The Online Investing AI Blog

It seems that the economy is the number one topic of discussion these days. Most people are blaming it for all of their financial problems. The news is full of stories about the negative effects of the terrible economy such as foreclosures and layoffs.

Maybe we are just die hard are optimists, but I noticed that my previous post entitled Falling Prices are the Bright Side of a Bad Economy was quite popular. So here are more reasons why the bad economy is actually good for us.

One reason that I touched upon in the previous post is the falling price of oil and gasoline. Not only does it make life easy for us at the pump, but it has a cascading effect throughout the economy. Most of the things that we consume are physical, and therefore require energy to be delivered to us. When oil prices are high, it costs more money to ship everything. And these cost increases can be seen in every physical product that we consume. It includes drinks, food, books, computers, and even cars. The good news is that as the cost of crude oil falls, the price of most of the other items in the economy falls as well.

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Business Strategy, Money, US Economy crude oil, customer service, depression, economy, energy, finances, foreclosure, gasoline, layoffs, recession

It’s quite surprising that the most popular post we’ve had to date is about the possibility of a depression in 2009. I wrote that post at the end of last year, when this whole economic crisis is just getting started. Since then, the economy has steadily deteriorated. I wonder if more and more people are getting the idea that we could have another depression in the near future.

Notice that the title of today’s post is about the next depression. Many so-called financial experts on TV say, “I have never seen anything like this. We’re in uncharted waters.” This just means that they are clueless. There is nothing uncharted about depressions. In fact, a depression happens, on average, once every 80 years. There is no question that we will have another depression. The question is, will it be this year, or in another year?

Over the last few days, the stock market has rallied in a big way. Does this mean that the financial crisis is over? Absolutely not. There is nothing but bad financial news these days. And, the effects of layoffs, the falling stock market and bankrupt businesses is just beginning to have its effect. Besides that, it’s pretty obvious that the housing market will continue to fall quickly.

The chart of a stock or financial market index is nothing more than the sum of human emotion over time. Many people who think that they are financially educated, and have gone to college or sport MBAs believe that the price of the stock depends on fundamental values such as PE ratios. Although these fundamentals have some bearing on the stock price, there are other factors that are far more important. The most powerful factor that contributes to the valuation of the stock is human emotion.

Imagine a train going downhill, and the brakes are broken. How can you possibly stop it? It has so much momentum, and it’s so heavy, it is hard to imagine how much force is required to get it to stop. Our economy is quite similar. It has already generated so much momentum that it will continue to go down.

Is Obama going to be able to save us? Personally speaking, I don’t think so. However, the good news is that every individual has the power to save themselves. Each person can choose to drift along the river of financial loss, or take control of their ship and improve their financial future.

If you think this economy is all bad news, then consider this: in every economy, there are ways of making money. Here’s a recent post about some ideas about how to profit in the current falling economy.

Investing, Money, US Economy 2009, bankruptcy, depression, economy, finances, housing, layoffs, Obama, recession, stock market

As the economic crisis continues, investors are having a big challenge in the markets. For buy-and-hold investors and mutual fund owners, many portfolios are down 50% or more. And then, on some days there is a big upswing, such as today when the markets are up 6%. But there’s one class of investor that can easily profit from these volatile markets.

Enter the short-term trader. The daytrader or swing trader will open up a position and then close it after a short period of time. They can often sell a stock short, which means they make money as the stock goes down in price. As the markets go up and down with high levels of volatility, it becomes easier for short-term traders make money. And this is especially true for markets that are going down, as in the last six months.

However, trading requires diligent practice and commitment to learning to become proficient. It’s very easy to open up an online account with a few thousand dollars and start trading. But it’s more challenging to actually make money consistently. That’s why we always recommend getting the necessary resources to succeed at trading. This means books, CDs, seminars and online training. There’s no guarantee that someone can become a successful trader in a short period of time. However, anyone who is committed and learns from successful people can become a successful trader.

Amidst the massive layoffs, business uncertainty, and economic turmoil, perhaps this could be a good time to learn become a trader. Many people who have lost their jobs have plenty of time on their hands and are looking for better ways of making money. And many people who are concerned about losing their job now feel motivated to learn a new skill that will provide more financial security. Perhaps trading is such a skill.

