For the last 12 years we have seen the Japanese stock market slowly sinking from a high of 38,000 to about 8,000, more than a 75% loss and very close to the price of the Dow Jones Industrial Average. Why should we care about their stock market?

Please understand that the stock market price is a reflection of the overall economy of a country. Every major country has a stock market index related to their economic health. Today almost every one of them has been in negative numbers for the past 3 years. If you believe the numbers we are in a worldwide recession and the trend is still down. That means we can see further slowing of the world economic health. So what? Well, it could be the difference in your having a job or not having one.

Japan used to think that an unemployment number of 2% was terrible. It is now running about 5%. So, fewer people are working. Why should you care? Japan is our second largest customer for U.S. produced goods. If less people are working than there are less yen to buy American goods. Japanese businesses won’t have as much money to buy new equipment much of which is purchased here. What happens there could be a reflection of what could happen here.

Why has their market dropped so horrendously? The bankers made mortgages and loans to companies. Most bank do. However when a loan went bad (collateralized by stock of the company) they did not charge it against their books. When the stock went down they did not revalue it on their books. In the U.S. the banks are required to ‘mark to the market’ every reporting period. That means they must say what it is valued at at that time, not when they bought it. Japanese banks (and Argentine banks) are not required to do that so they show on the books a fictitious valuation for loans and stocks many of which are worthless. The investment community knows this so they keep selling Japanese stocks.

Can we do anything about it? Probably not because it is political and there seem to even fewer ‘honest politicians’ in Japan than we have in Washington. But we can learn a lesson that you must above all be honest with yourself. When you have a stock in your portfolio or 401K that is going down you should sell it so that the loss will not become greater. Most Japanese banks are broke and you don’t want to end up that way.

Brokers will tell you you don’t have a loss until you sell which is so much hog wash. How much is your portfolio really worth? And in what direction is it headed? Don’t let your investments become another Japan.

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

It is finally catching up with them. The brokerage companies I mean. For years they have been feeding bad food to their flock and now the flock is rebelling. The customer has been low man on the totem pole for too long. That food has been the disinformation that has caused customers to lose large sums of money.

Last year there were 33,000 brokerage company recommendations for thousands of stocks. Things like Strong Buy, Buy, Long Term Buy, Outperform, Underperform, Neutral, and Hold. The one word that was missing was Sell. Of those thousands of messages sent to their clients only 125 were Sell. Something is very seriously wrong here. While the market was going up in 1999 the so-called analysts whose job it is to figure out if the company is a BUY candidate were telling you to buy everything in sight. Anyone could have used a dart and thrown it at the long listing of stocks in the newspaper and hit a winner almost every time.

What happened to the in-depth analysis of the brokerage company geniuses when these same stocks started down. I know - Hold. They call it Buy and Hold, but I call it Buy and Prey. In 2000 over 1,000 stocks on the Nasdaq lost more than 90% of their value and today many of those companies have gone under. Why were you not notified and told to sell? Because the brokerage companies were making more money doing Initial Public Offerings (IPO) than they were making commissions on your trading.

To say the naughty word "Sell" would have made company executives mad and they would not have given the brokerage company a shot at their next Initial Public Offering (IPO). To heck with the customer; he doesn’t count. There are cases where analysts were fired because they told clients to sell out.

Now that the lucrative IPO market has dried up maybe the brokerage companies will begin to realize they have a fiduciary responsibility to their customers. Hundreds of thousands of customers’ accounts have lost 40%, 50% and more of their equity. If the short-sighted brokers had protected these accounts they would have hundreds of millions of extra dollars left so the customer could trade again which would mean millions more in commissions for the house. Now the dollar cost averaging technique is left with no dollars to invest.

Customers are afraid to put more money in the stock market because they have been so badly abused. They know something is wrong, but they don’t know what so they wisely hold onto their money and refuse to pour more into losing propositions. Brokers want the customers to buy stocks and not put their dollars into a money market account where they make no commission.

The golden goose has lost quite a few pounds, but let’s hope the brokerage companies have learned that by treating customers with respect and feeding them properly will bring them greater rewards.

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

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

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

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

Economists know more about how the fragments of society work than anyone. In school they are taught to break down the economy into its tiniest parts and to quantify each minutiae so it can become part of a formula. Once done those econometric formulas should become a viable equation to predict how the total economy will react when a change occurs to any part of the formula.

Since economists know all this I must ask if these formulas are so good at predicting the economy why aren’t all economists rich?

They aren’t. And I will give you some clues why.

The more complicated a formula the less likely it is to work. When the economy is not reacting the way an economist thinks it should based on his formula he will tell you that one part of his equation is not acting "normally", whatever that is. Another thing you will find is there is no Holy Grail formula. Each one of these PhDs has tweaked the basic one and either added or subtracted parts or maybe changed the weighting of certain parts. If you ask 1,000 economists for an answer to what will happen and why you will receive 1,000 different reasons. That doesn’t mean they are all wrong. It does mean there is no one right way to arrive at a correct prediction. The law of averages will have many with a valid answer even if their reasoning is wrong. Sometimes pure luck is enough.

When I was a floor trader there were a thousand guys trading and each one had a different method to determine if the market was going up or down. One wanted to buy. Another thought the market was headed lower and wanted to sell. At that moment you realize that there is a 50/50 chance one of them is correct. Every time an economist makes a prediction you and I could be a winner or loser.

There are some very smart economists. Not too many. Once in a while one of the young ones come up with an idea that all the others eventually adopt such as the Laffer Curve which we will not explore here. Until an economist has gone through a major bull and bear market cycle you would not want to live or die with his predictions.

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

Question: How does it get better when it gets worse?

