What does this word mean? Greed? To remind myself I had to look at dictionary entry again. “Greed (also called avarice) in psychology is an inordinate desire to acquire or possess more than one needs or deserves, especially with respect to material wealth.” There is no doubt I have been greedy in my life in different ways. Whether wanting more food, drink or money. Yes, I am a sinner! The sole purpose of playing in the stock market is to make more money than what I need. I now know when the greedy snake does peak its ugly head. That I have to be very aware of its existence and respect it when I see it!

The vision and payout from the greedy snake

In October 2008, I brought a £500 worth of Mwana Africa stocks for 3.5p each. In January 2010 I sold that same stock at 13p. I made £1500 within 15 months, on my original investment of £500. But during this process of selling that stock, my greed played a few games with me in my head.

It said…

The Devil (Greed) spoke these words: ”This stock has already earned me 300% gain, it will make me more money over the coming years. Leave the investment in!”

Then…

The Angel (Logic) spoke these words: “I should be happy with the money I have made 300% which most people wouldn’t make in a year. The 300% profit you see before you isn’t profit until you take it out of the market.”

The logic behind my reasoning of taking the profit

It’s very hard not to be greedy, your mind is your greatest enemy in making or losing money. The art here is not to control “Greed” but respect and be aware of its immense force in wealth building within the financial realms. The following points show the reasoning behind why I didn’t let greed take over my wealth and profits.

• The profit I made was 300% some fund managers don’t even make this in a year.
• Being greedy would have meant risking the 300% which could decline to 200% or 100% profit.
• The money is still paper until I sold the shares and took full advantage of the profits I had made.
• As this was a predominantly a gold mining company, if gold prices took a hit. My profit would suffer.
• Controlling my internal emotions to think I have cheated myself out of more profit.
• Weighing the risks of the company/sector and what the overall market was doing.

The conclusion and poem to the greedy snake

Here is a little poem I have adapted from the film “Revolver” to suit the financial world

Money and Greed

Money is a destructive angel.
How could anything that looks so good be so bad?
But there is no angel as destructive as greed.
In the end she gets them all.
They think they can handle her,
They think they can control her,
Greed is the only snake that cannot be charmed.
But greed of the snake can only charm you
And the mask it wears – material wealth

Step 1. You should not spend more than what you earn. If you go on doing it, you’re asking for trouble. Always cut your coat according to your cloth.

Step 2. Create an emergency fund. You must do it taking into account contingencies like unemployment, divorce or disability. Do it by earmarking three month’s expenditures. Don’t touch it for trivial reasons.

Step 3. Make cash payments frequently. Cut down on your credit card usage and use cash as much as possible for purchases. This would help you eliminate debt faster.

Step 4. Find a financial planner. You can visit the Financial Planning Association or FPA for a licensed financial planner in your area.

Step 5. Write down the names of all your creditors and the respective amounts that you are obliged to repay. This would give you an exact idea about the overall amount of debt that you owe. Get your credit report from a credit reporting agency to ensure that you have not failed to remember any creditors.

Step 6. Communicate with your creditors and try to negotiate. Numerous consumers don’t know that they can get in touch with their creditors and request for reduced interest rates and elimination of late fees or over the limit fees. More often than not, your request would be approved by them since they don’t wish to lose your business.

Step 7. Reduce spending and use your savings to pay off your debts. Always search for techniques to cut down on your expenditures. For instance, if you are a car owner, by refinancing your car loan you can save a lot of money.

Step 8. Make more than the minimum payments for your credit card bills. This would help you pay down the principal quickly and make you debt free. If possible, pay an amount that is thrice your minimum necessary payment.

Great news, outbreak contained human existence not under threat is good news for the world. Well apart from the big pharmaceutical companies which created millions of dollars/pounds worth of drug Tamiflu on the hopes of an outbreak. What should the pharmaceutical companies do? After all they have spent millions of dollars/pounds worth of the stockpiled Tamiflu drug that doesn’t get used. They make a huge loss and lose out on massive profit! Thats what you thought, (here comes the conspiracy bit!).

The theory

This is my theory anyway for what the big pharmaceutical companies did next! Instead of wasting millions dollars/pounds of investment! Why don’t they invent or create a pandemic whereby their product Tamiflu can be used. What if the big Pharmaceutical giants invented or spread the Swine Flu virus, so that their product Tamiflu could be used? Now that’s an idea! No stockpiles, governments bought in masses to prevent an epidemic and create a millions of dollars/pounds worth of trade!

