The Online Investing AI Blog

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To say that pessimism reigns in the market misses the mark.

Fear and panic is a better description.

Conventional theory states that cool heads prevail in periods of excessive fear, just as hot heads lose during stretches of irrational exuberance.

There are essentially four scenarios of how this economy will play out over the next few years. At least one of them will flout the conventional notion that bad economies are time to make money.

Read more…

Accelerating Technology, Investing, Money, Online Investing AI, US Economy bad economy, depression, economy, recession, technology, US Economy, wealth, wealth creation

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The United States existed as a nation for almost a hundred years without levying a personal income tax. And even when the first income tax was eventually foisted on the American people it was due to the substantial costs of the Civil War.

The first income taxes were in the single-digit ranged. After some court wrangling, the legally-debatable income tax was pegged at 2 percent, but only for 10 percent of the wealthiest Americans.

The tax code could be summed up in a few pages.

Now the tax code is thousands of pages, fluctuates continually, and has risen to take well over a third of a person’s income.

How did the tax code become such a ponderous, mysterious document?

In a word: Power.

Read more…

Investing, Money, Online Investing AI, US Economy economy, Money, power, tax, US Economy, wealth

I don’t pretend to be an expert on macroeconomic policy and I certainly am not an expert of the gold standard, so take this post with a grain of salt or a fleck of gold dust.

The gold standard meant that each paper dollar was backed by dollar of gold held in Fort Knox, or some other federal gold reserve facility. The standard also kept the government budget in check, say gold standard bearers.

In case you haven’t notice, we’re running a bit of a deficit.

The logical conclusion would be to go back on the gold standard and the economic crisis will go away. Again, not an expert here, but this idea just doesn’t jibe. First, historically speaking, there were lots of economic panics while we were on the gold standard. Take the Great Depression. Please.

Secondly, like oil reliance, gold reliance can cause problems, too. Any disruption or threat of disruption to the gold supply can cause the economy to unhinge.

Third, the economy is no longer based on gold. I suppose at one time, especially in the west, gold was a precious commodity. At one time, economies were based on coconuts and ox hides. Should we go back to the coconut standard or the ox hide standard? Now, it’s fair to say that a few pounds of silicon are capable of producing far more value than a couple pounds of gold.

I believe the real economy is based on information and innovation today and there’s no way to equate that value with a lump of metal.

The gold standard is just an excuse for financial responsibility. And this blame goes all around: financial irresponsibility on the part of the citizens and businesses who look at government handouts as some type of bottomless piggy bank and fiscal irresponsibility on the part of our government and its agencies.

Going back to the way things were done in the past isn’t change. Let’s move from the gold standard to the bold standard.

Accelerating Technology, Business Strategy, Dreams Come True, Great Books, Internet, Investing, Money, Online Investing AI, Success, US Economy budget, deficit, depression, dollar, gold, gold standard, information, Money, past, recession, US Economy, wealth

In this fascinating article from Inc. magazine, I learned how one man created a company that made $10 million last year in revenue with no employees! And to top that, he only works one hour per day! What’s his secret?

Markus Frind, like most people, decided that he wanted to try Internet dating. But when he discovered he had to pay money to sign up, he thought, “Wouldn’t it be great if there were a dating website that was totally free?” Probably many people have thought that, but he was the one that took action.

Guess what? Millions of people flocked to his site, and over the last five years have helped it grow into what is possibly the largest dating site in the world. His traffic is four times that of the giant Match.com. In fact, he serves 1.5 billion pages per month!

How did Markus build a dating empire, all by himself, when his competitors have hundreds of employees and millions of dollars of startup money? He used one of the secrets of success:

Focus on What’s Important

Most people waste their entire working day (and their lives) thinking about and fixing things that make absolutely no difference. Most of the so-called work that goes on at companies is really fixing stuff that is not broken, chitchat, and meetings. All of those activities create zero value for the company and for the customer.

Contrast that with the way Marcus thinks. Before he fixes anything he asks a high quality question:

Does this really need to be fixed?

And usually the answer is no. Plentyoffish.com is not the prettiest site on the Internet. But who cares? People don’t go to a dating website to see pretty graphics or a cool design. People go to a dating website to find that special someone. And that is the kernel of value creation that Markus is focused on. It’s that one idea, that is powerful enough to allow one person to build a business worth tens of millions of dollars.

Wouldn’t it be wonderful if everyone who had an idea could make it real in the same way that Markus has! And it’s possible. Because the Internet and computers offer unlimited opportunity for anybody willing to try.

Accelerating Technology, Business Strategy, Dreams Come True, Internet, Money, Success, US Economy business, business success, dating websites, entrepreneur, financial success, Internet, Markus Frind, Plentyoffish.com, Success, US Economy

It’s the holidays. This is the time that stores expect to make money. Christmas, Hanukkah, and all the holidays are a gold mine for retailers, who often make 15% of their sales this week alone.

When people aren’t shopping, they’re watching TV and learning about the financial crisis around the world. The automakers are complaining about the credit markets. The retailers are complaining about the housing market. The shoppers are worried about the economy. But there is one company that is not complaining about anything.

