the Fed Funds rate is 2.5%)? I really do not see deep value here. While a P/E of 20 is at the low end of its five-year range, it is interesting to note that Warren Buffett started buying his shares of Coca-Cola in 1988 when the P/E was only 13 (with a market cap of less than $15 billion) – and analysts at the time were proclaiming the stock to be expensive! S&P currently projects a fair value of Coca-Cola at $46, so there is really not a great margin of safety here.

While I believe Coca-Cola is a very strong brand and should be a part of every investor’s long-term core holdings, I do not believe it is a good time to buy at this point. The growth in the stock price of KO was neither due to luck nor coincidence – it was due to Goizueta’s shrewd management of the stock price, Keough’s salesmanship of the company, and Ivester’s financial genius – along with a roaring bull market more than anything else. Despite the lack of leadership in Coca-Cola during the last seven years, part of the old dream of KO being a growth stock has still hung on – for far too long. For KO to be an attractive stock once again, this author will need to see a more compelling valuation, such as a stock price of $25 to $30 a share. At some point, however, I believe KO may be a glamour stock once again (as it still has a lot of potential in China and India where only a total of about 850 million cases of Coke finished products were shipped in 2004, compared to 20 billion cases for the entire world), but not until some of the weak hands have been shaken out from the stock.

Please let us know your thoughts and opinions. Is KO a buy, hold or sell?

Henry To, CFA, is co-founder and partner of the economic advisory firm, MarketThoughts LLC, an advisor to the hedge fund Independence Partners, LP. Marketthoughts.com is a service provided by MarkertThoughts LLC, and provides a twice-a-week commentary designed to educate subscribers about the stock market and the economy beyond the headlines. This commentary usually involves focusing on the fundamentals and technicals of the current stock market, but may also include individual sector and stock analyses - as well as more general investing topics such as the Dow Theory, investing psychology, and financial history.

It takes a total mental commitment to the task. It becomes a complete way of life. You cannot be a part timer. You cannot work at a regular job and trade stocks successfully.

When you decide to make your living this way you must be willing to work 365 days a year, 7 days each week, 24 hours every day with no time off. I know.

How do I know? As an exchange member for 17 years and a floor trader I can personally tell you there is no time off. Never. Almost every waking moment is given to thinking about your current positions. Where should I sell? Should I move my stop up a little more? There are 3 more trades I’d like to make, but I need to save some extra cash in case I need it for a margin call. It is hard to pass up a trade that looks as good as XYZ, but I have to maintain my trading discipline. And so much more.

These are just a few of the thoughts that run through your head. You are constantly being torn by the natural enemies of fear and greed, yet you must hold your equilibrium to try to make dispassionate decisions. The first law of trading is to protect your capital so that any single trade will not have you going home broke.

If you are working a regular job or you own a business you cannot be a trader. One or the other or both of these pursuits will suffer. When I owned my brokerage company I did not make one single trade for 8 years because I understood the commitment necessary to be a successful trader.

Why am I telling you all this? Because I don’t want you to lose your money in the market as so many people do and I especially don’t want you to think you can be a day trader. You can still make money in the market and beat 90% of the Wall Street experts. Here’s how.

First you must learn that you CAN time the market even though your broker and all those "experts" will tell you that you can’t. There are several good timing advisory services that you may subscribe to or you can develop you own method.

Second, don’t believe all that horsewash about research. That is Wall Street smoke and mirrors. Don’t try to pick individual stocks. Stick to no-load mutual funds with a discount broker and buy only the best performing funds during the past 6 and 12 months. When they quit being in the top 1% sell them and find new ones that are going up.

There isn’t enough space here to give you the details, but I want you to realize that you can safely make plenty of money in the market without devoting 365/7/24.

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

Now where have I heard that before? I know. It was my broker.