What a win/win situation! Now wouldn’t the shareholders be happy with that. Especially in a time of uncertainty in the Stock Market and Recession. The Pharmaceutical giants just wait a year till the whole media and fuss on the Bird Flu dies down. And introduce the Swine Flu?

Now that is some food for thought! Just don’t make it a Bacon Sandwich for me, especially if the porks from Mexico!

When I was young, naïve and inexperienced, I bought a course from Vince Stanzione for £400. This contained a strategy guide, DVD and his secret to making more money than you can dream off! The secret was using moving averages of 20 and 40 days. These lines give you signals when to buy and sell. He made it sound so easy and yes it looked easy too! He used past charts to show how it worked and proved the moving average strategy worked. The problem was that past charts used worked. But for future market movements, I found a lot of the time I entered trades the moving average signals didn’t work! The terms he and many other trading universities use are that 7 out of 10 trades will be losing ones and 3 will be winning. The three winning trades will make up for your 7 losses and make you a profit.

[Cough, Cough]! What a load of bullshit! Pardon my French! Did you know that 90% of Spread Betters lose! The spread betting firms are making so much money that they don’t have enough Vans to take the bags of money to the banks. Why because there are traders selling their secrets (get rich quick schemes) to make you lose money! It wouldn’t surprise me at all if the spread betting companies are funding these ventures. All these get rich quick schemes all have one thing in common and that is chartism. After vast trading experience with charting I have concluded that it doesn’t work! Ok you may win a few trades with this technique. And these winning trades may well get you hooked into believing that you can make more money! Does this sound familiar? What these trading firms are luring you into is gambling with your money instead of teaching you how to make well informed educated trades into consistently making a profit. As Richard Farleigh says in his book Taming the Lion – “Chartists are the Astrologers in the Market. They use a pseudo-science.” Not saying more on the topic.

News Based Trading – After reading many books, blogs and various articles. I have come to the conclusion fundamental analysis and news based trading will give you an advantage into the stock market. There are no real books that explain how to analyse news within the stock market. What I mean by news based trading is monitoring, final results, economic events & data, sales forecast. I have found a couple of books that have helped me look for which pieces of news to trade on these are If its raining in Brazil, Buy Starbucks by Peter Navarro and UK Traders Bible by Dominic Connolly – (Quality book with practical advise and examples. Cuts the crap and goes straight into honing your trading skills.).

Putting the theory into practice

So to test this theory I started to trade purely on news and market reaction to it. Some of the news has already been priced in however some news the market reacted to immediately. And its these bits of news you need to decipher and act quickly to profit on. Even though the market may have moved a lot, you can still scalp off a few extra points on top of it as long as you catch it early enough! I proceeded to set up my blackberry to receive newsfeeds straight from the Reuters/Financial Times website and acted on news that I felt which would rise/fall the individual stock price. One example of a trade I did was when Remy Cointreau issued a 15% drop in profits before the French Market opened, I set an order to open at 0.50p a point. Left it till mid-afternoon and took a nice £150 profit. The share prices dropped further I could have made more of a profit, but had my exit strategy set! As they say “Proof is in the pudding”, click here to see a few of my profitable News Trades (with links) along with IG Index Dealing tickets.

The trick is with News Trading is finding event worthy news that will cause a reaction to a share or sector. But also try to find out what the market expectation is too as this can sometimes throw a spanner in the works. For example if “Company A” makes a loss of 10%, that to us means that’s generally bad news and we would expect the stock prices to fall. But in reality “Company A’s” stock prices would to rise. And then I am left scratching my head thinking. Why? The stock price would rise because “Company A” had done better than Market Analysts had predicted of a 20% loss. Get the picture. Some news can create an instant reaction to an equity/stock, some news can take longer to penetrate the markets reaction. Therefore different types of News can impact different depths and layers within the Stock Market.

The Conclusion: Chartism vs New based trading

If traders and trading universities are trying to get you to trade purely on Charts then don’t listen to them, just remember get rich quick schemes don’t work (If its sounds too good to be true, it probably is! Famous saying but very true!). Quite simply you cant beat the stock market that easily. If you can I take my hat off to you (And expect a free ride on your very expensive yacht proving me wrong!). Majority of successful Stock Market traders have worked hard at analysing the Markets and finding financial instruments and tools into giving them a profit. In essence any trader telling stating you can make money purely of trading charts run the other way. Have tried & tested doesn’t work.

