I have been in business since I graduated from law school in 1993. My husband and I started our own tiny little law firm and we practiced law for eight years before entering the world of real estate development in 2001. Real estate went well for a dozen years, until I made the mistake of partnering with the wrong guy. That partnership has given me tremendous insights into what makes a bad business partner.

Sign # 1: An Unsavory Past

The first sign that you have a bad business partner is if you find out that your partner has an unsavory past. He associates with criminals and shady characters. He evades tax. He prefers the criminal element. He is comfortable with illegality.

My ex-partner was charged with conspiracy to commit murder along with two accomplices in the early 1990’s. He allegedly tried to hire a hit man to kill a former business partner of his with whom he had a falling out. He was arrested with $16,000 in cash in his sock. Soon thereafter, he was also charged with possession of $2 million of stolen property, including Rolex watches straight from the factory, paintings, and jewelry.

Sign # 2: Loves to Litigate

The second sign that you have a bad business partner is if he loves to litigate. It appears that your partner has sued every person with whom he previously went into business. He believes the courts are the place to resolve disputes.

My ex-partner launched ten lawsuits in the decade before I partnered with him. He sued his employees; he sued his lawyers; he sued his former business partners; he sued his competitors; he sued his wife.

Sign # 3: An Unethical Business

The third sign that you have a bad business partner is if he makes his money offering unethical services. His business provides no lasting value to its clients and customers. He makes money off a service that doesn’t work. He takes advantage of desperate people. He permits unethical behaviour in his business. He sells goods and services that are ineffective.

My ex-partner runs a business that does not work in the long run for the vast majority of his customers. The product has been called dangerous by many in his industry. He had to pay approximately $800,000 to a customer who died using his product.

Sign # 4: Denigrates Those Closest to Them

The fourth sign that you have a bad business partner is if he is prepared to denigrate the people that are closest to him. Rather than treasure his spouse, he puts her down and belittles her. Rather than be loyal to his friends, he talks ill of them behind their backs. Rather than give credit to others, he takes all the credit himself. If someone is prepared to do that to the people he “loves and respects”, imagine what he will do to you.

My ex-partner made derogatory statements about his wife even though he was still with her. He was unable to keep friends because he kept betraying them. He would end a long standing friendship over a few dollars. He didn’t value the people closest to him.

Sign # 5: A Vengeful Personality

The fifth sign that you have a bad business partner is if he demonstrates an overriding desire for retribution. Everything is personal. He doesn’t consider the sensible move or the logical solution. He must punish you for what he perceives you have done to him. And he will lie to accomplish his malign objectives.

My ex-partner refused to sell his half of the business back to me despite an offer that he would receive all of his money back plus a significant profit. He also refused to sell the business privately to maximize its value and ensure everyone was paid back and made a handsome profit. He preferred instead to destroy the value of the business to punish me and to ensure he got his revenge. And he lied to accomplish his objectives.

Sign # 6: No Remorse

The sixth sign that you have a bad business partner is if he shows no remorse. He is never wrong. He is prepared to spend whatever it takes for someone to say that he was right. He will manipulate the process through his high priced advisers for whatever the cost so long as it fulfills his malign objectives. He never wants to have to apologize. He never wants to be wrong. He will pay any price to not have to admit he was mistaken.

My ex-partner hired lawyers, receivers, accountants and private detectives all to try to show the world that he was right and I was wrong. He showed no remorse for destroying our business. He was happy to cause personal damage. He seemed happy to destroy the financial lives of anyone who crossed him. He manipulated the facts with the sole objective of trying to show he was right.


Due diligence about your proposed business partner is critically important. Ask his peers about him. Check out his past behaviour. Had I known beforehand about my ex-partner’s past and personality traits, I would like to think I would have chosen differently.

If you are thinking of partnering with someone who demonstrates the above characteristics, RUN AWAY…don’t walk, run! No matter how good the partnership sounds now, it will end badly. If you are already in business with one of them, plan your exit now, and quickly. People like I have described make very bad partners. They will destroy you if you partner with them.