So I took his advice and bought some of the stocks he recommended. I am still waiting for the ’sell high’ part of the equation. Everything he touted went up for a while and now it is lower than when I bought it. It is so low I can’t bring myself to sell it. My capital has shrunk about 60% from where I started. That’s a lot of money to me because it took a long time to save it. What happened?

The brokerage company that your broker works for puts out recommendations almost very week for various companies listed on the major stock exchanges. They have simple things like Buy or Strong Buy. Then they have a complex group of words used when they downgrade a stock. It never goes from Buy to Sell. No, it becomes Accumulate, Underperform, Attractive, Market Perform, Neutral or some other meaningless term. If any stock is ever downgraded even one notch sell it immediately. Finally after a stock has lost 50% or more of its value it becomes a ‘Hold". And you know where you are holding it.

Last year the brokerage companies gave over 33,000 stock recommendations to their customers. Of those only 125 were Sell. On the NASDAQ exchange alone there were over 1,000 stocks that lost more than 90% of their value. The "experts", known as analysts, were all telling you to buy. Your kid could have thrown a dart at the Wall Street Journal in 1999 and done as good a job as almost any analyst. What I want to know (and I think you do too) is if they were smart enough to tell you to buy then why weren’t they able to tell you to sell?

I’ll tell you why. Brokerage companies never give sell signals because they don’t want to offend a company that might come out with a public offering on which they will make a killing. It is better to kill a few customers than miss out on several million dollars. You pay commission and ask for honest advice, but you are being fed disinformation.

Is there any way you can protect yourself from this nonsense? Yes! It is called a stop-loss order. Brokers don’t like them because then they have to watch your account. He will tell you you don’t need it as he will watch your account. And pigs can fly. The average broker has 300 accounts and unless you have a large 6-figure account you will be on the bottom of the pile.

Anyone can place a protective open stop-loss order for stocks. Most are about 8% to 15% below the highest closing price. I recommend that each Saturday morning you look in the paper for the Friday closing price of your stock and place your open stop each Monday morning with the broker. As your stock moves up keep raising the stop and you will sell near the high. Never lower it. This will lock in your profit or take you out of a losing position. I can assure you your broker will never call you to sell. Brokers are not taught to protect your capital.

This is the only way to buy low, sell high, protect your capital and lock in your profits.

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

Are you one of those many people who dread reading their 401K statements? You have been watching it decline for about 2 years and are wondering if will ever stop. Just about everyone says the market will come back. Brokers say you are in for the long haul so don’t worry. Any account that drops to a 50% loss has to go up 100% to get "even" and that is a very difficult phenomenon. If you have an 80% loss as has already occurred in the Nasdaq you would need a 400% rally to get "even". At 90% you have to see a 900% rise to that mythical "even".

Buy and Hold has been preached so long and so loudly that everyone believes it. As Adolph Hitler said when you tell a lie tell a big one. Wall Street has been screaming this one down the throats of investors for so long it has become conventional wisdom. Look at your 401K today and compare it to 2 years ago and tell me you believe in Buy and Hold. Common sense will not allow it.

Every broker has been taught that market timing doesn’t work. Yes, they teach them that and they have been good students. The problem is they have had a bad teacher. Within the funds you now own the fund managers buy and SELL many times during the year because there is a time to sell. Selling is the key to successful stock market investing.

A friend mine came to me with his wife’s 401K from United Airlines. It is composed of 8 Fidelity mutual funds. The employee can pick any one or more. Since the first of the year six of the eight are down from 3% to 27% (average 10.77%) and the other two were up an average of 3%. The two that are up are fixed income funds otherwise known as bond funds. If you have a 401K, IRA or SEP or almost any mutual funds the only place to preserve your capital during this secular bear market is in a bond fund - a no-load bond fund. Do NOT pay commission for these. And there are many of them.

For years Wall Street has condemned those of us who use market timing. Well, you can call me what you want, but I will have my money when the Buy and Holders are broke.