After much searching, I have found that news based trading works and works well. However the main problems I have faced with this type of trading is finding out what the market expectation is and having real time news from a Bloomberg terminal (cannot afford one of these just yet!). I am still exploring this topic and will be writing a follow up with further findings. Currently researching pairs trading with fundamental analysis and early indications show that this is certainly a great investment stratergy to use for our current economic climate.

Nikolai Kondratiev was a Russian born economist, he proposed that western economies work in super-cycles, each cycle lasting between 50 to 60 years. Each cycle consists of an age of prosperity, recession, depression and improvement. Western capitalist economies have long-term cycles of boom followed by depression. These economic cycles are now called “Kondratiev waves” or grand super cycles.

Looking deeper into the Kondratiev waves

It is quite interesting how Kondratiev constructed his theory. He observed particular characteristics about the growth and decline of the long wave. As he was researching his theory he detailed the number of years that the economy expanded and contracted during each part of the half century long cycle. He investigated the industries that suffered the most during a down wave and found out how important a role Technology plays in leading out of one downward wave into the next upturn wave. When Kondratiev developed his theory he also researched the 50-54 year catastrophes and renewals which where known and observed by the Mayans and independently by the ancient Israelites. These observations learned by ancient cultures lead Kondratiev to developing a modern expression of this super-cycle. His calculations indicate that capitalist countries tend to follow a long rhythmic pattern of approximately half a century of growth and decline.

How long does the grand super cycle last wave last?

The wave which averages about 54 years in length, begins with the up wave (improvement) whereby prices rise slowly along with a new economic expansion. This lasts around 25-30 years, with inflation running at a very high level during this period. When this expansion peaks it creates a foundation for a deep recession that suddenly jolts the economy. This is the time when commodity prices break from their highs and the prices can plumb low depths that would have been unimaginable during the ‘good’ times. This can last for a long period. However it is not all doom and gloom, with prices eventually stabilising as the economy recovers. This is the beginning of a period of selective expansion that will normally last 10 years.

The most scary aspect of this current wave-if Kondratiev is correct, is the possibility of a rapid decline from recession to depression in most major economies. We appear to be entering a period of deflation that could last until 2024. The signs are already there and it is a hard to turn a blind eye to his theory. Already on the news we are seeing that this is the “Worst Recession in a 100 years!” so welcome to the age of the recession/depression- hold on to your seats its going to be a bumpy ride. On the downside, each mega-inflationary period had its own ‘crazy’ dealers. In the 1700’s it was the South Sea Bubble with people believing that mega sums could be made on the Spice trade with the Far-East, during the 1920’s depression it was the desire to borrow money and invest on the possibility of an-ever-rising stock market.

What happened to the share prices?

As share values plummeted so did any ‘value’ that people had within these shares, leading to the Depression. In the Late 90’s the bet was on Technology stocks and that led to another mini-depression. This time it was the belief that house prices would forever defy gravity-so the debt on them based on their asset value was sold around the world to banks and investors by hedge funds. Of course nothing defies gravity and at some stage matters come to a head and bubbles burst! So are Kondratiev waves a function of the way people ‘perceive’ reality in the financial world? When confidence is high we ride the wave and when confidence is low-we drown? Remember it is the up-turns that have created the prosperity that we bathe in currently-so everything is not as bad as it seems. However if you lose your job then this is scant comfort.

The only possible glint on the horizon maybe that Kondratiev had not factored in the complex mathematics of the crazy hedge fund dealers who have basically caused this particular downturn. Also compared to the past we are working within a global arena and it is quite possible that a sensible global stimulus could get us out of this cycle much sooner than expected. This is where Obama’s gamble of injecting money into the USA economy could help to create stability for the next growth phase in the whole world. We should also factor in the issue of global warming and the urgency to deal with this that could create a new era of slow steady, sustainable stable growth. The other side of the coin may be that we no longer grow madly like we did but we live in a sustainable manner. In many ways this wave is very different from the past ones that Kondratiev studied. As political pundits say-‘It’s the Economy, stupid!’.

Calculation example: 1 year at 5% – $2500 x 1.05 = $2625 then $2625 – $2500 = $125 – Profit.

So there you have it! Here is a Guaranteed money tip as well as buying the item you really wanted! Don’t spend all your profits at once!

