The Online Investing AI Blog

Everyone seems to running around complaining about the economy and unemployment and lamenting the fall in the stock or housing markets. Let’s stop running for a second and ask an important question.

How did we get into this situation?

The markets did not suddenly decide to go down by themselves. They are simply going down after going up for a long, long time. Markets go up and markets go down. It’s part of the grand scheme of things.

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I read some really disturbing news in the vast reams of disturbing news out there. But this one has nothing to do with rigged elections and the blown economy.

In a survey  of  1,000 Break Media users, only 29 percent of males aged 18-34 say they are saving money. This is in contrast to national saving average, which is up like 15 percent. And, during a recession savings rates naturally go up. But not the savings rate of young males, apparently.

What’s wrong with the investment habits of Johnny?

I think there are a few reasons for this financial illiteracy.

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As the stock markets have made a big rebound, some people think that we are out of the woods. Has Obama’s massive plan averted financial disaster?

I think that it is way too early to tell. The fact that the markets have come back to nearly previous high levels is a great sign. The problem is that nothing has changed fundamentally in the economy. Unemployment is still high, and there is no reason that it will come down in the near future. Domestic automakers are finished, but the American people are left holding the bag. Demand for goods and services is not rising, and businesses have little ability to grow in the near future. Housing prices are falling, and I don’t think Obama’s plan will be enough to keep them from continuing to fall.

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An interesting debate is percolating about the new book, “Free,”  by Chris Anderson.

I haven’t read it (yet), but apparently Seth Godin and Malcolm Gladwell have. Anderson’s book says that as computing power increases and its cost decreases, information products are essentially going to be free.

In a New Yorker article, Gladwell disagrees with the theory. He, pretty adroitly, brings up reasons why Anderson’s theory will flop: from the inability for YouTube to turn a profit to the failure for nuclear energy to produce super cheap power.

In response, Godin declares a mighty, “So what?” Whatever the price of nuclear power in China is, Godin points out, the digital world is getting cheaper, faster, and more powerful. Whether or not there’s a business model to support it, the info-Singularity approacheth. Godin counters:

The first argument that makes no sense is, “should we want free to be the future?”

Who cares if we want it? It is.

The second argument that makes no sense is, “how will this new business model support the world as we know it today?”

Who cares if it does? It is. It’s happening. The world will change around it, because the world has no choice. I’m sorry if that’s inconvenient, but it’s true.

There’s a similar debate on Automated Trading.

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Traditionally, most people who had any money to invest relied on financial advisors to help them. Or, more accurately, they bought the financial products that their advisor was selling, and thought about investing as little as possible. The result has been a population of Americans who have no idea how to invest and believe that investing is too difficult for them to understand.

It was quite easy for the financial advisor to sell mutual funds to their clients because their clients didn’t know anything. They trusted that the advisor had their best interests in mind, and that they would have a bright financial future. Nothing could be further from the truth.

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There’s an old military adage.

Generals always fight the the last war.

Rows of men executing Napoleonic tactics were mowed down by increasingly accurate and sophisticated weaponry in the American Civil War.

Gallant European cavalry units galloped into World War I battlefields to meet tanks and machine guns.

World War II generals saw Vietnam like a conventional battlefield, even though it was anything but conventional.

After reading a Discovery Channel report, I’m convinced we’re fighting the last war on health care.
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As the Automated Trading revolution gathers steam, it will be fascinating to watch how it unfolds. Right now, very few people know or use Automated Trading systems. Yet this is not the stone ages. This is the world of the Internet, and even Internet 2.0.

In today’s ultra-connected world, information travels faster than ever. Even regular web sites and email is incredibly slow compared to blogs and Twitter. As the rate of information exchange accelerates, so does the rate of change throughout the world. Researchers and developers are able to communicate and leverage off each other’s work faster. And acceptance of new products and services by consumers is accelerating as well.

What does this mean for the Automated Trading revolution?

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Flickr photo by Bohman

When those pink slips are passed out and those cardboard boxes appear on desks, most workers have pity and remorse for their soon-to-be departed colleagues.

But, it may be the unemployed who should pity the workers who still have a job.

First, the work load will increase without their fellow helpers there to shoulder some of the burden.

Another reason is that while the laid-off worker has accepted his or her fate, the current employees are still left with the anxiety that their positions may be the next head on the chopping block.

And, according to a survey (found in the June 29the edition of the Investor’s Business Daily), workers who are laid-off actually getting their lives together!

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The news and television has been dominated by Michael Jackson’s death. Yet there is one aspect of his life that is really fascinating: the way he managed his finances.

How is it possible for the number 4 highest selling artist (over 800 million records) in the history of music to be $400 million in debt?

I suppose it’s pretty simple. If you can spend more money than you make, then anyone can do it. Apparently he was making $20 million per year, and spending $30 million. Add a bunch of lawsuits and your own 2,800 acre amusement park, and it’s possible to get to a debt of $400 million.

So what?

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The head talkers of Washington D.C. and talking heads of Wall Street are in a frenzy about job creation numbers.

What is the meaning of job creation?

How is a job created?

Is a job saved the same as a job created?

With the unemployment rate soaring into double digits, the so-called experts offer a range of theories and programs that are designed to create jobs and/or save jobs.They believe the twist of a pen could create a million jobs–or save a million jobs, whatever.

Still another rash of programs, taxes, and penalties are promising to help build the “green economy.”

Bunk.

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