The Online Investing AI Blog

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We’ve just witnessed a historic event.

Last Tuesday, the Dow — a benchmark for stock market strength — cruised to 14,285, well passed the former record set in Oct. 2007. As of Friday, the Dow rested at 14,397. And there was a collective shoulder shrug.

That reaction was in contrast to the heady days of stock market gains in the 1980s and 1990s when each Dow and Nasdaq record was reported breathlessly for days. It was a moveable feast.

So, what’s different about this record?

First, people are paranoid because the last record in Oct. 2007 was soon followed by an almost complete economic collapse. Within months of this record the Dow plummeted, losing half of its value and bouncing along those bottoms for years. Investors are wary of the same happening again.

They have statistical reasons to be wary. Raw economic numbers — GDP growth and employment, for instance — are not even close to the strength that led up to the rally in 2007. The housing market? It’s still a basket case. Also, the stock market gains are based a lot on government — especially the Fed — tampering with the numbers. Cheap dollars have fueled the rally.

However, it may be a mistake to hold this view on the economy exclusively. Remember fear can be just as damaging to your portfolio as greed. Also, remember that time has a way of balancing prices. What was up, might come down a little; what was down, may end up higher.

Read more…

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The whole philosophy of using machine learning and artificial intelligence in investing is that machines can make trades quickly and without being burdened by emotions.

It’s the last bit that I’ll talk about today. Emotions — like fear and greed — skew the decision-making processes of the investor, causing him or her to but too high or sell to low based purely on feelings. A good example: you would probably pay more for food if you’re hungry than if you just had a big dinner.

Therefore — and this conclusion is inescapable — machines that do not have emotions can trade better.

Except, this logic is totally wrong. Well, not wrong. But it forgets the most important variable. The market and the economy runs on emotions. Even if every investor was an emotion-less cyborg, the rest of the economy, which underlies all stocks and commodities, runs on desires and emotions.

A successful investment system can not possibly rule out emotions. In fact, the most successful investment system would totally understand emotions, but not ruled by them. This system would understand how desire for something quickly turns to the desire to not lose something — fear. Likewise, it would be able to sense when the momentum of fear turns into a buying opportunity. It could sense that the greed in the real estate market was becoming too frothy, or that the fear of a recession was starting to bottom out.

In short, the best investment system understands emotions. It just isn’t ruled by them.

Read more…

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So, the Fed is trying to give another bolt to the economy.

Great.

It didn’t seem to work before, but if there’s one thing that we have all learned is that if a tactic continually fails, you should keep doing it until it works.

Sort of like smashing your head into a wall repeatedly if you need to make a household repair.

Well, here are some lessons I have found around the internet. Just like the Fed knows they can always print more money, I know people will always publish more posts.

So relax! These do not require you to smash your head into the wall. Just give them a read.

Wall Street Journal — Management Secrets of the NFL

Dumb Little Man — 13 Warning Signs That What Your Delegated Won’t Get Done

Financial Samurai — A Day Job is Much Easier Than Entrepreneurship

Finance Fox — Do You Need a Career Change?

Invest It Wisely — You Don’t Need to be Born an Entrepreneur

Untemplater — What is eHealth Insurance?

The Digerati Life — Skip Commercial Banks! How Cash Only Living Can Work

Business Strategy, Internet, Investing, Money, Success blogs, economy, fiscal policy, government, insurance, Investing, Money, news, newspapers

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Here’s the thought experiment: You come home on Friday evening after a hard week at the office, do you…

1. Immediately order a pizza and pig out.

2. Have that pizza on Sunday evening after a few days rest.

Most people go right to number 1.

According to a guest post by Professor Dan Ariely on Tim Ferris’ blog, this is called ego depletion. Basically, there’s a connection between exhaustion and consumption. In this case, when you’re exhausted — a state called “ego depletion” — you tend to be more drawn to bad food choices, like junk food.

“I’ve always suspected that we start each day with a limited number of decision-making points that, once depleted, leave us cognitively impaired. This is part of the reason that automating minutiae, adopting rituals, and applying creativity only where it’s most valuable (e.g. not deciding what to eat for breakfast) is so important to me.”

Ego Depletion and Personal Finance

I’m wondering whether this doesn’t work for bad personal financial decisions. One of the reasons that I’m interested in automated trading is because there are human weaknesses — like ego depletion — that can interfere with trading, investing, and spending.