Amazon.com posted record-breaking sales, and is having its best holiday season ever. How is this possible? When nearly every other company is losing money, and the whole US economy is going straight down, how is it possible that one company can do better than ever? It’s because Amazon.com is committed to finding new ways of making money.

One driver of Amazon’s success is the trend of online shopping. We all know it’s 1,000 times more convenient, faster, easier and cheaper to just buy something online than to actually go out and buy it. And that’s why online shopping is growing at double-digit rates every year, while shopping in stores is going down. So Amazon has positioned itself to ride the trend that makes it easy to succeed.

Another powerful driver for Amazon is in the innovation. From the Kindle to the ever increasing range of goods that it sells, Amazon is always finding new ways of making money. It started as a bookstore. Now, some of the biggest sellers are gaming consoles. If you consider the fact that a gaming console that costs $300 is going to make the company a lot more money than just a book, it’s easy to see how Amazon sales and profits continue to grow.

It’s easy to see their big differences between the average American store and Amazon.com. And, it’s interesting to think about the difference is in strategy as well. What if every company in America used innovation like Amazon does? What would that do for the US economy?

Business Strategy, Internet, Online Investing AI, Success, US Economy Amazon.com, christmas, holidays, online shopping, shopping, US Economy

In a previous post, I suggested that we have serious economic challenges mounting their ugly heads in our near future. Over the last 12 months, markets have gone down 40%. Owners of mutual funds have seen their portfolios go down by that much or more.

Although I titled this post about the future, I do not profess to know the future. Humans are not omniscient, and therefore they cannot tell the future.

But even without knowing the future, you can still be prepared for it. if the weather forecast says 20% chance of rain, you probably be okay. But if you bring an umbrella, you’ll definitely be okay.

And so it is with money. Millions of people have trusted so-called experts to manage their money. Unfortunately, they find themselves in the unenviable position of owning mutual funds. Their so-called expert did not prepare them for the rainy days ahead.

Many would-be investors are freaking out right now because they were not told that they could lose most of their money. They were not told that markets go up and markets go down. They were not told that the market could go down 90%.

Contrary to popular opinion, ignorance is not bliss. Ignorance is going out without an umbrella, and not even having the weather forecast.

So, what’s the solution? One solution is to get educated. Those financial experts have no intention of educating you. Because that’s not their business. Their business is to sell mutual funds and other so-called investment vehicles and make money on the commissions. So, if you want to get educated, you have to look elsewhere.

A good starting point is Rich Dad, Poor Dad. This book is a must read for anyone who has any desire to achieve financial success.

Investing, Money, US Economy advisers, depression, finances, financial success, market, recession, US Economy

Many people have heard, “If you save $100 a month, you’ll be a millionaire.” Although this is true, it takes about 50 years. Who wants a million dollars in 50 years?

And, this idea ignores one small but thorny detail: inflation. Inflation will eat up that million dollars just as fast as it is saved. Because in 50 years a million dollars will not be worth much. Maybe it will be worth $10,000. Or $1,000. Or nothing.

So, what’s the point. The point is that inflation is rising right now, and most people are completely unaware. They believe when the government says, “Inflation is low.” This is simply a lie.

If you look at the price of food, housing, gasoline and energy its obvious that inflation is not low. And, if you compare the prices with 5 years ago, the dollar has lost half its value.

You will reach the same conclusion if you compare the value of a dollar with other currencies. Compared to the British Pound, Euro and even the Japanese Yen(!), the dollar has lost a large percentage of its value compared to 5 years ago.

The important thing to learn from all this is that our financial success is not determined by how much we can save, but more by how well we use what we save. That means how much money we can make from our savings. For most people, that means a CD or money market account. These investments pay much less than inflation, so the people who buy them are actually losing money. These investors are certain to lose money, so I suppose that makes it a low risk investment. You have a good idea how much you will lose when you get into the investment!

All this to say that people who save money, follow the conventional wisdom, and believe the government will get screwed. On the other hand, people who get educated, become successful investors, and find a better solution will succeed and have as much money as they want.

Investing, US Economy financial freedom, inflation, Investing, saving, US Economy

Apparently a lot of people were upset about my last post about the economy and future problems. Its true that the American economy is at the top of a boom. And everything in economics (and life) happens in cycles: booms and busts, success and failure, summer and winter.

But there is one force that is more powerful than the boom and bust cycle. Its the power to create our future. Many people believe that the economy is the master of their destiny. They say, “My business is not doing well because the economy is bad.” Or, “I can’t get a job because companies are not hiring.”

Those ideas may be true in general for the economy, and they may be true for the average individual, but they don’t need to be true for everyone. We each have the skills, intelligence and tools to create our own future. If people are not buying a luxury product because the economy is in recession, then find a less luxurious product that people are willing to buy.

It is much easier to make money when markets are going down, anyway. There were more millionaires made during the great depression than in any other time up to that point in history. The question to ask is not, “Can I make money?” The question to ask is, “How can I make money in this economy?”