One of the great things about trading is that people can learn at their own pace. They can study before they go to work or when they come home, or even during lunchtime. Another benefit is that it is not necessary to watch the market throughout the day. Using limit and stoploss orders, it’s possible to enter trades before going to work and they will be automatically executed during the market hours without any human intervention.

Anyone who is committed to investing the time and effort it takes to become a successful trader will succeed. Part of this investment is in learning what not to do. In a previous post, I reviewed the Top 7 Mistakes New Traders Make.

These times of economic crisis has been challenging for millions of people. And millions more are afraid of losing their house or their job. Now that we are faced with the real need to find new ways of making money, perhaps this could be a good opportunity to learn a new financial skill such as trading.

This is the sixth post of a series about how the down economy is good for your finances. The previous post is A Wake-Up Call for Personal Finances. The next article is Now Could Be a Good Time to Purchase Assets.

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Investing, Money, Success, US Economy buy-and-hold, economy, Investing, layoffs, recession, stock market, stocks, trading

Now that the economy is falling faster and faster, everybody is concerned. Businesses are worried that they won’t stay in business. Employees are worried about getting laid off. Politicians are worried that they won’t be able to turn the economy around, and then won’t get reelected. This financial downturn is still described as a recession, but there’s no sign that it will get better in the near future.

Most people are looking to the government to save them. Homeowners facing foreclosure want to get money to keep their houses. Giant businesses like AIG, Bank of America, and all three US automakers are borrowing money by the billions. The experts on TV say that we are in uncharted waters.

Is possible that widespread personal financial challenges are really a symptom of a different problem? I wonder if people who are concerned about being laid off or losing their home would be in a different financial position if they weren’t dependent on their jobs for income. These days, there’s so much opportunity everywhere, I wonder if everyone might be better off finding ways of making money outside of having a job.

Or, maybe it’s more about managing money. Before this whole crisis started, Americans were leading the world with high levels of debt and low savings rates. Maybe some of the people who are having financial challenges would not be in this situation if they had been better at managing their money. So, could this whole financial crisis be a wake-up call for us to learn to manage our finances better?

Personally, I would hope that each person can become financially self-sufficient so that they don’t depend on the government for income. The future looks even more challenging. Many people are having a tough time financially right now, but unfortunately there are many people who are going to have a much tougher time in the next 10 years. Why? Social Insecurity.

Social Insecurity (widely known as Social Security) is going to disappear. Perhaps 100 million people who are depending on it to retire in the future will be left out in the cold, just like people who are losing their jobs today. Most people don’t want to face the fact that Social Insecurity cannot be counted on, but it’s pretty obvious. Why? Because the government has already spent all the money! Social Insecurity has a liability of over $10 trillion, and absolutely zero money to pay. Anyone who is trusting the government to take care of them when they retire is flirting with financial disaster.

So what’s the solution? One solution is to start finding other ways of making money. It’s a bit funny to say that on this blog, because 90% of the comments we receive are from people who have their own blog. Guess what’s on those blogs. Advertising! Because it’s possible to make a significant income and launch a business with something as simple and free as a blog.

The other solution is to improve our minds. Everything that we have in life is a result of the way that we think. Therefore we are big promoters of reading the right kinds of books. To find them, or least our favorites, just look on the right side of the blog.

Many people will say that it’s too late to improve one’s finances, but it’s never too late. Anyone who’s worried about having enough money can take this opportunity to build a better financial future. Whether it’s learning about managing money, starting a business, or just reading a book, each step we take determines a new destination. I hope that everyone chooses a destination of wealth and riches.

This is the fifth post of a series about how the down economy is good for your finances. The previous post is Falling Prices are the Bright Side of a Bad Economy. The next post is A Volatile Economy is Great for Traders.

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Investing, Money, Success, US Economy bail out, depression, financial education, financial success, for closure, layoffs, opportunity, personal finances, recession, Social Insecurity

Today’s big news is that the unemployment rate has reached 8.1%. The automakers and banks are doing worse than ever, and people are questioning whether it’s really a good idea to keep giving them bailout money. At this point, there are no signs of hope for the economy. It seems that layoffs will continue to increase.