How To Save Money On Stamps

Once again, the price of stamps was raised by a penny, making the cost of mailing a simple domestic letter forty-six cents each. Since I forgot about it at the time, the surprise made me think about stamps, and the amount of money I spend on them annually. Further down, I will share some great ideas I had for chopping that number down.

Hopefully you purchased some Forever Stamps before the hike. If not, let that be a lesson to do so before the next rise in rates. The postal service also announced a brand new forever stamp. Known as the Global Forever First-Class Mail International, they only cost $1.10 and will get a one-ounce parcel to any country on the planet. You can also send a Canadian pal a two-ounce envelope with this stamp.

Now that you know you can stock up on Forever Stamps for your domestic and international correspondence, let’s also take a look at ways to reduce your dependence on stamps:

  1. Don’t send as many letters, notes and cards. E-mail messages are faster and easier than snail mail.
  2. Use online bill pay. Virtually every utility company and phone service provider takes online payments these days. You might even be able to pay your rent or mortgage while on your home computer. Look for the secure lock on the site URL, and rest assured that your information is safe.
  3. Fax is still an option. Although not as popular as before the internet, faxes are a great way to deliver documents almost immediately. Always ask for permission to use the fax machine at your job unless the transfer is specifically job-related. Many home printer/scanner devices have a fax option as well, which means that you probably have the means to send faxes from your home already.
  4. Stamp collectors and outlets often have old stamps that aren’t collectibles. You can usually get these vintage stamps at a slight discount from their face value.
  5. Forever Stamps are the perfect solution because price increases will never diminish the value of these stamps.
  6. Bulk purchases through Costco and similar retailers sometimes include a small discount as well. is a good list of places to get stamps at good prices

How Much Does It Cost to Repair a Home’s Sewer Main?

Sewer repair is a messy job, but when the line backs up, repairs are necessary. Depending on the extent of the damage, an entire replacement may be necessary.

No matter what type of repair is needed, you can expect to spend quite a bit of money to get the job done. How much does it really cost to repair a sewer main?

Initial Signs of Sewer Main Problems

Before diving into the costs of repair and replacement, it’s important to talk about the initial signs and symptoms of sewer main problems. If you catch these warning signs early on, the repairs will be far less costly than an entire sewer main replacement.

Here’s what to look for:

Flooding Around the Perimeter of the Home

Wastewater should stay in the ground where it belongs. When wastewater floods around the yard, the perimeter of the home or on the street, it’s a sign that the sewer line is either clogged or broken.

Call in a plumber if you see flooding around your home. A plumber will fix the problem and help keep your sewer healthy.

Clogged Pipes

Clogged pipes may be a sign of a sewer main issue, but it may also just be a simple clog. If you hear bubbling sounds coming from the toilet, it may just be a pipe clog that’s causing the problem.  

High Water and Sewer Bills

If you’ve been living in the home for a while, you should know your average water and sewer bill. If you see a sudden spike in your sewer and water bills, it may be a sign that something is wrong. Significant changes typically indicate that the sewer main is broken.

Clogged Drains

Drains get clogged from time to time, but if you’re clearing clogs every week, something may be wrong with the sewer main.

The Average Cost of a Sewer Main Repair and Replacement

Sewer repairs are never cheap. While costs will vary depending on the extent of the damage and the plumber, most homeowners can expect to spend about:

  • $2,000 for repairs
  • Between $1,300 and $2,700 for replacement

Yes, the costs are high, but this is a home repair that you can’t put off.

Excavation Repair

Traditional sewer repair methods require excavation before any pipes can be repaired or replaced.

Your plumber will need to find and dig up the trouble area. That means having to dig up your yard, which can ruin your landscaping, driveway or your patio.

All of this adds up to you having to spend a lot on repairs and replacement. If excavation is needed, costs can easily reach $20,000.

Here’s a breakdown of the costs:

  • Land clearing: $2,500
  • Land excavation: $2,600
  • Sewer cleaning: $300

You’ll also need to consider the costs of repairing your lawn and any hardscapes (patio, driveway, etc.) that may be damaged in the excavation process.