Stock mutual funds do not work in a long-term bear market. Mutual funds, as we have known them for the past 20 years, are dead. You now have only two choices within your retirement account for your money - a bond fund or a plain money market account. Don’t cry that you will only make 5% on your money. Think about the 20% to 40% you will not lose. According to Lipper 99% of U.S. equity funds lost money in the second quarter. I have been telling investors for years - cash is a position.

Enronitis broke thousands of people because they would not (could not) sell as the stock broke down. Don’t let 401K-itis break you.

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

Has your broker been calling you recently with the "great opportunity" to get in on a new Initial Public Offering? With friends like that you don’t need any enemies.

I don’t care how good this new stock offering sounds. The chances it will stay even or go up are about 1 in 3 and I don’t want to play those odds with my money.

Most of the new IPOs these days are from the technology sector. That is where the romance and big money has been, but the NASDAQ topped out on March 10 this year. It is a good idea to take a look at what has happened to these new offerings since that time.

The S&P500 Index has dropped only 3% since March 10 while the NASDAQ Composite has fallen 43%. Here are a couple of numbers you will want to remember for the rest of your life if you have any interest in the stock market. Sixty percent of the move in any stock is due to the category or sector it is in. Twenty percent of a stock price is due to the overall market movement and 20% is caused by the quality of the company itself. You can immediately recognize that even if you have bought the best stock it has only a 1 in 5 chance of going up if the other 2 factors are not working for you. Since March 10 the New Issues Index is down 67%.

With all the major market indexes in the sewer there is little hope for ever finding one of those new issues that comes out at $10 and runs up to $200. Those days are gone forever - at least in the technology field. The NASDAQ has a better chance of going to 1500 before it ever goes back to 5000.

For the next year, maybe longer, we are going to see the number of new issues dry up and almost disappear. And there are many other good reasons other than the overall market. In a new issue you have no idea how the company will perform. Will management make its projected goals? Is there any possibility of a profit? You have no track record for their price performance. Will the stock price trend up or down? The more of these unknowns you throw into the mix the less chance there is that the stock will go up.

Last year we had a raging bull charging through fences and tearing everything up and we all loved it. All we had to do was follow the bull. The bear has taken his place and is ruining the landscape. And you know what bears do in the woods. Be careful where you step - or put your 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

For weeks, no, months we have been bombarded with nothing but negative news about the economy in general and thousands of individual companies. The stock market has dropped thousands of points and more than $8 trillion in paper assets have disappeared.

Note I said paper assets because until you turn it into spendable money these numbers are but a figure on a piece of paper. Sure that doesn’t make you feel any better when you bought Lucent at $80 and have seen it go to 80 cents. You could have protected you profits or reduced your loss if you have placed an open stop-loss order with your broker. Brokers hate this, but YOU must protect you capital because he is not going to.

This past 2 weeks the bad news has continued to be shoveled out by the news media, but instead of making the market go down it has rallied about 1,000 points. Having been a floor trader for many years my experience with this kind of reaction tells me what is going on. The market is ignoring the bad stuff and has decided to go UP. Hooray! The traders are grasping at anything that looks bullish and not paying any attention to the negatives.

The market had become so oversold that almost anything will cause it to advance. Now you want to know if this is "the Bottom". No one can know for sure because the long -term trend remains down and is still in place. The voice of the market is now clearly saying, "I don’t want to go down for a while". It might even allow the stock prices to continue to rise. How far and for how long - don’t ask. No one knows. The stock market remains an enigma wrapped in a mystery. A few very astute (or lucky) folks are able to understand market language and make profits whether it goes up or down. Mr. Average Broker (also Mr. Average Financial Planner) has no idea what the market is saying. They have not taken the time to learn their trade.

Many times what is actually bad news makes the market go up. Here is one example. The weekly unemployment figure comes out to show there were 30,000 fewer jobs. That isn’t good news. The DOW jumps up 100 points. Huh? The Wall Street mavens were predicting job losses of 55,000 so this number is a blessing. See what I mean? It is not the actual news, but the difference in what was expected and what actually occurred. You can apply this to almost every statistic put out by important government and private agencies.