I remember a guy I once worked with who got laid off several years ago. We were right in the middle of an important software project, and he was the lead developer and Chief Technology Officer. One Monday morning, the boss walked into his office and told him,

I’m sorry, but we’re laying you off. Clean out your desk and leave.

The boss may not have been that blunt, but he watched as the poor guy cleaned out his desk. The boss watched to make sure the employee didn’t try to delete any files from his computer. After he put all his stuff in a box, the guy just walked out. He blinked at the bright sun. It was 10 o’clock in the morning.

Many people would feel very sorry for this guy. But you know what? This kind of thing happens to everybody. People get laid off. Relationships end. (Is a job like a relationship?) As the saying goes, stuff happens. I think it’s part of life. Sometimes unexpected and unfortunate occurrences befall us. We can’t always control what happens to us, but we can control what we do with the situation.

Even though layoffs are at record highs right now, there’s another side to the story. Opportunity is also at an all-time high. Here are some random ideas about turning the unfortunate layoff into opportunity.

1. Train for a New Career
   Many people are constantly complaining about their job because they hate it. Being laid off is a great opportunity to choose a new career. As the world changes faster and faster, there is less and less need for a college degree. There are many great jobs that we can train for just by studying and learning on the Internet.
   Lynda.com is one of my favorite online learning sites. For just $25 per month, anyone can learn hundreds of different software packages. Microsoft Excel? No problem. Adobe Photoshop? No problem. Anybody with the resources to read this post has everything they need to learn all the skills they need for a brand-new career. It could be web design. Or Internet marketing. Or copywriting. Or even writing for blogs.
2. Freelance Work
   There many ways to use our job skills and talents to make money without having a job. Doing freelance work is a great way to keep our skills up and make money at the same time. Often, an employer will hire former employees on a freelance basis. It’s a win for the employer, because they can get what they need done. And it’s a win for the freelancer, because they can make money and retain time and career freedom.
3. Start a Business
   Many of the most successful companies in America were started during recessions. In many ways, it’s actually easier to start a business after being laid off. For one thing, we have a lot more time. It’s easier to find the time to research or start a new business. For most people who have a full-time job, by the end of they day when they come home from work, they are too tired to do anything besides watch TV. And on the weekends, they’re busy doing all the stuff we didn’t have time to do during the week. If we have nothing to do all day besides watching TV, we can find the time to think about and develop a new business.
4. Get Financially Educated
   Anyone who is dependent on a job for their income could probably use a little bit more financial education. Maybe it’s about managing their finances better. Or finding out about financial opportunity such as investing. In America, anyone can get rich. All the information is available from books, CDs and seminars, and even the internet (and blogs!). Going to the library is free. And, if you want to see some of our favorite books, look at the recommended reading on the right side of this page.
5. Become an Investor
   Since the Internet is the great equalizer, investing has become easier and easier to learn. It’s possible for anybody with even a small amount of savings to learn how to become a successful investor. And there are many ways of doing it. It could be through the stock market. Or real estate. Or, precious metals such as gold and silver. It could be going to garage sales and buying antiques or other valuable items that people think are junk. I don’t know. But I do think that being laid off gives people the time and energy to learn about and try different ways of investing.

Being laid off can be a very traumatic experience and creates tough financial problems. However, just because we have financial problems does not mean we are financially helpless. It takes more work and creativity than just going to the prison cubicle each day, but it is possible to turn a layoff situation into something useful.

This is the second of a series about how the down economy is good for your finances. The previous post is What Are the Hidden Opportunities of a Down Economy? The next post is Tough Times are an Opportunity to Get Better at Managing Money.

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Investing, Money, Success, US Economy business, career, financial education, freelance, Investing, layoffs, the economy

As the stock market continues to fall, investors are becoming more and more discouraged. Layoffs are at record highs, and many large companies are requesting bailout money. At this moment, there are no signs of any positive improvements in the economy.