Non-Excavation Repair

In some cases, excavation isn’t necessary to make repairs to a sewer line. Trenchless or cured-in-place-pipe repairs can resolve the issue without forcing you to dig up your yard.

Sewer main projects that do not require excavation typically cost less than $1,000.

5 Ways to Save Money on Plumbing Repairs

No one wants to have to call a plumber, but at some point, every homeowner will have to. Plumbing repairs don’t have to cost you an arm and a leg. Use these six tips to save money on plumbing repairs.

1. Fix Small Problems Right Away

It’s easy to procrastinate on fixing small problems. Right now, that dripping faucet is nothing more than an annoyance. It’s easy to close the door and forget about it. But if you don’t fix the problem now, it can easily progress into a bigger and more expensive issue.

A small problem will take just a little bit of time and money to repair. A big problem will take up a lot of time and cost a lot of money.

2. Inspect and Clean Your Drains

Drain clogs can be caused by a number of different things, from hair to grease and everything in between. But clogs can also be caused by collapsed pipes and tree roots.

Have your drain inspected by a plumber, and invest in a good drain cleaning to keep your drains free and clear. Instead of pouring liquid drain cleaner down the drain, have your plumber use a snake to clear clogs and clean out your pipes.

3. Be Careful What You Flush and Pour Down the Drain

The only thing that should be flushed down the toilet is human waste and toilet paper. Even products that are marketed as flushable, like wipes and sanitary products, can eventually cause clogs and costly plumbing repairs.

Even hair and bleach can damage your pipes over time.

Be equally as cautious about what you pour down your drains. You may have been told that it’s okay to pour grease down the drain as long as it’s followed by hot water and soap. But this won’t prevent all of the grease from clogging your pipes.

Instead of pouring grease down the drain, dump it into a Ziploc bag, and wipe down pots and pans before washing them.

4. Strain Your Drains

Hair can cause serious drain clogs and even damage pipes over time. A simple way to prevent expensive clogs is to cover drains with mesh screens. These drain strainers will catch loose strands of hair. Clean out these strainers weekly to prevent build-up.

5. Pour Water Down Unused Drains

If you have drains in your home that don’t get much use, like spare bathrooms or basement drains, things can start to get smelly after a while. That smell is actually sewer gas, and it’s as unhealthy as it is foul-smelling.

Make it a point to pour water down these drains at least once a week. Every few months, pour baking soda and vinegar down the drain followed by hot water to clean out the pipes.

6. Insulate Pipes

Frozen pipes can crack and eventually burst, leaving you with a giant mess and a costly plumbing repair. You can’t prevent freezing temperatures, but you can insulate exposed pipes to keep them from freezing and potentially bursting. Interior pipes can be kept warm by leaving the cabinet doors under sinks open. Allowing water to drip from the faucet can help prevent pressure build-up that can damage pipes.

7 Essential Benefits of Online Shopping

Millions of people enjoy online shopping, with impressive choice and availability at the heart of its consistent success across the globe. Considering this contemporary climate, it’s no surprise that one of the primary considerations of big and small shopping outlets in Canada is the need to have an online presence, allowing commercial brands to reach and cater to their clients 24/7. Indeed, from a customer’s perspective, online shopping is ideal in many respects; fast, convenient and comfortable, we are able to access a world of items with the most minimal effort. With benefits going far beyond these initial factors, it looks like online shopping is here to stay:


  1. It’s convenient.


The main advantage of online shopping is unquestionably its convenience, with the ability to make an order at any time, from any place. You can shop at 3AM in your pajamas, in the office while you’re on your coffee break, or on the bus as you make your way home. With the further advantages of avoiding traffic and pushy shop assistants, it is by far the most peaceful way to find all that you need.


  1. It’s cheaper.


You’ll have an easier time finding good deals online, thanks to how the Internet allows quick and efficient research of all of the offers currently available. Web-based stores have lower overhead so they can pass on their savings to their customers, meaning that you’re almost always likely to enjoy cheaper prices online. Moreover, comparison sites allow you to quickly identify how to purchase your item for the best possible price.


