Just about everything you have been told about Social Security is an obfuscation. That is a big word for convoluted truth or lie.

In a recently published obscure government document by the presidential Social Security commission there are two pages that expose the truth. Neither Democrats nor Republicans want you to read this. Shining the light of truth on the weirdness of politicians seldom makes them happy; however, you owe to yourself to know the truth.

When they take out from your paycheck for FICA – that’s the SS deduction – the money is sent to the Social Security Trust Fund. Your money is held in the fund for some future date when it is returned to you upon retirement. During that time it is gaining interest at about 2%. Pretty shabby, but better than nothing. This is all well and good as long as the money is really there, but it isn’t. What?

Now follow me with this beautiful bit of political sleight of hand. The money is invested in U.S. Treasury bills. Good, sound and safe as it gets. Right? Wait. Let’s understand what has happened here. The Federal government has issued pieces of paper called Treasury bills which they have created out of thin air and replaced your real money. The Fed has borrowed your money in the trust fund and given you a promissory note in the form of a Treasury Bill. That money has now been transferred to the General Fund where our honest politicians spend it on whatever piece of pork they want. That does include necessities such the Army, Navy and Marines, welfare recipients and government employees like Senators and Congressmen.

Let’s jump ahead to your retirement date maybe 20 or 30 years from now. You and thousands like you have been putting in billions for all these years and Uncle has been printing T-Bills. Now you want your money back. Shucks, anyone knows you just cash in the T-Bills. Where does the money come from for the T-bill? From the government that created it. That means those funds must come back out of the General Fund, which is composed of taxes. But they already spent it. It’s gone. Something is wrong here.

The Fed took your money and put a piece of paper in its place as a promise to pay when the time came, but they did not back it up with anything except a promise to pay. All returns to SS retirees comes back out of payments by others now paying into SS. But what if there is less money being deducted for FICA at that time? It is called a shortfall. What the Fed has created is a giant Ponzie scheme where the first people who invested in it get paid, but those who came in later get less, little or maybe nothing.

As long as there is a Federal surplus or a balanced budget you are OK, but when that disappears it means taxes on everyone must be raised to pay for the SS benefits. Smoke and mirrors.

Politicians don’t want you to be able to invest any of your own money because it means they will have less to spend and could care less what happens 10, 20 or 30 years from now as they will be long gone.

That is the truth about your Social Security Trust Fund. There isn’t any and never has been.

Perhaps we were asking the wrong questions this past election.

Our Senators/Congressmen do not pay into Social Security, and therefore they do not collect from it. Social Security benefits were not suitable for them.

They felt they should have a special plan. Many years ago they voted in their benefit plan. In more recent years, no congressperson has felt the need to change it. After all, it is a great plan. For all practical purposes, their plan works like this:

When they retire, no matter how long they have been in office, they continue to draw their same pay until they die, except that it may be increased from time to time by the cost-of-living adjustments. For example, former Senator Bill Bradley (New Jersey) and his wife may be expected to draw $7,900,000 over an average life span, with Mrs. Bradley drawing $275,000.00 during the last year of her life. Their cost for this excellent plan is zero, nada, zilch.This little perk they voted in for themselves is free to them.

You and I pick up the tab for this plan. Our tax dollars at work! From Social Security, which you and I pay into every payday for our own retirement, with an equal amount paid in by our employer, we can expect to receive an averageof $1,000 per month. We would have to collect our benefits for 68 years and 1month to equal the Bradley’s benefits.

Imagine for a moment that you could structure a retirement plan so desirable, that worked so well, that Railroad Employees, Postal Workers,and others who were not in the plan would clamor to be included. This is how good Social Security could be, if only one small change were made.

That change would be to jerk the Golden Fleece Retirement Plan out from under the Congressmen & Senators. Put them into the Social Security plan with the rest of us. Watch how fast they fix it!

If enough people receive this message, maybe a seed will be planted and maybe good changes will evolve.

Our girl Hillary Rodham Clinton now comes under this Congressional Retirement Plan. Sspeaking of the Clinton’s, it’s common knowledge that in order for her to establish NY State residency, they purchased a $million-plus house in upscale Chappaqua, NY. Makes sense.

Now, they are entitled to Secret Service protection for life. Still makes sense. Here is where it becomes interesting. A residence had to be built in order to house the Secret Service agents. The Clintons now charge the Secret Service rent for the use of said residence and that rent is just about equal to their mortgage payment, meaning that we, the tax payers, are paying the Clinton’s mortgage.