The interesting thing is that sometimes, when things are really bad, there are special opportunities available to us. A few years ago, I went to visit a lady who was selling a cat. She had a thick Russian accent, and I asked her about her story. She had come to America just 10 years before. She came here with nothing. Her only asset was her experience in the textile industry. She had arrived in America in 1990.

She was wonderfully lovely and warm, so I was curious about her life. How did she get to live in a nice house in Berverly Hills? I said, “I see you here in this beautiful house, and you came here just 10 years ago with nothing. How did you come to own this beautiful house in Beverly Hills in such a short period of time?”

She responded,

Oh, many people ask me that. When I came here, I got a job working in textiles, and I saved my money. My dream was to buy a house in Beverly Hills. Then, in 1994, the Northridge earthquake hit. Everyone was talking about leaving LA. Many people wanted to get rid of their house, but there was no one buying. People were giving away their houses! I bought this one for $200,000 right after the earthquake.

I thought, “Isn’t that incredible! She came here with nothing, and five years later, she owns a house in Beverly Hills! I guess America really is the land of opportunity, and that’s why everybody wants to come to America.” Now her house is worth about $2 million.

The current financial negativity and economic situation reminded me of her story. Everybody is running in fear about the economy. However, just because large businesses are failing and people are losing their jobs does not mean that there are no opportunities available. As a matter of fact, the worse the economy gets, the more opportunity there is to make money quickly. There were more millionaires made during the Great Depression then at any other time in the preceding history of the United States.

Where is this opportunity? How can we make money when the stock market is falling and people are at risk of losing their jobs?

1. Foreclosures
   As real estate prices continue to fall, there are fewer and fewer people buying properties. This means that there’s less competition and it’s easy to buy a great property at a great price. Personally, I would not buy any real estate at this time, because it’s pretty obvious that prices are going to continue to fall. However, the story may be different in six months.
2. Small Businesses and Independent Contractors
   As larger companies have more problems, the market is ripe with opportunity for small businesses and individuals working as independent contractors. Large businesses are slow to adapt to the fast changing economy. A large businesses is like a giant cruise ship. It’s very powerful, and can travel a great distance, but it is also very slow to change course.
   That’s why now is a great time to build a small business or work freelance. Many of the suppliers to businesses are failing, and it’s possible to provide services to replace those suppliers that have gone out of business. In addition, businesses are looking for ways to cut costs and improve productivity. This means that they are open to finding new suppliers.
3. Stock Trading
   Buying and selling stocks as a trader, and not as an investor, requires diligent work. However, anyone with an Internet connection and is the willingness to learn can succeed. Large amounts of capital are not required. And, volatile markets as well as down markets make it easier to make money quickly.
4. eBay
   As local markets crumble, and people start selling stuff, it becomes possible to find better and better values. One of the tried and true ways of making money is to purchase in the local market and sell in a large (or national) market. Demand on eBay is strong because people are more careful about spending their money, and buying less in retail stores. eBay offers them an opportunity to buy more stuff with less money.

These are just a few random ideas about how we can use the down economy to make money. Many people will say that these are tough times, and it’s hard to survive. That may be true for the masses, but does not have to be true for the individual. I hope that each person who wishes to improve their finances finds a way to make it happen, regardless of the economy.

This is the first of a series about how the down economy is good for your finances. The next post is in the series is Can Getting Laid Off Actually be a Good Experience?

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Business Strategy, Investing, Money, Success, US Economy depression, eBay, economy, foreclosures, layoffs, opportunity, recession, stock market

Most people are terrified of the current economic turmoil, and they have good reason to be. The financial guys on TV are saying that we are in uncharted waters, but that just means that things could get as bad as they were during the Great Depression. If not worse.

It’s true that the forces that make the economy go up or down do affect us, but we have the choice of deciding how we react. Just because the stock market is going down does not mean that our net worth needs to go down as well. Just because other people are losing money does not mean that each individual needs to lose.

Here are the top five financial mistakes made during recessions and depressions.