  1. You have more options.


When you shop in a physical store, your options can be limited; an entire high street might only have a few retail stores offering what you require, and you still aren’t guaranteed to find exactly what you’re looking for after having made the effort to venture to each different store. This problem is totally minimized with the endless availability found on the Internet, with tens of thousands of choices at your fingertips. With just a few clicks of your mouse, you can browse to your heart’s content.


  1. Sending gifts to loved ones is easy.


Christmas is a busy time of the year for shoppers, and can spell a lot of stress for those struggling to find the perfect gift. If you want to give gifts to a dozen family members and friends, you can end up spending the entire day buying gifts for them and then arranging their delivery. Online shopping greatly reduces the laborious nature of this process, by offering the opportunity for customers to have the e-store mail a gift to them directly and maximizing the ease of buying many things at once – there is no question that having a variety of gifts delivered directly to your door is far favorable to carrying huge bags of items across your local shopping center.


  1. There are no lines.


One of the worst things about shopping in person is the need to spend ages waiting at the checkout counter, especially if you’re hard-pressed for time or feeling exhausted from shopping. With online shopping, you don’t have to deal with long queues, angry customers or abrupt cashiers. By browsing online from the comfort of your home, benefit from total peace and quiet as you seek out your items.


  1. You spend less.


It’s no secret that shopping in person often means that we end up buying unnecessary things, with the irresistible appeal of certain items attracting our attention (and money). Shopping in person also has the necessary considerations of spending money on practical aspects, such as transportation and parking. Internet shopping eliminates these inconveniences, by offering the opportunity to focus on exactly what you want to buy through the use of dedicated searches and website sections. With many stores offering free shipping, online shopping allows you to save money at every stage.


  1. Hard to find items can be found online.


If you’re looking for a specific type of antique or a niche item, it can take an eternity to find these by shopping in person. With the power of research and vast availability, the Internet allows you to discover this type of product both far more quickly and far more easily – and will sometimes even allow you to buy items that are otherwise impossible to find. In addition, online shopping will frequently provide these items at a far slower price than elsewhere.


These are just a few of the benefits of shopping online, with many other positive benefits always waiting to be discovered. Although it’s always necessary to be vigilant while shopping online – despite recent developments in anti-fraud protection and security in technology, it’s still possible to be caught out – online shopping remains one of the most desirable ways to purchase the products you require. With enormous availability, tailor-made convenience and the highest levels of ease, there has been no better time to embrace Internet shopping.


Effective Ways to Reduce Your Weekly Shopping Costs

Do you spend more money on shopping than you should? It’s a problem most consumers face and it can be tempting to overspend every time you go to your local store to purchase your weekly shopping. However, there are many ways you can control your spending and eventually only buy the items you really need. Below are some of the most effective ways to reduce your weekly shopping costs.

Plan and Create a Shopping List

First of all, you have to become more disciplined when it comes to shopping. Creating a plan and drawing up a shopping list is the most effective way to focus on the items you really need to buy. It also allows you to eliminate the items you don’t need that are adding the additional dollars to your weekly shopping bill.

Stick to Your Plan and Shopping List

It’s all good and well creating a plan and a shopping list. However, when you go to your local stores, there are many temptations that can lead you astray. Once you have created your plan and shopping list, stick to it and don’t buy anything else.


Coupons from coupon providers like can greatly reduce the amount you spend on a wide range of products. Once again, make sure you use these coupons to purchase essential items or an item you have planned to buy.

Shop Online

Today’s shoppers have more choices than the previous generations of shoppers. The internet in particular gives you a much wider range of products to choose from. You can quickly compare prices and decide whether or not it’s cheaper to purchase certain items online or in your local store.

Buy Generic Products

Consider purchasing generic products. In many cases, a generic product and a branded product are exactly the same, but you’re paying extra just for the label that appears on many branded products. If you do this for the products you buy the most often, you could end up making substantial savings each week.

Shop Around

It pays to shop around and understand how each store tries to entice customers inside their doors. For example, most stores use loss leader strategies whereby they advertise and sell certain products at a loss to tempt you into their store. However, other products often cost more or you end up purchasing more products than you intended to buy. You can turn this to your advantage by shopping around in different stores and only buying these lower cost items.