Last week we had a jobs report from Washington that there were fewer jobs created than they had anticipated, but the stock market took that as good news and the DOW had a strong rally. WOW! The bad news somehow turned into good news because the unemployment rate dropped one tenth of one percent.

Wait a minute. We had fewer employed yet the unemployment rate went down. How can that be? It seems that if you have been out of work for a while and your unemployment benefits have run out and you have become so discouraged you are no longer looking for work you are not counted as unemployed. You should read that sentence again. This is government statistics to make you think that black is white.

It is pointed out that many in that category have gone into business for themselves so they don’t count – as they should not. Remember that people work to provide income and most folks work for other folks. Usually new businesses take about 18 months to get to break even so these entrepreneurs must eat of their savings until new purchasing power is realized. (I know. I’ve been there.) Unfortunately, 80% of new businesses fail within the first 5 years. (I’ve been there too.)

It is amazing that the stock market can find enough new money to propel it higher. Where is all this cash coming from? You can thank Sir Alan Greenspan, head of the Federal Reserve. He has been flooding the economy with cash so banks will have cheap money to make loans to businesses yet when I look at the trend of Commercial Bank Loans for the past 2 years they have been steadily declining. Banks want to loan, but businesses don’t want to increase their borrowing for expansion. No expansion, no new jobs created.

Why don’t the businesses want to buy new machinery to expand their production and hire new people? Because they have excess production capacity now. According to business surveys most companies are only running their plants at 75% of capacity. When you have 100 machines of which only 75 are working why would anyone buy more to produce nothing?

Yet the stock market keeps going up. Why? Investors believe, rightly or wrongly, that there is light at the end of the tunnel. Things will get better. They think world buying will pick up and capacity utilization will increase to the point more machines and workers will be hired. The market is going up on anticipation.

Now you’ve got it. The bad news is really good news. And the stock market always comes back.

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

Four blind men were asked to give a description of an elephant. They had not seen one or ever encountered such a beast.

One grabbed hold of its tail. Another put his arms around a leg. The third gripped its trunk and the fourth walked into the side. The description given by each one was correct and accurate except it did not describe the elephant’s true form. Each man was right and each man was wrong.

We now have some equally blind men trying to describe what is happening in our economy and the stock market - economists, brokers, bankers and financial planners.

The economists say that because of the interest rate cuts by the Federal Reserve and the huge inflow of cash that the economy will recover in a short time. The bankers opine that all that money that the banks are allowed to loan is not being given to their old customers and they definitely don’t want to make new loans to new and unknown companies. The brokers say you are in for the long haul and don’t worry the market always comes back. The financial planners have a new plan to diversify your holdings by shifting your money around to take advantage of this current market.

They are all right and they are all wrong. You cannot explain the overall economy with a single solution. We have a complex mix with new ingredients coming to our awareness each day.

To get a better look at this elephant you must stand back not only in distance but in time as well. Ask this question: Where is the country now economically in comparison to September 10 before the terrorist attack? At that time the stock market was going down and we were in a recession. Then the market crashed and the recession was officially declared. The stock market has climbed back up to where it was September 10 and the economists are telling us that the recession may be over.

However, when I look at this elephant it still looks like the same elephant. The basic portions of the economy are still slow and slowing. Unemployment is rising. The banks are not loaning money even though they have it. Venture capitalists are not putting money in new companies. Manufacturing capacity has not come back. We have weaker housing because of higher interest rates and the consumer is spending like he used to. Deflation has reared its ugly head. Most of the new spending has been on counter terrorism that is not productive and taxes have not been reduced so the consumer can have more spendable cash. And a lot more.

The stock market rally has been in anticipation of greater corporate profits that could be a long way off.

Now is the time to be wary of whom you listen to before you invest or make any changes in your investments. The elephant being described to you may not look like that at all.

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

Just 30 years ago the stock market was a shadow of what it is today. There were many fewer shareholders and the daily volume was a fraction of what it is at present. No one thought you would every be able to trade a billion or more shares in one day. Of course that was in the old days when they had tickers and the word digital was something you did with your fingers.

Now we have world markets. There seems to be a stock exchange in almost every country. Did you know there is a stock exchange (of sorts) in Baghdad? I have not heard if they are back in business now that the war is over.

It is kind of amazing that with all these new traders and with all the varied stocks in every part of the globe that market mechanics would have changed. They have not.

As a technical analyst and trader (I was an exchange member and floor trader for 17 years) I still see the same trading patterns I saw 30 years ago. Wouldn’t you think with this tremendous expansion that something would be different? It isn’t. Why?

The reason is very simple. People don’t change. The basics of the market – fear and greed – still dominate. Emotions have not differed in thousands of years. As far back as recorded history people have reacted in almost the same way.

The emotions of traders can be plotted and you can see it in the charts that are printed out each day to show the price action of the market. Once an upward trend sets in people begin to buy, putting the market higher attracting more buyers until the greater fool application has run its course.

In the years I have been trading I have seen many new technical indicators. When you think about it almost all of them are based on the emotions of the mass of investors, even such simple indicators as moving averages. As a continuing student of the market I have studied and have used many of them. I don’t know any successful investor who does not use them.

A broker or financial planner who does know understand and use these indicators is doomed to failure. If anyone in the financial field every says they don’t work you can be sure he is a loser because he has not taken the time to learn his trade. He is worse than a carpenter who does not know how to use a hammer and saw.

A good technician can go to any exchange in the world, not know the language and still make money.

Stock charts are like EKGs that doctors read to see how your heart is doing. Some doctors can understand them and other have not learned.

The basic principles of trading have not changed over the years even though the market is many times larger than it was because people have not changed. Whether you invest on your local exchange or globally everything remains the same.

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