1. Listening to “Expert” Advice
   Most of the people who have lost 40% and 50% of the value in their retirement accounts are in an unfortunate position because of so-called expert financial advice that they received. Most financial advisors are completely clueless, and do not create value for their customers. As a matter of fact, most financial advisors are nothing more than salespeople who sell mutual funds that pay the highest commissions.
2. Not Looking for Opportunity
   The best time to find opportunity is when the markets are going down, and everybody is running in fear. It really doesn’t matter what you want to invest in. Financial downturns reveal massive opportunities. When housing prices are down and forclosures are at record levels, it’s easy to buy a house in a great neighborhood for a wonderful price. Similarly, for a value investor, the time to buy stocks is when the market is down. As a matter of fact, Warren Buffett is buying stocks like crazy right now.
3. Depending on Our Job for Our Income
   When times were good, people thought their job would always be there for them. And if they couldn’t stand it anymore they would just quit and get a new one. Record high unemployment and massive job cuts are making it obvious that jobs are not a secure source of income. We feel that the economy is going to continue to go down, and the layoffs are just getting started.
4. Depending on the Government or Other People
   90% of people are dependent on Social Security, Medicare or their former employer’s pension to survive after they retire. This will not work because Social Security and Medicare are going to disappear, and many pension plans will go bankrupt. We are responsible for our own financial future, and hoping that the government or anyone else will take care of us is a dangerous game.
5. Not Getting Educated
   Financial education is not taught in our schools system, and that is the reason that most people are completely unprepared for the current financial crisis. It is our own responsibility to get educated so that we can succeed financially. Fortunately, this does not require a college degree or night school. All it requires is reading books, listening to CDs and/or going to seminars. The information is available. It’s our job to get the information that we need to improve our financial lives.

For anyone who feels scared about the current economic turmoil and their future, now is the time to make a change. Not tomorrow. Not next week. Right now is the time. Because the choices we’ve made in the past have brought us to our current point in life. If we are not satisfied with where we are, and if we want to change anything in our lives, then now is the time to start.

Investing, Money, Success, US Economy depression, downturn, financial mistakes, job cuts, layoffs, markets, recession, the economy

A friend recently called and said a series of layoffs hit his current employer. He might be next.

I expected, at the very least, a little fear, but that’s not what I sensed. It seemed like after months of speculation and weeks of tension in the office, the news of layoffs hit him as a relief.

I believe that the once firm solder that welded his true self with his work self was beginning to break free. He was discovering that “what you do” is not synonymous with “who you are.” Or, as I and Frank Sinatra like to call it: do-be-do-be-do, that subtle chant that balances our work and our life.

In fact, if truth were known, his work self had long since overtaken his real self. His real goals and real interests were supplanted by paper-filing, bean counting and pencil pushing.

The news of the layoff–this sudden divorce–finally broke the hypnotic spell formed by the recitation of fear mantras (I must. I have to. They’ll fire me.) and the comfort of a set schedule.

While he’ll continue to go to work, a plan, of sorts, is being formulated and I think the counsel is worth passing along.

• Since he has time, he’s already preparing for the financial challenges with some personal budget cuts. He’s starting with the things he doesn’t need: 400 channels on the tube, for instance.
• He’s raising immediate cash by selling some stuff he’s collected over the years and talked himself out of selling because he never had enough time.
• He’s developing other revenue sources by exploring things he loves to do. This weekend, he’ll help another friend cut wood. It’s the type of physical labor he loves. (Go figure.) He also wants to explore his passions and see if he can convert them to money: writing and inventing.
• He’ll look for passive income, too. Making money through investing and trading is one possibility.
• Finally, there are aspects of his job he likes and is good at. He’ll start a career search. This time, though, it will be on his own terms. Or maybe, he’ll start his own business using these skills?

As we work on Online Investing AI, it’s a mission of ours to begin to help people break the hypnotic spells of “who they are” versus “what they do.” We would like to provide as many people as possible a way to earn passive income growth (through trading) and build financial independence, so that they go to work because they want to, not because they have to.

In my opinion, the contributions of people discovering who they are… not hiding what they do… will improve the world in unimagineable ways.

Business Strategy, Dreams Come True, Investing, Money employment, layoff, layoffs, work