Buy Healthy Products

We’re all being told to eat healthy. However, many people live hectic lives and are more inclined to buy products that are convenient, such as microwavable foods. However, buying healthier foods will not only benefit your health, but it could also benefit your financial health too.

Shopping is one of those costs most people face each week. However, there are many ways you can reduce your outgoings and the tips mentioned above are a great starting point for anyone who wants to reduce this necessary expenditure.

Norma Walton, Toxic Business Partners

How do you spot a toxic business partner, ideally before you are in business with him?  Bad business partners can literally ruin your life.  They can employ a scorched earth approach to your business. They can make false allegations against you.  They can ruin your public reputation.  They can even try to send you to jail.

bad company quote

We are judged by the company we keep.  That is true in friendships, in business relationships, in marriages.  The people we trust and surround ourselves with will have a big impact on our lives.  It is important to choose wisely.

Here are a few tips I’ve gathered through personal experience:

First of all, you need to check out the background of your proposed business partner.  If that partner has a history of nasty litigation with prior partners; a criminal past; has been accused of tax evasion in the past; has a lousy relationship with his spouse and/or his children; or has blown up prior business relationships for no good reason, run away.  Don’t walk, run.angry partner

Secondly, if everything initially with that partner seems too good to be true, you are likely missing something that will hurt you in the end.  Business partnerships should be a true give and take.  They should be balanced and each partner should understand and appreciate exactly what the other partner brings to the relationship.  If your partner does not appreciate the value you bring to the relationship, exit the partnership.  That lack of appreciation will never change and will cause big problems down the road.

Thirdly, if your business partner shows no empathy towards others, you have a problem.  People who are narcissistic and self involved feel every perceived slight deeply but have no sympathy or understanding for others who are experiencing real pain.  Watch how he treats his loved ones.  If he is always talking derogatively about his spouse, for example, he will likely also speak the same way about you to third parties.  Also indicative is how he treats people less powerful, less rich or less educated than himself.  If he treats those people with disdain, he is to be avoided.

difficult partners

Fourthly, if your proposed partner seems to never be the one at fault and always blames others, he is trouble.  Those who don’t acknowledge their own mistakes are guaranteed to repeat them.  Unless someone is reflective and realizes that he makes mistakes, that person can never learn from his mistakes.  If you meet someone like this or are in partnership with someone like this, you need to get out.

There is nothing better than being in a positive, enjoyable, productive partnership with people you care about and appreciate.  There is nothing worse than having a toxic business partner.  He will suck the life out of you no matter how well you perform and how well your business may do.kardashian quote  In the end, toxic partners will ruin you and your business.  Get out while you still can.

Index and Sector ETFs: Mutual Funds: Speculation X3

How many of you remember the immortal words of P. T. Barnum? On Wall Street, the incubation period for new product scams may be measured in years instead of minutes, but the end result is always a greed-driven rush to financial disaster.

The meltdown spawned index mutual funds, and their dismal failure gave life to “enhanced” index funds, a wide variety of speculative hedge funds, and a rapidly growing assortment of Index ETFs. Deja Vu all over again, with the popular ishare variety of ETF leading the lemmings to the cliffs.

How far will we allow Wall Street to move us away from the basic building blocks of investing? Whatever happened to stocks and bonds? The Investment Gods are appalled.

A market or sector index is a statistical measuring device that tracks prices in securities selected to represent a portion of the overall market. ETF creators:

  • select a sampling of the market that they expect to be representative of the whole,
  • purchase the securities, and then
  • issue the ishares, SPDRS, CUBEs, etc. that speculators then trade on the exchanges just like equities.

Unlike ordinary index funds, ETF shares are not handled directly by the fund. As a result, they can move either up or down from the value of the securities in the fund, which, in turn, may or may not mirror the index they were selected to track. Confused? There’s more — these things are designed for manipulation.

