"smart money"

the biggest crock going on wall street is the concept of "smart money". i suppose, in one sense, it's not so far off in relative terms, since when the sheep start to panic sell (or binge buy), lots of folks who have seen it all before are always there to grab the bargains and sell the crap and take all the money, as far as that passes for "smart". but the real euphemism ought to be "insider money" (arrayed in the market against the "stupid money", so you can see how lopsided the contest is likely to be), and there ought to be a warning label (scratch-and-sniff to be fully appropriate) about how the insider money is always going to lie and steal in order to cheat you out of your fair share.

however!

unlike losing your money at a casino, where the house truly IS smarter than you, the good news about going into the market against insiders, liars and thieves is that they're not always terribly smart, nor even aware of you and your tiny portfolio, and they're actually quite easily manipulated themselves, if you're patient and thoughtful enough to find the opportunities.

take our recent discussions about citi and aig: in the process of fleecing the foolhardy who sold sold sold as their investments tanked tanked tanked, the greedy, lying, thieving robber barons kept riding the profit merry-go-round down down down to the point of silliness. 33 cents a share for an institution that any fool could see the government was never going to let fail? i'm quite sure the only reason they kept letting the price keep falling is that they knew there were still rubes panicked enough to want to get out at any cost, so why not keep waiting on the sidelines for the bottom to show up, and simply make that much more money when it was finally time to buy in?

now i'm not recommending trying to guess when the fat, greedy, lying, cheating cats are going to decide the bottom is reached, because that's where the idiots and the day traders get handed their margin calls. but i am suggesting that you can watch the shenanigans from the sideline and pretty much tell when the worst is over. (i.e. when the bank is finally forced to admit that they're actually running at a profit, so as not to deserve any more pork barrel handouts anymore, or when the "insurance" company cum hedge fund points out how far the losing positions have been unwound to much the same effect). so you miss the first 50% gains, (the pure profit of the purloiners, which should be another rant for another time and something for consideration for criminal charges), but you do catch the uphill-running tiger by its tail in time enough to stay for a nice profitable little ride. (like i said, i'm already safely out of citi and aig for the full amount of my original investment, and i'm sitting pretty with beaucoup shares of both, set aside to offset the burden of the taxation that will be necessary to have allowed their resurrection in the first place).

so the real suggestion is this: aig at a buck was a bargain. (it's not so bad at a buck fifty, either). there are a lot of folks in this country who could afford to take a flyer on 100 shares of it. (so why didn't/don't they???). the fact that today's market will dip at the start means that anybody and everybody can get in and grab some on the down-tick. no excuses.

somebody ought to be teaching the real world to kids in school, including how to balance a checkbook, how to calculate compound interest, and how to understand financial statements and equity markets to the extent of being able to recognize a stone cold bargain when it presents itself. the object is not to get rich or make a killing, (for that you need to become a lying, cheating thieving insider), but to get yourself of the equity side of capitalism before the interest and taxes side shows up to take all your lunch and retirement money. trust me, if you work for a living, you WILL be gouged and taxed (yes, cheated) out of a large portion of the fruits of your labors, in order to enrich the privileged few. the key is to get your feet into both boats, so to speak, and enrich yourself to a similar extent as you're getting fleeced, so it all ends up even.

rule #1: compound interest is the most powerful force in the universe. (maybe albert einstein actually said it, like is commonly attributed, or maybe he didn't, but that doesn't mean it's not true). compound interest IS the most powerful force in the universe. so get on the right side of it. save. (think of it as "pay yourself first"). never pay interest (or buy insurance) on anything not absolutely required. (it's hard to buy a house without a mortgage, and they get you with compulsory coverage on your car, too, so consider the fact that you're already losing big before you even get started). don't borrow or insure anything else except your health. no outstanding credit card balances. no service contracts. NOTHING. if you're already in debt, pay it off before you buy anything else. no new tv's. no new cars. no fancy dinners out. this is economic war, and you're losing. get back in the game.

rule #2: owners win. renting your living space can make sense in certain short-term conditions. it absolutely can be cheaper than burying yourself in debt in a bad real estate market. but there's a reason people become landlords, and that's because they make more in profit than it costs to own, and, guess what, you're the one footing that bill. goes double for equities. there's a reason businesses sell you tv's and cars and stuff. they make a profit. if you're buying that stuff, better make sure you're cut in for your share of the profit, or somebody else will be very glad that you're enriching them on both ends.

rule #3: republicrats are the enemy. yes, i know, many readers will urgently prefer to argue that it's really the democrats (or republicans) who are the enemy. only trouble is, the rest of the readers will urgently prefer to argue that it's really the republicans (or the democrats) who are the enemy. and guess what--they're both so wrong that it gives me ulcers just to think about it. repeat after me: republicrats are the enemy. the senate banking committee has been run by one or the other since we've all been born, and this mess is not because one or the other wasn't running it since we've all been born. think about it, and review the campaign contributions from aig and citi and all the rest of the worst of the worst. they've contributed lavishly to BOTH, because they know that as long as the two of them are kicking the committee chairmanships back and forth to each other like little cash-stuffed footballs, that the money train is going to keep on chugging and chugging for them and their graft-besotted pocket politicos. and that's what they want. status quo. republicrat hegemony over all the perks and pork. so STOP it. rip up your voter registration/affiliation and tell city hall you want a new one that says you're UNENROLLED. because otherwise they use you as a proxy down in washington (and over on beacon hill) to keep the never-ending debate about coke vs pepsi, i mean, republicrat vs republicrat, going non-stop so that no other competitors or ideas can ever wedge their way into the discussion. yeah, some will try to whine that the preponderance of democrats in boston makes being a republican somehow less offensive here in this state, but that's such a load of crap that i don't even know where to start. mitt romney chose his affiliation for the same reason that you need to stop yours. it's corrupt. period.

there WILL be a quiz.