- Posted by e2 on 01.29.09
- Tags Family Changes, Modern Family
Today I’m going to give you the most important investment advice you’ll ever receive. You should never invest again without doing this. This technique is something Warren Buffett knows, Sam Zell knows, Bill Gates knows, and Peter Lynch knows. It works for bonds, currencies, stocks, real estate, and the money in your bank account. Einstein called this technique the most powerful force in the universe. It should be the first financial lesson you teach your children.
Investor A starts investing in an IRA account at age 26. He deposits $2,000 into his IRA each year. He invests this money in a portfolio of safe stocks that pay 10% dividends. He continues these contributions until he retires at age 65. Investor B starts investing in an IRA account at age 19. He also deposits $2,000 each year and invests in the same 10% dividend portfolio. Investor B only makes seven contributions. After age 26, he makes no more payments. Their stock portfolios show no share-price appreciation. They just crank out 10% dividends each year. On their 65th birthdays, the two investors compare the balances in their accounts.
Investor A Investor B
Account balance $973,704 $944,641
Less contributions -$80,000 -$14,000
Earnings $893,704 $930,641
Money grew 11-fold 66-fold
Even though investor B only made seven contributions, he ended up with more money than Investor A, who made 40 contributions. The trick is, investor B started seven years earlier than A. So on the day investor A made his first contribution, Investor B had already accumulated $22,959 and his portfolio was spinning off $2,296 a year in dividends.
This study demonstrates the incredible power of compound earnings. Warren Buffett, Peter Lynch, Sam Zell, and Bill Gates all used it to create fortunes. The beauty is, it’s safe, it’s mathematically certain, and anyone can do it.
To compound your money into a fortune, you need four things:
Compounding takes time. The more time you give it, the more money it’ll generate for you. This is why it’s so important to teach your children about compounding. Time is the driving force.
You need commitment. Compounding is boring. It requires no trading, predicting, or risk taking. That’s because there is no risk. Most people don’t have enough self-control to let their investments stand for long periods of time.
You need to save. No one likes to save money… especially 19-year-olds. But for compounding to work, you need to save money from a young age.
Finally, you need a safe investment that generates interest, dividends, or retained earnings. Small increases in yield turn into huge increases in fortune when you compound over many years.
Right now, the government is doing everything it can to prevent you from using this amazing technique. It cut interest rates to zero. It’s inflating the money supply, which undermines true interest rates. And it would like to raise tax on dividends and interest receipts.
Fortunately, there are still ways to make compounding work for you. Take advantage of 401ks, IRAs, DRIP plans, and tax-sheltered investments like MLPs. They’ll defer your tax liabilities until you’re finished compounding. Look to the stock market for safe, high-yield investments. The financial crisis was a huge stroke of fortune for young income investors. The safest municipal and investment-grade corporate bond funds are paying yields over 10%. The riskier ones will pay you over 20%. You can make 20% income by selling covered calls on the strongest American blue-chip stocks. Even boring pipeline investments pay 10% dividend yields.
If you want to be rich, you should build a portfolio of these safe, high-yield investments, shelter them from tax, add to your account every year, and let your earnings compound for 40 years. You’ll easily accumulate a million dollars, and probably a lot more.
- Posted by e2 on 01.28.09
- Tags Site Review
Nowadays, anybody with a computer and an internet connection is ready to start broadcasting to the whole world, for free. Online tools make publishing on the internet extremely easy and accessible to people with hardly any technical knowledge.
The phenomenon of democratized media results in a landscape of millions of micro-media, most importantly in the following forms: Weblogs (or blogs), web pages that are extremely easy to update, published by one person or a group. Most recent ‘posts’or articles are displayed at the top. Blogs typically offer the possibility for readers to leave comments on posts, which typically leads to dialogue. Creating a basic weblog is free, and every weblog is globally accessible. This form of media come with a universal technology for distributing content over the Internet: RSS. RSS is a very important part of all three technologies, as it allows consumers to literally subscribe to content.
Payingpost.com, a new advertising agency on the net, already prepared for extremely precise targeting of consumers. Their new technologies will enable advertising messages to be specifically targeted at people who find the message relevant. They have learn to understand ‘last mile’marketing: producing a piece of advertising for an extremely targeted audience.
Payingpost’s blog marketing campaign program is already set up to communicate with consumers in a fair, transparent way. They are producing campaigns that actually blend in with their context, rather than campaigns that arrest viewers because they stand out in magazines, newspaper pages and television content.
Payingpost has a completely new type of creativity, a way of working that might be compared to that of today’s public relations industry. They play a pioneer role in adapting the new virtues of the social, conversation-enabling internet.
Payingpost has also created a marketplace where advertisers can pay bloggers a fixed amount to blog on their product or service. Advertiser’s can set a maximum limit that they want to spend on posts and then payingpost members will create a post on their blogs about the advertiser’s product or service.
- Posted by e2 on 01.25.09
- Tags Family Changes, Modern Family
The current economic problems have their roots in one major thing: the vast expansion of debt in the United States over the last three decades. Americans have borrowed far more money than they can ever hope to repay. Much of this debt is tied to residential real estate, but there are also record amounts of credit-card, commercial real estate, and public (state and federal) debt.
