The Online Investing AI Blog

You hear these statements a lot from investors:

“I’m going to be ready for the next black swan.”

Or…

“Past performance is not indicative of future results.

I’ve even said them myself.

But, as cool as it sounds and as much as the media wants to taut these as official catchphrases for investors, it doesn’t make a lot of sense, according to Ken Fisher. In fact, Fisher teaches quite the opposite in his book Markets Never Forget. But People Do.

We’ll start with the slam on past performance one first.

Most people think that past performance means the future price movement is absolutely unpredictable. But that’s not absolutely true and it leads to rash investment decisions, according to Fisher.

Fisher quotes investor John Templeton’s warning against the belief that “This time, it’s different.” The media expresses this as “the new normal.” Fisher uses reams of statistical evidence to prove that there is no such thing as a new normal–investment and economic patterns are pretty consistent throughout the past few hundred years.

The market remembers. People forget. And the pattern continues.

When the media shucks this line on the new normal, they’re telling the investor, throw out the rule book, this situation is totally different. The investor can not use probability to guide him or her through these new, treacherous shoals.

Indeed, you can’t use past performance to precisely predict the future, but you can use history, as Fisher says, as a range of possible outcomes. This narrows down probabilities–and that’s all the wise investor needs to make money.

Black Swans

Black Swans — unexpected economic events — are not wildly unpredictable events as you might think. Take the real estate meltdown. Is it so hard to believe that when real estate prices swing wildly up, that they might one day swing wildly down?

The key phrase is “one day.” The event itself wasn’t terribly unpredictable, but the timing of the sudden downswing is harder to predict.

But, you don’t need to find a Black Swan, or figure out exactly when the Black Swan will arrive, if you pay attention to history.

Read more…

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It only took Wikipedia one day to teach the world that it will take a lot more than government bureaucrats to stop information and knowledge from circulating on the web.

The act of protest–shutting down the site–chilled the forces who were trying to push the anti-piracy legislation. Several other sites joined in.

Is there a compromise position? I think everyone’s entitled to the rights of their works. But this didn’t appear to be the right legislation.

What I think this week taught us — or maybe just me, I can’t speak for everyone — is that the real government is truly outside of the bureaucracy now. If we can influence decisions this way, could we begin to grab other powers away from the government, back to ourselves? That’s a question mark for a reason. There’s a fine line between collective intelligence and mob mentality. And that fine line is called knowledge.

Anyway. The web survived intact. And I was still able to do some online reading.

Here’s what I found…

Read more…

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J. Paul Getty said to become rich you need to make money in your sleep.

Easy for him to say, he had oil gushing out of wells 24-7.

Unless you have an oil derrick in your backyard, a solid modern, non-gusher alternative is to earn residual income from any number of business opportunities–from blogging to real estate. Residual income is a set-it and pretty much forget-it system to earn money on a regular basis, whether that’s daily, weekly, monthly, etc.

(Note: I said, “pretty much.”)

The thing is, there are a lot of ways to attain residual income strands, but not all of the methods appeal to all people. In the next few steps, you’ll learn how to brainstorm ways to make residual income.

Your first step is to ask yourself some questions:

How Much?

One of the first questions you should ask is how much do you expect from your streams of residual income. Do you want to make a little side money? Are you expecting to quit your job? Are you going for billionaire status? All are possible, but the probability changes based on what models you expect to use and what services and products you expect to offer.

What Interests You?

This may sound silly, but trust me this is a biggie. Many people believe that as long as they are making money, they could care a less what they’re actually doing to earn cash. That’s a mistake. Let’s say you start blogging as a source of your revenue streams, but you hate to write. Chances are that you’ll never establish the content necessary to run a profitable blog. Even if you do start earning money, you might not be able to sustain your blog.

Understand the types of residual income

If you know what you like and have set some type of income goal, you can look for residual income methods to fit the criteria. This is a partial list, but here are a few of the most popular and easiest and cheapest to start.

• Affiliate marketing
• Niche sites
• Selling your own products
• Search engine marketing
• Dividend investing
• eBook author
• Selling apps
• Real estate

*Notice I didn’t mention multi-level marketing (MLM). Just to be real here: I have never found one that either worked, or one that I could recommend in good conscience. Most of the ones that do work take too much of your soul to be worthwhile. Having said that, it is an example of a residual income-generating business.

Read more…

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Well, my brothers and sisters, if you made it through Friday the 13th, 2012, you can weather any apocalypse or tribulation, if you ask me.

And if you weathered the past few years of investment hell and churn, I think you’re ready to prosper in the upcoming months and years.

(I never say… “it can’t get worse, right?” Because that’s been somewhat of a jinx.)

Here are two secrets to preparing yourself for any investment condition:

1)  Maintain discipline. It’s easy to let emotions carry you away–either to euphoria or to despair. But, over the long term, what this does is make you bail when you should be joining, and make you join when you should bail.

2) The next secret I call my ABE theory: Always Be Educated. Keep learning no matter what. Read. Think. Write.

Here are some posts and articles that might help you on your ABE quest:

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Each month, you can get deals on Kindle books at Amazon.

Typically, Amazon prices the books at around $3.99, but some are a lot less. The books cover a range of subjects and topics, but usually they have a few titles in the business and self-improvement section, two subjects that this blog is concerned with.

Here are some good ones that I discovered in the list.

Check them out.