So, let’s explore how ego depletion may affect your personal financial situation.

Check out this scenario.

You’ve been trading all week long. You’ve been trying to maintain your discipline and set strict stop loss rules. But things are turning south by the end of the week. You see a pretty risky trade brewing.

Do you:

1.) Cut your losses and re-charge your batteries.

2.) Take a stab at turning a quick win before the week ends.

I’m suggesting that most would take that trade.

Here’s another scenario we probably all can relate to.

Read more…

Great Books, Internet, Investing, Money body, dead-ends, diet, health, Investing, job, mind, Money, rules, Success, work

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There was some good economic news this week. There was some bad economic news this week.

Some people say we’re in for another economic disaster; others say the recovery is just starting.

And that means there are a still a lot of unknowns out there.

And there are — and, guess what?–there always will be a lot of unknowns out there.

The best you can do in uncertain times is stay informed and stay disciplined. There has never been a time in human history when the connection to knowledge has been this easy.

Here are a few links to get you started

Financial Samurai – Taking Money For Granted: What To Do If The Money Runs Out?

See Debt Run — How to Find $500 by Raiding Your Collections

Street Smart Finance — Why I Blog and Why You Should Too

Invest It Wisely — I Don’t Worry About Retirement Now, Do I?

My Journey to Millions — How Families Are Dealing With the Recession

Howard Lindzon — How to Invest for Profits and Joy

Pick the Brain – Post-traumatic Growth: What Research Says About Why Some Grow While Others Break In The Face of Adversity

The College Investor — Do You Know Henry?

Untemplater — How to Cope With The Agony of Waiting

One Cent at a Time — Tips to Avoid Online Auction Scams

Business Strategy, Great Books, Internet, Investing, Money, Online Investing AI blogs, family, Internet, Investing, Links, Money, reading, retirement, Success

If you’ve ever visited the department of motor vehicle’s office, or an open bar office Christmas party, you know that the number of jackasses in the world considerably outnumber the rest of humanity.

These are the same people who bought dotcom stocks for thousands of times their net worth and took $700,000 mortgages on homes worth about $200,000 a few years before.

So, that’s bad for investors, right?

Not according to Michael Dever and just some good old common horse sense. You can actually learn how to take advantage of these jackass investors.

Dever, who is Founder, CEO & Director of Research of Brandywine Asset Management, says you can take advantage of jackasses to make money as an investor. In fact, he’s written the book about it. It’s called Jackass Investing: Don’t do it. Profit from it.

The book, which Dever says is the result of a decade of research and three decades of trading experience, teaches some contrarian lessons.

For instance, Dever believes that every decision is a trade–even the decision not to trade. He names that decision the Rush trade, after the rock band.

One difference between investors and jackass investors is whether they know if they’re investing… or gambling.

Read more…

Great Books, Investing, Money advice, bonds, books, debt, finances, Investing, stocks, Success

Robert Kiyosaki recently updated the Rich Dad site, making it easier to find the Cashflow game. Look on the top left of the page.

Rich Dad's Cashflow Game is Free

Alternately, you can go to the Cashflow game page and log in. The trick is that you need to have a Rich Dad account, and you will need to sign up for one on the Rich Dad main website.

Read more…

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Mortgage rates have fallen to yet new lows. According to this article at CBS Money Watch, the average 30 year rate is at 3.62%. This is the lowest level in the history of the U.S. mortgage market.

The 30 year mortgage started in the 1950′s. Why are mortgage rates today the lowest ever? It can be explained by the easy money policy of the U.S. government. The government has been flooding the world with money, especially since the financial crisis of 2008.

Read more…

Investing, Money, Success, US Economy bubble, housing, interest rates, Investing, Money, mortgage, Success

I believe that crowd funding and crowd investing will have a profound effect on entrepreneurship and on the economy. Crowdfunding will allow regular investors to take positions in early stage startups -

We are lucky enough to have spoken with David J. Paul, co-founder and chief strategy officer for Crowdfunder. Crowdfunder is a pioneer and a catalyst in the idea of crowdfunding. We have already seen how using the power of people to provides funds for political, non-profit and artistic projects has opened new paths for activists and artists. Now, investors are going to get a turn.