1. Cars – one of the biggest wealth killers. Most people end up taking loans to buy the latest and greatest car. The only two advantages of buying a new car are that they are less likely to break down and that you’ll get a few years under warranty. The major disadvantage of buying a new car is that it will rapidly depreciate in value. This could run into thousands of pounds of dead cash within a few years. What’s even worse is that if you took out a loan to pay for the car, you’ll be paying interest on top of the depreciation. It’ a little like owning a house with negative equity. While you could also buy a cheaper, older car, the downside is that you could be spending money on breakdowns, repairs and spare parts, but the car is likely to be fully depreciated.The solution to this dilemma is in striking the right balance between a new and an old car. For instance, many rental companies sell cars with a few thousand miles on the clock and an excellent service history. Buying a car like this strikes the right balance between old and new and offers you a reasonably well depreciated asset.
2. Bank Credit/Loans – If you don’t require a loan then don’t take one. Banks love to give out money, and the longer you’re in debt with them, the more money they make. Interest rates often vary, so if you need the money, then don’t pay a fraction more interest than you have to. Do your research.  Remember, though – Don’t take out a bank loan unless you really need it!
3. Direct Debits – How many direct debits have you got? Direct debits are the silent killers of your wealth. They’ll just take money out of your account each month without any notification until you stop them with the bank. Companies have a habit of charging the maximum amount possible each year. Many utility companies have millions of pounds of customer’s money gathering interest in their accounts. You trust them and they take more than they should! Solution – Remove any unwanted Direct Debits (DD) such as an old Gym Membership or Internet Subscription that you don’t use. Also, check up on essential DD’s to see that you’re not being overcharged.
4. Alcohol – How much do you spend a week on Alcohol? Calculate how much you spend on drink each week. A warning: This may shed light on your dark ignorance of how much money you’re actually spending on drinking. Only the brave should do this calculation. Solution – Set a weekly budget for how much you’re going to spend on Alcohol, then stick to it.
   
5. Unnecessary Material Goods and Vanity – I don’t really need to say much here, apart from that this is an expense that can be totally avoided. You may think you need the newest, greatest mobile phone or LCD TV, but these things are not worth getting into debt over. Your money is always better invested elsewhere. Don’t get attracted to the latest trend or brand as prices almost always drop after a year or two. Solution – Don’t by unnecessary goods you don’t need just to massage your ego–especially if you don’t have the money to burn

Keep on your toes for the Wealth Assassins

The above list may make seem like common sense. However, many people fail to act upon these simple realities. Ignorance may be bliss, but it doesn’t take the problem away. Take the time to assess your financial situation and stop unnecessary expenditures. I hope the above has sparked your mind into stopping the wealth assassins from putting a bullet through your financial heart!

Where do I start?

Lots of work, persistence and trying (and trying again and again) will get you everything you want. I see a lot of people moan about how little money they have, but they’re the same people who won’t actually do anything about it (welcome to the life of the loser). The people who do something off of their own backs and try to create opportunities will often be successful (welcome to the life of a winner).

The following personal characteristics make up the successful person:

• Willingness to try
• Persistence
• Self-reliance
• Initiative
• Hard work
• Trying, trying and trying again

The first step into investing in yourself is enrolling in professional courses. In some industries these courses are worth their weight in gold. If it cost you $3,000 for a course that pushes you two rungs higher in your career and commands a pay rise of $10,000, would you sacrifice time to take the course? If your answer is yes, what’s stopping you?

Know your enemy

Your greatest enemy in life is you. No matter what you’re trying to achieve, seeds of doubt will enter your mind. Don’t let this doubt grow as it may prevent you getting what you truly want from life. For most people, this is to live ‘the easy life’. If you want the easy life then don’t expect the high life. Don’t groan about not having money, and don’t bitch about that friend who does have money to burn.

The following examples are real people who have achieved a great deal of wealth and power through hard work, education and persistence alone.

Duncan Ballantyne – a famous entrepreneur who first made it by making money from his Ice Cream fleet. This is a classic example of hard work and persistence.

Deborah Meaden - studied business at Brighton Technical College, during which she worked as a sales-room model in a fashion house.

James Caan - Graduated from the Advanced Management Programme at Harvard Business School. This again shows a willingness to invest time in studying.

Richard Farleigh – Studied economics at the University of New South Wales. He has achieved his goals with a lot of hard work.