And it’s all perfectly legal.

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

We need a rabbit!

This was a pretty horrible week for the market with two 100-point days and Friday closing on the lows.

During these past few days Sir Alan told us things are looking up and the economy is basically strong. Mr. Market didn?t hear him. It seems that jaw boning can?t get people to buy. In fact there were more sellers than buyers.

If you go back in history it is a truism that has become conventional wisdom that the stock market goes up during an election year. The reasoning is obvious. The president – who ever he is – in office will pull out all the stops to create the illusion that the economy is in good shape and he is the one who takes credit for it. Both Mr. Bush and the Fed chairman better get their best top hat out and reach way down for that white rabbit.

It is going take some real magic to get folks in a buying mood. The lower it goes the less likely they are to buy. Of course, brokers are calling and telling investors, ?This is the break to buy. Stocks are cheap. Better get on board now. You can?t let this opportunity pass by. You can?t afford to be out of the market.? And on and on with the platitudes. Don?t believe any of that hog wash.

What brokers should be telling investors is to protect their money by placing stop loss orders. You can be sure that won?t happen. The big brokerage firms frown on stops and punish brokers who encourage customers to use them. Fortunately, when I was a broker I worked for company that did not penalize this concept and I refused to take a customer who would not place stops when they bought something. That is why I never lost customers and had them for years.

This year the major indexes (DOW, S&P, and NASDAQ) are down. Not a great deal, but definitely lower. This means for those who invest in index mutual funds that they are running a loss. Brokers always say, ?You are in for the long haul? so not to worry about what is happening now. That?s what they told you in 2000 and you still have not recovered your losses from then.

No brokerage firm tells the true story of the secular bull and bear markets. These have occurred with great regularity for the past 200 years and will, if history continues to repeat, follow the same course. The shortest secular bear has been 8 years and the longest 25 years. At a minimum we are not half way through this one. Prudent investors (and I hope that?s you) will protect their portfolios with stop loss protection on every position. Every broker and financial planner will advise against it, but it your money not theirs.

The market is not magic. Hocus pocus and white rabbits will not make it go up for very long. Illusions are not where it?s at. Forget the brokers? abracadabras and place your stop loss protection today.

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

1-888-345-7870; al@mutualfundstrategy.com

Wall Street has been preaching the doctrine of Buy and Hold forever. The worst part about it is the small investor (and some big ones) actually believe it. Brokers and financial planners believe it, but when you show them they can get a better return by timing the market they just say, It can’t be done. They are either lazy or stupid.

Most brokers have not learned their trade – investing. Webster says that means putting money into something (stocks) for the purpose of obtaining an income or profit. When people look at their brokerage statements these days they must wonder where their broker went to school. Investors could have done better with a dartboard.

Brokers are not taught to make money. They are taught all the regulations that come out of Washington that must be followed so the brokerage company will not be sued. To my knowledge none of them are taught the basic fundamentals of increasing customers’ wealth or protecting the customers’ capital from loss.

Brokerage houses hire people to do reports about companies. They call them analysts, but today those jobs have deteriorated into snow jobs to get people to buy stock in a particular company. When you read the report you will find it very professionally done with pretty pictures and graphs and charts. Wow! I’ll buy that. And a few months later you will wish you hadn’t. When you have a loss the standard reply is, Don’t worry. You are in for the long haul. The market always comes back. In your lifetime? Today there are hundreds of stocks that have lost 50% to 90% of their value and there is absolutely no hope they will ever recover those losses. But?.you are in for the long haul. You now have the Buy and Hold philosophy.

Why do so many people cling to this doctrine?

You have a stock you bought for $40 per share that went up to some profitable number and now is down below $10/share. You’re out 75% of your money. You are waiting for it to go back up so you can get out even and I will tell you even is a loser.

Many years ago I heard a story about how they used to catch monkeys in Africa. A hole was made just big enough for the monkey to get his outstretched hand in a hollowed out coconut shell. Fruit and sweets were placed inside. The monkey put his hand in and gripped the goodies, but could not remove his clinched fist. It refused to let go even when the hunter came to put him in a cage. All the monkey had to do was let go of the candy and he could have escaped.

Many investors are the same way about the stock they bought. They won’t let go. The investor does not want to admit he was wrong. You are not wrong until you sell – just broke. Small losses will not hurt you, but holding on can put you in the poverty cage. Buy and Hold conventional wisdom will break you. Learn to let go of the losers quickly and you will preserve your capital.