Make a Real Living as a Freelance Writer

By Jenna Glatzer

“Step-by-step instructions on how writers can earn top dollar writing for magazines are provided in this book. Secrets are revealed about what the high-paying magazines really want, how to build relationships with editors, how to ascertain which sections of a magazine are open to freelancers, what kinds of stories are in demand, what to do if a deadbeat publisher doesn’t pay up, how to market reprints, and how to become an expert in one’s chosen writing field. Basic terms like query, clips, and source sheet are defined for beginning writers, and tips on everything from coming up with an idea to pitching a syndicated column are also included.”

The Only Investment Guide You’ll Ever Need

By Andrew Tobias

“For more than thirty years, The Only Investment Guide You’ll Ever Need has been a favorite finance guide, earning the allegiance of more than a million readers across the United States. Now even more indispensable, this completely revised and updated edition will show readers how to use money to their best advantage in the wake of epochal change on Wall Street, no matter how much or how little they may have.”

Goals!

By Brian Tracy

“Based on more than 20 years of experience and 40 years of research, this book presents a completely updated and practical, proven strategy for creating and meeting goals that has been used by more than 1 million people already in its first edition.”

Switched on Selling

By Jerry V. Tiplitz

“Is your brain stuck in the OFF position? Are you switched-off for any part of the sales process-from making cold calls to answering questions, to asking for the order, to handling rejection? Switched-On Selling is a proven, leading-edge, mind-body technology that will immediately re-wire the default settings for all parts of the sales process to balance your brain for optimum success. It starts working as soon as you finish each chapter!”

The Day Wall Street Exploded

By Beverly Gage

“In The Day Wall Street Exploded, Beverly Gage tells the story of a once infamous but now largely forgotten terrorist attack. Based on thousands of pages of Bureau of Investigation reports, this historical detective saga traces the four-year hunt for the perpetrators, a worldwide effort that spread as far as Italy and the new Soviet nation.”

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The worst four-letter word in finance, especially since, let’s say, 2008 is “debt.”

Personal debt.

National debt.

Sovereign debt.

They all have nasty connotations.

But, is debt always bad, without exception?

I think there are a few wise ways to use debt as a tool, not as a weapon of mass self-destruction. Here are four reasons not to be afraid of debt.

Read more…

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What’s this?

Good economic news?

Come on. That can’t be right.

Well, the U.S. unemployment rate has taken some steps in the right direction and economic growth appears to be creeping back.

I wouldn’t say that the road to economic recovery is paved for us, but any signs of improvement are appreciated. It could be that irrational optimism that led to irrational pessimism is now on its inexorable pendulum swing back to the other side.

It may be that bloggers and writers are more hopeful in the new year, but hopeful writers have made it into my regular reading.

Here are a few of my faves for this week:

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Well, financially speaking, 2011 was a hum-dinger.

Hum-dinger is a technical term, of course, which means bat sh*t crazy.

We’ve had more economic news in 2011 than we typically endure in a decade–crashes, recovery, more crashes and more recovery.

Can we expect more of the same in 2012?

I think I’ll leave this to the dozens of other bloggers who are offering their predictions for the coming year.

I’ll just provide some good reading material that will help you make up your own mind.

Here’s to a great 2012 for all of you!

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As we barrel headlong into 2012, I am committed to a challenge to read 12 business books that will help me make this year better and richer.
These books aren’t just about business, because business is only one part of this plan. I’d like to make it more of a total approach–body, mind, and soul.
Notice that some of these are startup-based. I have a few business ideas, so I thought these may encourage me to keep at these ventures.
I’m hoping to read at least one of the following books each month–although this is not in any order.
Hopefully, I’ll be able to add a review for each eventually.

Venture Deals
Word is this book has everything you need to know about venture capital.

Startup Weekend
Can you start up a business in 54 hours? These authors say… Yep!

KaChing
Joel Comm, an eCommerce maverick, wrote this one that’s been on my list for awhile. 2012 will be the year I’ll finally check it out.

Markets Never Forget, but People Do
This is by Ken Fisher. I read a few of his previous works and am hoping this is just as good.

Pricing the Future: Finance, Physics, and the 300-year Journey to the Black-Scholes Equation
George G. Szpiro wrote this. I believe there is a fundamental link between physics and finance. Is this the book that proves my theory or tosses it into the circular file? We’ll find out.

Market Mind Games
I preach about not using your emotions to invest. Am I right? Denise Shull says I’m not. Emotions are key to good investing. I’ll find out more for you.

Read more…

Scrooge is a name most associated with cruel, grubby, greedy, and boring rich people.

But the guy who Charles Dickens named his famous character after wasn’t that way at all.

Dickens based Scrooge, the name at least, on a Scottish merchant named Ebenezer Lennox Scoggie… who didn’t sound Scroogey at all..

“In life, Scroggie was apparently a rambunctious, generous and licentious man who gave wild parties, impregnated the odd serving wench and once wonderfully interrupted the General Assembly of the Church of Scotland by grabbing the buttocks of a hapless countess.”

While it is a great name for a skinflint, Dickens may have revealed his mild dyslexia when he named his character.

Dickens was in the capital to deliver a lecture to an audience of Edinburgh notables. He was wandering the city, killing time before the talk, when he visited the Canongate Kirk graveyard.

There, as revealed by his diaries, he saw a memorial slab which read: “Ebenezer Lennox Scroggie – meal man”. The description referred to his main trade as a corn merchant. However, the author mistakenly translated it as “mean man.”

Though he was shocked by the description, it gave him food for thought and two years later, art imitated life – or so the author believed.

Read more in the Scotsman: Revealed: the Scot who inspired Dickens’ Scrooge

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