We interviewed DJ about how using the power of crowds to invest in startups could change how we do business.

When will crowd funding, or crowd investing start in earnest?

Congress passed the law in late March and the President signed the bill in early April, which gave the Security and Exchange Commision the authority to make the regulations for the industry by the end of the year. So the soonest we will see crowd investing in earnest will be in early 2013.

How is Crowdfunder positioned to facilitate crowd investing?

Crowdfunder will be a full service Crowdfunding portal which will offer start-ups, entrepreneurs and small business direct access to capital to build their business through various different types of securities, while also offering investors of all economic groups the opportunity to invest in small and start-up companies.

How is it different from current crowd funding services, such as Kickstarter?

While Kickstarter’s crowdfunding campagns are limited to donation and incentive based, CrowdFunder campagns will allow issuers to actually raise capital through the sale and issuance of equity and debt securities — much like bigger companies are able to raise money through IPO’s.

How do you think crowd investing will affect the economy?

We think crowdfunding will have a real and significant impact on the American economy, as we will be helping to facilitate getting capital into the hands of start-ups and small businesses which have historically been the biggest and best source for job creation during every significant employment down-turn since the Second World War.

If you’re interested in signing up as a Crowdfunder member just sign up here.

Business Strategy, Internet, Investing, Money, Online Investing AI, Success crowdfunder, crowdfunding, crowdsource, Investing

CC--My Melting Brain

“The Matrix is a system, Neo. That system is our enemy. But when you’re inside, you look around, what do you see? Businessmen, teachers, lawyers, carpenters. The very minds of the people we are trying to save. But until we do, these people are still a part of that system and that makes them our enemy.”

You, too, are trapped in a Matrix–a Personal Financial Matrix. This matrix controls what you do, who you know, and where you go. It does not, however, control who you are… or what you will become.

The Personal Financial Matrix is a network of corporations, government agencies, and businesses who are trying to enslave you. They jack into your brain with a tangle of wires. Marketing messages. Investment schemes. Cultural mythos. Expectations.

“That you are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind.”

But, here’s your red pill.

The Matrix only works if you let it change your thoughts. Your mind is ultimately your own.

You just need to know how the Matrix works to influence your thoughts… and you’re free.

Marketing Messages

Marketing messages rarely work by targeting an outside need, but by attacking an inner need. When you buy clothes, food, cars, or homes, you may choose that purchase, not based on a need for shelter, clothing, and transportation, but on a need to express yourself. You want to say you are successful. Or, that you’re loved. Or, that you’re sexy. Companies know this and nuance messages to activate that need into action. However, you’ll pay more that. And, in what could be a downward spiral, you’ll go into debt… which leads to more inferiority… and worse purchases.

Debt

Speaking of debt, avoid it. It’s one of the strongest pulls of the Matrix. Granted, there are some “good” forms of debt. For instance, if you take out a loan on a home or investment property that has a reasonable chance of increasing at a rate higher than the interest rate, that’s a good form of debt.

Investing

Investments tweak each emotional string that keeps us attached to the Matrix.

• Desire
• Greed
• Fear
• Pride

When you invest emotionally, the likelihood the you will increase losses and decrease opportunities, rises dramatically. This doesn’t even touch on the number of investment schemes out there.

People who are burnt by investments, think they can escape the Matrix by not investing anymore. Unfortunately, they become more enslaved, believing that wealth and financial independence is unattainable. They become mired in safe careers that are neither safe, nor a career.

Paycheck-to-Paycheck

Often, people take jobs that support their lifestyle. That’s not a bad thing, necessarily. But, when people choose jobs in areas where the cost of living matches their salary, they start to live paycheck-to-paycheck. There’s no room for savings. There’s no room for advancement. There’s no room to take risks. There’s no room to become an entrepreneur. It’s a form of wage slavery.

How to Escape

Often, the Personal Financial Matrix insinuates itself in your life over time and you don’t recognize you’ve been captured.

No matter how deeply your involved in the Matrix, once you see it, you can begin your escape. Knowledge is the key.

Start by reversing old attitudes and bad habits.

Read more…

Great Books, Internet, Investing, Money attitude, brain, desiresdebt, hypnosis, income, Investing, job, matrix, mind, needs