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

Every day I hear from the ?experts? on CNBC-TV and the radio gurus that the way to buy stocks is find value. One man?s Rembrandt is another man?s connect-the-dots and fill in the spaces. Valuation is like beauty. It is in the mind of the beholder.

If valuation is the key to buying stocks then there should be some kind of a formula to determine what is undervalued and over-valued. In every industry there are formulas for standards of performance. For cars we want to know the zero to 60 miles per hour in how many seconds. For soap we want it to be 99 and 44/100 percent pure. For alcoholic beverages it could be how long it has been aged. And on and on.

Yet in the stock market we have no hard and fast set of rules by which to judge a company performance. Ah, and there?s the rub! No matter how good a company performance might be it may have no bearing on the price performance of the stock. You can find good companies that are within a sector that is doing poorly and yet one company can be making huge profits and sales, but the stock price is going nowhere. There need not be any correlation.

When you are in a bull market almost every stock goes up ? even the dogs. When you are in a bear market almost every stock goes down ? even the best ones. We ended an 18 year bull market in 2000 and almost without exception every stock headed for the exit.

Bull and bear markets follow relatively standard patterns of about 16 to 18 years up and 16 to 18 years down and the valuations go right along with them. If you own stocks or especially index funds during the bear periods you will be lucky to have broken even at the end of the 16-year cycle. Cash in your mattress will outperform market returns while the bear is in charge.

During these bear times there will be periods when the market will have a nice advance such as the one we saw start in 2003. These intermediate rises can ultimately bring many investors back into the market only to lose it when the rally is over and true valuation returns.

One valuation measurement for the overall market is the Price/Earnings ratio of the S&P500 Index. The median number for the historic purposes has been around 14. Today it is running about 21 which is considered high. When bear markets end the P/E can be about 6 or 8. There are other factors to be considered when buying any stock or fund, but the one thing that is most important is to have an exit strategy. Without one you will give back your profits.

No one knows exactly where the top or bottom of a market move will be. Knowing conventional valuations is one tool to help your buying and selling decisions.

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

On Monday, November 25, 2000 Investor’s Business Daily listed on page B1 the Top 25 Growth Mutual Funds for the last 36 months along with their performance for the year 2000 to date. Only four showed a profit this year of 21% and the other three had increases of 12%, 5%, and 5%. Fifteen had loss of from 10% to 28% and the other 6 were down slightly.

In the column next to them there is a list of Top 25 Growth Funds for the past 3 months for the year 2000 to date. Only 2 had increases in price for the year 2000, 4 were even and all the rest are showing losses for the year.

Now pay attention and think about this next sentence. Not one mutual fund appears in both lists.

What is the significance of this? It very simply tells you that buy and hold is NOT the way to make money with mutual funds.

I have been preaching for years to buy only no-load mutual funds and hold them only as long as they are going up. When they stop going up you sell them (paying no commission) and find another fund that is going up as the place to have your money. In this current bear market the latter is hard to find so what do you do? Put your money in a money market account and don’t worry about the market going down and dragging your investment with it. Protect your capital!

Don’t throw up your hands and say I can’t do that because my broker says to buy and hold – the market always comes back. It is not his money. It is yours. You must be the one to initiate the action to protect your capital. Brokers are not taught how to do this. I know – I used to own a brokerage company.

Brokers have been smart enough to learn, but taught all the wrong things when it comes to investing money. They claim you can’t time the market. WRONG again. They never encourage you to place stop-loss orders so you won’t lose all your money when you buy a new stock or fund and they never encourage you to use a trailing stop to protect the profits you have made.

I know there are people reading this column who have had stocks that have doubled, tripled, even more and now have that same stock that is now selling for less than they bought it.. Where was your broker when all this was happening? If he is so smart why didn’t he tell you to sell at the top? This also applies to mutual funds.

What I am trying to get across is the simple message that you cannot buy and hold. The secret every knowledgeable investor knows is to protect his capital first and then to protect his profits second.

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

What are you thinking when it comes to your no load mutual fund selections? Are you saving pennies and sacrificing dollars?

Are you spending your time looking at expense ratios, analyzing Morningstar ratings and searching for funds with low fees and no 12b1 charges? If you are like most people, you know these things in and out. You’ve spent hours evaluating them, and your chosen mutual funds cost little to purchase and maintain. But they still don’t perform to your hopes and expectations.