The same applies to good news that does not move the market up. What you think you see is not always what you get. Before you grasp any figure as either bullish or bearish find out what number was expected and wait for the reaction to it.

Bad news can be good news and visa versa.

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

How many people went to a cash position this week? There is no question that this market has scared the bajebers out of many investors, me included. Fortunately, I started going to cash some time ago, but I did give back a substantial amount of my profit.

Your broker never wants you to be in cash. You might take it out or invest it in something else. "Don’t worry, the market always comes back." Yes, and pigs can fly. Fund managers are even worse. Because I recommend selling out temporarily and going to cash does not mean I don’t have a long-term program. It means I don’t want to participate in a down market. CASH IS A POSITION. It is the same as owning Vanguard Index 500 when the market is going up and being in a Money Market Fund earning interest while the market is going down, but not losing your principle. Make sense?

Brokers will tell you over and over that you cannot "time the market". WRONG. Just because they are not smart enough to do it does not mean it cannot be done. I have been doing it for years and have never been caught in a bear market. Even the Federal Reserve Board published a paper saying that "market timing" works. There are timing programs or services that can be bought that are very simple and easy to understand. To protect your retirement funds you must have this in place.

In my column last week I called the market a Stealth Bear. It looks like it has come out of its den. You don’t want to be around when the bear is running loose. It can hurt you.

During this past few weeks we have seen some tech stocks lose 80, 90% of their value, but how about good ole Proctor & Gamble dropping 30% in one day? That is a stock held in a high percentage of retirement portfolios and hundreds, if not thousands, of mutual funds. It is going to be a long time before we see new highs in the Nasdaq Composite and the reason is very simple. There are people and fund managers who own many stocks that they would like to sell to get "even". Know anyone like that? This effectively puts a cap on any resurgence back to the top.

I have no idea if the market is going to go lower, but the tendency is toward more selling, not buying. This is a good time to have a position called CASH.

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

The broker told me not to sell because the mutual fund I owned had a 2% redemption fee and they would penalize me if I did.

I got to thinking about it and did some simple math to see what that would cost me if I sold. Several months ago I bought $5,000 of the fund. Fortunately, it was a no-load so I was not charged any commission. It seems that the brokerage house has instituted this fee for the sole purpose of dissuading me from ever selling it.

Now I could sell it for $5,500 and make a nice $500 profit in the last 3 months. Their charge of 2% would be $110. In other words they were charging me 22% of my profit which you can easily figure as $110/$500. That’s a long way from 2%. What a rip. My net was now $390.

More and more brokerage companies and mutual funds are adding redemption fees. No-load mutual funds are adding the fees even when you have an account with the fund family. Why? The fund managers are paid their 6-figure salaries not on how much profit they make for you but on the amount of money they have under management. He can generate big money for himself while you lose.

The whole idea of the mutual fund was to have a professional manager make money for you yet last year more than 95% of stock mutual funds lost money. It is pretty obvious you don’t need this guy to mangle your cash.

In the future before you purchase any fund ask the broker of there is any kind of redemption fee. If there is then find another fund and/or another broker. Discount brokers are the best because their brokers are not allowed to give you advice. You will find that advice from a broker is a eulogy for your money.

Redemption fees are like a ball and chain on your ability to make money. Any professional trader (and I was a floor trader for 17 years) will tell you that a small loss is OK, but never allow yourself to have a large loss. Excess fees are put on by brokerage companies and funds to keep you from selling out of a losing position. The broker does not make any money if your cash sits in a money market account so he will do everything legally possible to keep you from selling.

Buy and Hold might be OK for long-term bull markets, but during the current long-term bear market you should be able to sell without adding injury to insult. Redemption fees are a method to intimidate the investor from selling out a losing position. Don’t buy anything that comes with a ball and chain.

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