Opportunity is unlimited. Any 14 year old kid with a laptop can go to a cafe, get free internet access, build a business and compete with any huge company including Dell, Microsoft and Google. And that kid can start and own a business and become the richest person in the world. There is no shortage or resources. Only a shortage of ideas.

Investors and savers are concerned about the economy as well. As gas prices go up, food prices and everything else that we buy increases in cost. The government says, “inflation is low.” That’s fine that they say that, but it is not true. They make up all the numbers, anyway. If inflation is low, how is it possible that the price of food, housing and fuel have doubled in the last five years?

So, everyone with their wealth invested in mutual funds is seeing their value go down with the market. People with savings in CD’s and money market accounts are seeing the buying power of their money disappear because they are making 4%, but inflation is 14%.

But that is for average people. You are reading this, so you are not average. You can do something better, smarter and safer with your money, if you choose to.

Many of the above problems gave us the motivation and desire to find solutions. And the solution that we found is a way to make money no matter which way the markets are going. And, to do it safely, or at least more safely than any mutual or index fund.

Our finances, as with anything in life, can be made just the way we want them. The challenge is to find strategies that can make it happen. We believe that we have created the strategies to help millions of people throughout the world achieve their financial dreams.

Investing, Online Investing AI, US Economy economy, financial success, Success, US Economy

Today’s big news is that Fannie Mae and Freddie Mac stocks are crashing down. Fannie Mae and Freddie Mac are the largest lenders of home mortgages in the country. As home owners fail to pay their mortgages, lenders lose money.

As I write this, Fannie Mae is down 30% today. The image below is the stock price over the last year. It went from 70 to 7. That is a loss of 90%.

This stock chart teaches many lessons. The most obvious is that the future is not difficult to predict. The US housing market has been in trouble for years. It is common knowledge that lenders were selling loans that they knew their customers could not pay. That is why they gave them teaser rates that would readjust after a year or two. And, the customer knew they couldn’t pay as well, but they didn’t care. The consequences of not being able to pay their mortgage were in the distant future, and the pleasure of having a new house were in the present.

Another lesson is the lag in the chart. It has been clear that the US housing market has been in a bubble for years, but it the above stock only went down in the last year. Why did it take so long to see the results? Because the stock is a representation of the value of a company in the near term future. It does not represent the value of the company in 6 months, a year, or more.

For the executive team of most public companies, their top concern is hitting their numbers for the next quarter. This means they want to make their sales and profit projections for the next three months. Three months! This causes most public companies to make their decisions based on what will generate the greatest short term profit.

The catch is that what is good in the short term is often detrimental in the long term. This applies to both large companies and individuals. We all know that the apple is better to eat for our bodies in the long term, but we usually choose the chocolate because it tastes much better now! Its the same story for the home owner that leaves their future problems unsolved because they can get a new house now.

And, there is a final, more powerful and interesting lesson to be learned. I believe that the US housing market problems are just beginning. Things are going to get much worse for our economy, before they get better. More lenders will either declare bankruptcy or be saved by the US government. But the government is only spending the taxpayers’ money, so this merely pushes the problem further into the future. More people will fail to make their house payments.

The lessons of both history and the future are available for all to see. The question is, who will see the lesson and learn.

US Economy economy, housing, lenders, stock market, stocks, US Economy

Most Americans are totally unaware, but the the US dollar is losing its power. And not just its buying power.

Americans are totally unaware, but we have had a free ride for the last 80 years because the dollar was the default currency for the whole world. There was no country that could compete with America’s technology, economy, or military strength. Therefore, the dollar was the safest, strongest and best currency for all other countries to hold wealth. And, those factors made it the default currency for the pricing of such commodities as oil and gold.

This means that every country in the world would hold dollars in their central banks, and America could issue as much debt as it wanted. Because no matter how much debt is issued, other countries were willing to buy it. Its like a credit card with no limit. And American politicians borrowed and borrowed. They didn’t care; they knew that they would not be responsible for paying it back. And, even if Americans did end up paying it back, the politicians would pay the smallest amount. Think about it. They make the rules, so they make rules that work for them.

All good things come to an end, and America’s economic free ride is no exception. Changing technology, great equalizers such as the internet, and the rise of the European Union, China and India have made America’s strengths moot. In fact, America’s insurmountable strengths have been replaced by a nearly terminal weakness: the national debt.

As America’s debt soars, we can barely make payments on the existing debt. Social Security and Medicare are going to make our debt soar, and there is no political players on the horizon that can solve the problem.

So, that means the dollar has gone from the most desired currency in the world to being extremely weak. And the weakness will continue, as the debt grows, and other countries’ economies (China and India) become stronger.

The dollar has lost much of its value already. It has lost 50% of its value in the last 5 years alone. That is part of the reason that oil has hit an all time high (priced in dollars). And it will continue. As other countries start to sell the dollar, inflation will increase, and the dollar will lose more and more of its value.

US Economy china, dollar, india, national debt, US Economy