So, why is this happening? Because this kind of investing focuses on cost as opposed to value.

Investors with this philosophy have usually interviewed numerous advisors. But instead of trying to find someone suitable with a sensible approach, they only want to know who has the lowest fees. That’s like going to the cheapest auto repair shop and getting the best price, but your car still doesn’t run well.

Then there are the investors who call or email me wanting a recommendation on a no load mutual fund. They want one with no 12b1 charge, but they completely ignore the issue of how the fund might perform.

Both these kinds of investors spend their time trying to save pennies and in the process they are losing dollars. Instead of falling into the penny wise, dollar foolish trap, here are some ideas that will assist you in evaluating the end profit rather than just the short term saving.

1. Shift your focus from penny pinching to looking at the big picture: What can a mutual fund or an advisor do for you, not how much does it cost? Why? If you buy a given no load mutual fund at the right time and it gains a tidy 15% for you over a 6 week period, would you really care about the costs? If a mutual fund?or an advisor for that matter?can give you superior performance and an increase of several percentage points over your bargain price pick wouldn’t you pay an extra 0.25%?

2. Consider finding a fee-based investment advisor who uses a facts-based methodology and has a track record indicating those kinds of returns. For example, in my own practice I used a trend tracking approach to get my clients into the market on April 29, 2003. Plus, our research and homework led us to recommending funds that gained anywhere from 11.50% to 22.00% over the following 6 week period. How did you do during that time? Do you think any of my clients care whether one of these funds has a small 12b 1 charge? Or whether they have the lowest expense ratios in the industry? I know they don’t.

The bottom line is to look at costs as balanced by performance and that’s where you find value. Then seek true value not simple savings, enjoy healthy dollar-level returns and don’t sweat the pennies.

About The Author

Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless of people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: www.successful-investment.com; ulli@successful-investment.com

Did you run out to buy that duct tape yet? Don’t forget the plastic sheeting, bottles of water, canned food and a couple of books to read. What are you waiting for? I know – things to get better so you can resume your normal life style.

While you were waiting did you happen to notice what is happening to your investment portfolio, your retirement account? For the past 3 years it has needed duct tape and plastic sheeting to protect it from the poison gas coming from Wall Street. The gases, otherwise known as hot air, are the news flashes the brokers have been telling you. Surely you have heard – the market always comes back, hang in there, you are in for the long term and other such noxious odors have paralyzed investors to keep them from selling. There was one breath of fresh air you have not heard from your broker and is the one bit of pure oxygen that could have saved your account. Listen carefully and you might hear – SELL.

It is a word hardly ever uttered on Wall Street, but one which you should add to your vocabulary if you ever plan to make a profit in the stock market. Brokerage companies don’t want you to sell because they don’t make any money with your account if you are in a money market fund. When your stock or mutual fund started down did you get a call? Even when a stock loses 80% or more of its value they then change their recommendation from Buy to Hold – and you know where you are holding it.

Any fool can buy, but it takes a wise man to sell. Bernard Baruch, one of the most famous traders of all time, said, I always sell too soon. He was enjoying himself reading a paper on a park bench while stocks were crashing in 1929. The DOW lost 89% of it value. We have not been that unfortunate – yet. However, the NASDAQ has dropped almost 80%. If you owned any of those tech stocks and did not have a trailing stop-loss order you have given back all your profit.

It takes more than duct tape to protect yourself from death and destruction and that goes double for the information from brokers and financial planners. If they have kept you in the market these past 3 years with the Buy and Hold mantra don’t you think it is time you plastered some duct tape on them so you can escape that bad gaseous advice? You might not think yourself to be knowledgeable about investing, but surely you would have had enough sense to sell when a stock or fund loses 20, 30, 40% or more of its value. At 50% loss it means it has to go up 100% to get to even. You don’t want to get even; you want to get rich.

Before that poison gas from Wall Street completely kills your account get some fresh air – SELL.

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

Why? Because I am going to shatter your conventional wisdom as I have many times in previous columns about the lies that Wall Street continues to tell you. This time we are going to go deeper into the economy to unearth the truth about lies the politicians are telling you.

Let?s understand from the beginning that few politicians understand basic economics. Just because they work in Washington does not make them experts about the laws that have been passed or those they vote upon. Politicians do not create jobs or wealth. Don?t feel you are the only one who can?t make head or tail out of government statistics.