Unlike managed Closed-End Funds (CEFs), ETF shares can be created or redeemed by market specialists, and Institutional Investors can redeem 50,000 share lots (in kind) if there is a gap between the net-asset-value and the market price of the fund.

These activities create artificial demand in an attempt to minimize the gap between NAV and market price. Clearly, arbitrage activities provide profit-making opportunities to the fund sponsors that are not available to the shareholders. Perhaps that is why the fund expenses are so low — and why there are now thousands of the things to choose from.

Two other ETF idiosyncrasies need to be appreciated:

a) performance return statistics for index funds may not include expenses, but it should be obvious that none will ever outperform their market, and

b) index funds may publish P/E numbers that only include the profitable companies in the portfolio.

So, in addition to the normal risks associated with investing, we add: speculating in narrowly focused sectors, guessing on the prospects of unproven small cap companies, experimenting with securities in single countries, rolling the dice on commodities, and hoping for the eventual success of new technologies.

We then call this hodge-podge of speculation a diversified, passively managed, inexpensive approach to Modern Asset Management — based solely on the mathematical hocus pocus of Modern Portfolio Theory (MPT).

Once upon a time, but not so long ago, there were high yield junk bond funds that the financial community insisted were appropriate investments because of their diversification. Does diversified junk become un-junk? Isn’t passive management as much of an oxymoron as variable annuity? Who are they kidding?

But let’s not dwell upon the three or more levels of speculation that are the very foundation of all index and sector funds. Let’s move on to the two basic ideas that led to the development of plain vanilla Mutual Funds in the first place: diversification and professional management.

Mutual Funds were a monumental breakthrough that changed the investment world. Hands-on investing became possible for everyone. Self-directed retirement programs and cheap to administer employee benefit programs became doable.

The investment markets, once the domain of the wealthy, became the savings accounts of choice for the employed masses — because the “separate accounts” were both trusteed and professionally managed. When security self-direction came along, professional management was gone forever. Mutual fund management was delegated to the financially uneducated masses.

ETFs are not the antidote for the mob-managed & dismal long term performance of open end Mutual Funds, where professionals are always forced to sell low and to buy high. ETFs are the vehicles of choice for Wall Street to ram MPT mumbo jumbo down the throats of busy, inexperienced investors… and the regulators who love them because they are cheap.

Mutual fund performance is bad (long term, again) because managers have to do what the mob tells them to do — so Wall Street sells “passive products” with controlled content that they can manipulate more cheaply.

Here’s a thumbnail sketch of how well passive ETFs may have performed from the turn of the century through 2013: the DJIA growth rate was about 0% per year, the S & P 500 was negative; the NASDAQ Composite has just recently regained its 2000 value.

How many positive sectors, technologies, commodities, or capitalization categories could there have been?

Now subtract the fees… hmmmm. Again, how would those ETFs have fared? Hey, when you buy cheap and easy, it’s usually worth it. Now if you want performance, I suggest you try real management, as opposed to Mutual Fund management… but you need to take the time to understand the process.

If you can’t understand or accept the strategy, don’t hire the manager. Mutual Funds and ETFs cannot “beat the market” (not a well thought out investment objective anyway) because both are effectively managed by investor/speculators… not by professionals.

Sure, you might find some temporary smiles in your ETFs, but only if you take your profits will the smiles last. There may be times when it makes sense to use these products to hedge against a specific risk. But stop kidding yourself every time Wall Street comes up with a new short cut to investment success.

There is no reason why all of you can’t either run your own investment portfolio, or instruct someone as to how you want it done. Every guess, every estimate, every hedge, every sector bet, and every shortcut increases portfolio risk.

Products and gimmicks are never the answer. ETFs, a combination of the two, don’t even address the question properly — AND their rising popularity has raised the risk level throughout the Stock Market. How’s that, you ask?

The demand for the individual stocks included in ETFs is raising their prices without having anything to do with company fundamentals.

What’s in your portfolio?

How will ETFs and Mutual Funds fare in the next correction?

Are YOU ready.