Starting in 2006, when mortgage debts began to sour, asset prices began to fall – even though employment and wages remained strong. The only time that’s ever happened before was in the early stages of the Great Depression. This marked the beginning of the great "unwinding" as the excess debt began to unravel. The result has been a sustained decline in the underlying asset prices upon which layer after layer of debt had been securitized.
Declining asset prices and the large amount of mortgage debt already outstanding make it virtually impossible for the private sector to create any additional credit. And because Americans (in aggregate) have not saved a penny in almost a generation, there’s no way to keep the economy going. Americans have become credit junkies. Without more credit, America’s economy falls apart. But according to the Federal Reserve, outstanding U.S. consumer credit fell in November by $7.9 billion – the largest monthly decline ever. That’s a 3.7% annualized decline in consumer credit. That’s never happened before – not since 1943, when the records begin. Credit-card balances declined by $2.8 billion, and auto loans declined by $5.2 billion.
The declines in credit made a huge impact on consumer demand. Car sales fell by record amounts in December (32%), and retail sales fell across the board at Christmas. It was the worst holiday retail results in more than four decades. These declines to credit set the stage for what would normally be a long-lasting recession and a massive decline in asset prices. Imagine how far car prices would fall if it became impossible to get a car loan. Imagine how far home prices would fall if it became impossible to get a mortgage. But the U.S. government has one weapon no other country has – the world’s reserve currency.
The government clearly plans to make up for the shortfall in consumer demand by increased spending. The U.S. budget deficit for 2009 is now projected to be $1.1 trillion – more than 8% of GDP. Only during World War I and World War II did the government ever have bigger annual deficits. None of these figures include any of the new stimulus packages Barack Obama has promised, which means the actual deficit next year might grow to $2 trillion – around 15% of GDP.
Given our total debt already exceeds $10 trillion, it seems improbable this level of deficit spending can continue without sparking a run on the dollar via foreign governments selling U.S. Treasury bonds. No one believes our creditors will ever sell the dollar. But they’re wrong. Our creditors will not allow us to print money forever. South Korea is one of the largest holders of U.S. Treasury bonds. On January 19, the head of investments for South Korea’s government pension service, Kim Heeseok, told Bloomberg, "It’s time to sell U.S. Treasuries" because the ongoing stimulus is going to cause inflation. We are squandering and destroying the greatest advantage of our country – control over the world’s reserve currency.
In 2009, we will see government spending approach 30% of GDP. Our government is now bigger, as a percentage of our economy, than the socialist states of Europe, excluding their health care expenditures. And these figures don’t reflect the Federal Reserve’s actions. The Fed has tripled the size of its balance sheet, creating enormous amounts of new money by lending to hundreds of ailing banks and buying up more than $1 trillion worth of questionable asset-backed securities. This month, the Fed pledged to buy yet another $500 billion of Fannie- and Freddie-guaranteed mortgage securities, helping to force mortgage interest rates down.
This is how America ends – with the lie that we all can live at the expense of our neighbor and borrow endlessly. Rather than simply face a downturn in the economy, we plan to borrow trillions of dollars our children and grandchildren will be forced to repay. Rather than let all those people and institutions that took on too much debt (like GM) be liquidated and restructured, we plan to risk a hyperinflation. Rather than insist homeowners who can’t afford their mortgages lose their homes, we would jeopardize the credit rating of the country. It is all madness. None of the government’s bailout plans will solve any of the problems. The government can only shift the burden of the failures. Instead of bondholders and shareholders being wiped out, taxpayers are put on the hook. These actions will temporarily resuscitate the economy – but cause a permanent decline in the value of the dollar.
Fortunately for us, we have several ways to protect ourselves from what will happen. First, make sure to own physical gold and silver. A dollar run will send precious metals much higher. Second, own the highest-quality stocks in the world. And third, sell any long-dated U.S. government bonds you own. As the dollar loses its value and inflation returns to the economy, much of the value of these government IOUs will be wiped out. I’m not happy to be the one to tell you all this. I hope I’m dead wrong. But it’s paramount you take at least some measure of the precautionary steps I’ve just described. Bigger government is coming… and in the long run, it’s going to make things worse.
For the holidays, myheritage.com offered their users a 50% discount on their Premium subscription. This was received well and many people have asked them to extend the deadline to give them some more time to take up the offer. So they have extended it.
EXTENDED OFFER: Until January 31 2009, you can purchase their Premium subscription for 50% off. For a very low price of US $24 a year (or just $38 for two years) you can get: Up to 2500 names and 500MB of storage (about 500 photos) in your online family site. Premium features of Family Tree Builder 3.0 (current and future) Priority support.
One last bit of news: they have recently partnered with the company that pioneered genetic genealogy – FamilyTreeDNA. Myheritage.com chose them because they have the highest quality of DNA research. Together they are offering reduced-price DNA kits to help you uncover your family roots through your DNA and get past brick walls in your family research. If you’ve ever considered doing a DNA test or want to learn more, this is a good opportunity to get started at a lower cost.