The most misunderstood debate today is about OUTSOURCING. ? sending our jobs overseas. From March of 2001 to January of 2004 manufacturing jobs declined by 2.6 million ? a loss of 17%. BUT during that same period there was an increase of 17% in worker productivity and only a loss of 3% in jobs. More goods produced with fewer workers. Those jobs did not go overseas ? only 300,000 did. The majority were lost to better machines and will never reappear. If employment efficiency had not increased we would have even higher unemployment today.

That is why unions hate new machines. Loss of jobs. If a company wants to remain competitive they must be able to produce at the least cost or you won?t have a job. Do you think you would have your job today if your company continued to operate they way they did 5 years ago? Employment continues to increase every quarter even though we lose about 7% or 8% of U.S. jobs every quarter.

Has anyone told you that thousands of foreign companies have opened plants in the U.S? We don?t hear about the small ones only the BMWs, Toyotas and Hondas. According to Peter Drucker, management consultant, we import more jobs than we export. Jobs increased by millions after NAFTA and because of NAFTA.

Will these layoffs continue? It depends upon your industry sector. According to the Bureau of Labor Statistics there were more mass layoffs (50 or more) during this January than any previous January in history – 239,454 ? 1/3rd of those are in manufacturing.

The U.S. is still not producing enough new jobs to keep us even; that requires more than 150,000 new hires each month.

Political demagoguery blames everyone and anyone who is in office. Whoever the president is is the one to blame ? rightly or wrongly. Every industrialized country today has a problem with excess production capacity and is doing weird things to keep their workers on the production line. We are not the only ones with job losses. That does not make the guy in the unemployment line feel any better.

It is our productivity edge that has kept as many jobs as we have now or it would be a lot worse. Free trade is the answer and not tariffs on other country?s goods. As I have written before tariffs are hidden taxes on the consumer and benefit no one. They have NEVER worked in all of history and make more problems than they solve.

Don?t listen to the political rhetoric. You may not like what I have said, but maybe it will start you thinking.

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

1-888-345-7870; al@mutualfundstrategy.com

If you have been dealing with mutual funds for any length of time, you undoubtedly have faced the question of which is better: Load Funds or No Load Funds. If you are new to investing, load simply refers to the commission paid to the broker selling the fund. No load means there is no commission on the purchase or sale.

Most discussions in the past have centered exclusively on performance comparisons. Even rating services like Morningstar have occasionally chimed in with their opinion. However, rather than focusing only on performance, there are some other issues I consider far more important:

Ever have one of those sample boxes of candy? Each little piece is beautifully wrapped in colorful foil or decorated with an interesting design. Taste just one. So good! One more. And another. Before you know it the box is empty. Nothing left.

This upmove in the stock market is very tempting – and could leave you with a tummy ache.

All the market experts are telling you that the bull market is back and to get your buying clothes on. Open your wallet and get in before it is too late. Mr. Schwab says it is dangerous to be out of the market. There are great values out there. These stocks are so low they can’t go any lower. And there is a Santa Claus and an Easter Bunny.

There is one position I do advocate, but most broker and financial planners won’t like it. It is called CASH. No broker believes cash is a position. They say you must always be invested. It seems they have forgotten that investing means making money and another important part of investing means not losing money.

For the last month we have seen the market go up and some of you have seen some of your money come back. Not too much, but some. You want desperately to believe the bull market is back and your winnings will be restored. I sure hope so. Just suppose this is what is called a rally in a bear market and that it will not last. Then what? You don’t want to see your investments slip away again, do you? You don’t know if it is a good idea to sell now or wait. Your broker won’t be any help.

There is a solution. Stay with your stocks and mutual funds as long as they are going up, but sell them if they go down. How? Every Friday after the close you get the settlement prices of your various issues and you then call your broker Monday morning to put in a Good Til Cancelled Stop-Loss Order that is approximately 10% below that closing price. As long as the stock is going up you follow this procedure every week and eventually you will be stopped out. Never move your stop down. You no longer have to guess if this is the highest price that your stock will reach. The stock itself will tell you.

Now you have cash and, if you want to, you can buy a better stock or mutual fund that is going up..

When you pick out a new chocolate (stock) do it carefully and don’t try to eat the whole box at once. Sometimes it is best to put the box (your cash) away so you can come back to it another day.

Al Thomas’ book, If It Doesn’t Go Up, Don’t Buy It! has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870