Stock Market Corrections Are Beautiful… When

A correction is a beautiful thing, simply the flip side of a rally, big or small. Theoretically, even technically I’m told, corrections adjust equity prices to their actual value or “support levels”. In reality, it’s much easier than that.

Prices go down because of speculator reactions to expectations of news, speculator reactions to actual news, and investor profit taking. The two former “becauses” are more potent than ever before because there is more self-directed money out there than ever before. And therein lies the core of correctional beauty!

Mutual Fund unit holders rarely take profits but often take losses. Additionally, the new breed of Index Fund Speculators over-react to news of any kind because that’s what speculators do. Thus, if any brief little market hiccup becomes considerably more serious, new investment opportunities will become abundant!

Here’s a list of ten things to think about doing, or to avoid doing, during corrections of any magnitude:

1. Your present Asset Allocation should be tuned in to your long-term goals and objectives. Resist the urge to decrease your Equity allocation because you expect a further fall in stock prices. That would be an attempt to time the market, which is (rather obviously) impossible. Asset Allocation decisions should have nothing to do with stock market expectations.

2. Take a look at the past. There has never been a correction that has not proven to be a buying opportunity, so start collecting a diverse group of high quality, dividend paying, NYSE companies as they move lower in price— Investment Grade Value Stocks. I start shopping at 20% below the 52-week high water mark— the bargain bins are filling.

3. Don’t hoard that “smart cash” you accumulated during the last rally, and don’t look back and get yourself agitated because you might buy some issues too soon. There are no crystal balls, and no place for hindsight in an investment strategy. Buying too soon, in the right portfolio percentage, is nearly as important to long-term investment success as selling too soon is during rallies.

4. Take a look at the future. Nope, you can’t tell when the rally will resume or how long it will last. If you are buying quality equities now (as you certainly could be) you will be able to love the rally even more than you did the last time— as you take yet another round of profits. Smiles broaden with each new realized gain, especially when most Wall Streeters are still just scratchin’ their heads.

5. As (or if) the correction continues, buy more slowly as opposed to more quickly, and establish new positions incompletely. Hope for a short and steep decline, but prepare for a long one. There’s more to Shop at The Gap than meets the eye, and if you are doing it properly, you’ll run out of cash well before the new rally begins.

6. Your understanding and use of the Smart Cash concept has proven the wisdom of The Investor’s Creed (look it up). You should be out of cash while the market is still correcting— it gets less scary each time. As long your cash flow continues unabated, the change in market value is merely a perceptual issue.

7. Note that your Working Capital is still growing, in spite of falling prices, and examine your holdings for opportunities to average down on cost per share or to increase yield (on fixed income securities). Examine both fundamentals and price, lean hard on your experience, and don’t force the issue.

8. Identify new buying opportunities using a consistent set of rules, rally or correction. That way you will always know which of the two you are dealing with in spite of what the Wall Street propaganda mill spits out. Focus on Investment Grade Value Stocks; it’s just easier, as well as being less risky, and better for your peace of mind. Just think where you would be today had you heeded this advice years ago—

9. Examine your portfolio’s performance: with your asset allocation and investment objectives clearly in focus; in terms of market and interest rate cycles as opposed to calendar Quarters (never do that) and Years; and only with the use of the Working Capital Model (look this up also), because it is based upon your personal asset allocation. Remember, there is really no single index number to use for comparison purposes with a properly designed portfolio.

Unfortunately, only Self Directed 401k and IRA programs are able to use Market Cycle Investment Management.

10. So long as everything is down, there is nothing to worry about. Downgraded (or simply lazy) portfolio holdings should not be discarded during general or group specific weakness. Unless of course, you don’t have the courage to get rid of them during rallies— also general or sector specifical (sic).

Corrections (of all types) will vary in depth and duration, and both characteristics are clearly visible only in institutional grade rear view mirrors. The short and deep ones are most lovable (kind of like men, I’m told); the long and slow ones are more difficult to deal with. Short ones (those that last a few days, weeks, or months) are nearly impossible to deal with using Mutual Funds.

So if you overthink the environment or overcook the research, you’ll miss the party. Unlike many things in life, Stock Market realities need to be dealt with quickly, decisively, and with zero hindsight.