Make investing in yourself a mantra

It’s very important to note that you must invest time and money on yourself before you look at other investment ventures, such as buying a house, stock trading or saving a considerable amount of money. All these things can be yours when you have reached the career level you’ve been striving for. Eventually you’ll gather the disposable income to buy that house you dreamed of or to make millions from stock trading. You must first invest in yourself before your money will grow.

Having a clear picture in your mind of how much loss you are prepared to take on a stock is a good start. Should it be -10%, -20% or -30%? That’s your decision, but make sure you stick to the guideline you’ve set for yourself and take your money out when it’s time to do so. Yes, you will be battle scarred taking a loss, but even the big players suffer losses (and suffer them often). In our current climate of economic crisis having a good exit plan is more important than ever.

An example of a bad exit strategy

A few days ago I was listening to BBC Radio 5 as I headed into the office. The story was about a guy who’d purchased £250,000 (approximately 33,333 shares) worth of Halifax Bank of Scotland on the London Stock exchange at £7.50 each. Then, the mighty credit crunch crisis exploded. He kept holding on to the stock, hoping it would go up again. As you guessed, it didn’t, and now his shares are only worth £0.70p. He took a tenfold loss. This is a perfect example of someone who didn’t have a clear exit strategy and has paid the price — literally. A clear exit strategy would have been to get a grip on his fear and duck out with only a 10% or 30% loss.

What would you have done in that situation? Hoped the stock would have gone up at £6.50 or at £4.50 or maybe at £1.50 (by £1.50 you’d be praying!). Everyone will take losses on their shares at some point but how much you lose is partially under your control and can be minimized. Set a sensible target. For example, if a stock drops by 25% of its purchase price, sell it. Do you have a similarly clear and concise exit plan for when the market turns against you?

The same strategy can be applied even when you are making a profit from a stock. If a stock goes upwards you can lock in your profits. If you have a stock that has gone up by 70% and there’s still potential growth then consider putting in a 50% stop loss if the market turns so that your profits are protected.

Scary moments in my own portfolio and exiting to make a less profit

A few years ago (2005) I brought heavily into mining/oil gas shares. One of them was LSE:AIM Victoria Oil Gas at 52p and it went up to £2 (happy days!). I doubled my £4500 portfolio within 6 months. I was chuffed and thought that it couldn’t end, but the end came too soon. My 100% profit then slid to 90%. I thought the market was having a glitch and it would go back up, but then my portfolio went down further. It dropped down to 80% and then to 60%.

I maintained hope that the market would go up and even took up praying to God. It didn’t work, and I’m not the religious type. Slowly, my profits started to slip through my fingers. Eventually I took a stern approach when I finally realized the market was not going to go back up anytime soon. I took my profits at 40% and ran to the hills!

Once again my emotions and undefined exit strategy prevented me from taking an 80%-90% profit from my portfolio. I hope you can see that it’s crucial to have a well thought-out exit strategy whether your stock is flourishing or failing, and especially considering the market volatility we’re seeing today. Make sure you know which exits to take for financial success. Don’t let yourself be a rabbit caught in the headlights.

Bank Notes are worth more because we “trust” their worth

What’s stopping us exchanging our bank notes for gold today? The answer: because the Bank of England states that “This is no longer possible”. What? After an e-mail to the Bank of England to clarify why banknotes were no-longer linked to gold, they replied: “The link with gold was finally broken in 1931 and since that time there has been no other asset into which holders have the right to convert Bank of England notes.” But there was no explanation given as to why this regulation had passed.

What the Bank of England is saying is that a bank notes’ net-worth is the paper it’s printed on. However, the Bank of England seem to think that Bank Notes are valuable because we “trust” they can be exchanged for things we want to buy. This “trust” gives bank notes value. I’m sure the same could be said for most modern banking systems in the world today. On the dollar bill it states “In God we Trust”. But it’s not in God we trust, it’s the big banks who value our money!

Do we really trust the banks?

When you next pull out a tenner or ten dollar bill to pay for something, remember that its worth is based on “trust” and no longer its base value in gold. This is particularly important to know if banking systems fail because money value could diminish greatly. In the Great Depression people carried around barrow loads of bank notes as the intrinsic value of money plummeted. A recent example of this is occurring in Zimbabwe, where trust in the currency is so low that bread costs billions of Zimbabwean dollars! Given the recent banking crisis, could this happen in other countries?