Because amid all of the uncertainty, there is one indisputable fact that reads equally well in either market direction: there has never been a correction/rally that has not succumbed to the next rally/correction—

Think cycle instead of year, and smile more often.

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A Preemptive, Timeless, Portfolio Protection Strategy

A participant in the morning Market Cycle Investment Management (MCIM) workshop observed: I’ve noticed that my account balances are near all time high levels. People are talking down the economy and the dollar. Is there any preemptive action I need to take?

An afternoon workshop attendee spoke of a similar predicament, but cautioned that a repeat of the June 2007 through early March 2009 correction must be avoided — a portfolio protection plan is essential!

What were they missing?

These investors were taking pretty much for granted the fact that their investment portfolios had more than merely survived the most severe correction in financial market history. They had recouped all of their market value, and maintained their cash flow to boot. The market averages seemed afraid to move higher.

Their preemptive portfolio protection plan was already in place — and it worked amazingly well, as it certainly should for anyone who follows the general principles and disciplined strategies of the MCIM.

But instead of patting themselves on the back for their proper preparation and positioning, here they were, lamenting the possibility of the next dip in securities’ prices. Corrections, big and small, are a simple fact of investment life whose origination point can only be identified using rear view mirrors.

Investors constantly focus on the event instead of the opportunity that the event represents. Being retrospective instead of hindsightful helps us learn from our experiences. The length, depth, and scope of the financial crisis correction were unknowns in mid-2007. The parameters of the recent advance are just as much of a mystery now.

MCIM forces us to prepare for cyclical oscillations by requiring that: a) we take reasonable profits quickly whenever they are available, b) we maintain our “cost-based” asset allocation formula using long-term (retirement, etc.) goals, and c) we slowly move into new opportunities only after downturns that the “conventional wisdom” identifies as correction level— i. e., twenty percent.

  • So, a better question, concern, or observation during an unusually long rally, given the extraordinary performance scenario that these investors acknowledge, would be: What can I do to take advantage of the market cycle even more effectively — the next time?

The answer is as practically simple as it is emotionally difficult. You need to add to portfolios during precipitous or long term market downturns to take advantage of lower prices — just as you would do in every other aspect of your life. You need first to establish new positions, and then to add to old ones that continue to live up to WCM (Working Capital Model) quality standards.

You need to maintain your asset allocation by adding to income positions properly, and monitor cost based diversification levels closely. You need to apply cyclical patience and understanding to your thinking and hang on to the safety bar until the climb back up the hill makes you smile. Repeat the process. Repeat the process. Repeat the process.

The retrospective?

The MCIM methodology was nearly fifteen years old when the robust 1987 rally became the dreaded “Black Monday”, (computer loop?) correction of October 19th. Sudden and sharp, that 50% or so correction proved the applicability of a methodology that had fared well in earlier minor downturns.

According to the guidelines, portfolio “smart cash” was building through August; new buying overtook profit taking early in September, and continued well into 1988.

Ten years later, there was a slightly less disastrous correction, followed by clear sailing until 9/11. There was one major difference: the government didn’t kill any companies or undo market safeguards that had been in place since the Great Depression.

Dot-Com Bubble! What Dot-Com Bubble?

Working Capital Model buying rules prohibit the type of rampant speculation that became Wall Street vogue during that era. The WCM credo after the bursting was: “no NASDAQ, no Mutual Funds, no IPOs, no Problem.” Investment Grade Value Stocks (IGVSI stocks) regained their luster as the no-value-no-profits securities slip-slided away into the Hudson.

Embarrassed Wall Street investment firms used their influence to ban the “Brainwashing of the American Investor” book and sent the authorities in to stifle the free speech of WCM users — just a rumor, really.

Once again, through the “Financial Crisis”, for the umpteenth time in the forty years since its development, Working Capital Model operating systems have proven that they are an outstanding Market Cycle Investment Management Methodology.

And what was it that the workshop participants didn’t realize they had — a preemptive portfolio protection strategy for the entire market cycle. One that even a caveman can learn to use effectively.

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