July 24,2005

Homer's Hot Tip

Volume III, Number 8

Homer: Hi Kid.

Kid: Hey Homer, good to see you. How are you feelin'?

Homer: Like a million bucks - wish I had the million.

Kid: You're too funny Homer!

Homer: That's me, a laugh a minute. Remember that bit on international scam artists I told you about last month?
 

Kid: Yes sir.

Homer: Well I got an email letter from one of them and thought I would share it with you.

Kid: Really? You actually have one?

Homer: I think that is what I just said Kid. Here, you can take a look at it.

Kid: This is actually one of those scam letters they send out to part people from their money promising them millions?

Homer: Uh huh, right there in black and white.

Kid: Can I read it out loud?

Homer: Sure Kid, whatever makes you happy.

Kid: Well, you know Homer, maybe somebody will here it and not be a victim.

Homer: Go ahead Kid, read it.

Kid: Well its from:

    "Andrew Young,
     Consultant of the Economic
     Commission for Europe and Africa
     124 Aldersgate Street London."

Kid: You don't think the title is for real do you Homer?

Homer: Could be kid. You could be the consultant to the Economic Commission, all you have to do is say so. That doesn't mean anything. Go on Kid, read the letter.
 

Kid: Well it says...

     "Dear friend,

     I am a consultant of the Economic Commission for Europe and Africa. After the Iraqi crisis in the Middle East, the sum of $35,500,000.00(thirty five Million, five Hundred Thousand United States Dollars Only) was discovered during the oil forfeit program. These funds are presently in one of the banks in the United Kingdom. I have been informed by the Ambassador that heads the Economic Commission in New York to look for a reliable and trustworthy person who can assist in providing an account where these funds can be transferred.

     This transaction is 100% risk free and will demand absolute confidentiality at all cost. These funds do not have any record and can never be traced. These funds are unaccounted for. Once the fund is moved to your nominated account, you will be entitle to 30% while we keep 65% and 5% will be set aside to offset any expenses both locally and international. The 65% goes to the Ambassador. You will be entitle to substantial part from my percentage, in trust for investment.

     I must point out, that the people involved in this transaction are men with high political ambition and close to the corridors of power. Once you declare your interest in this proposal, I will furnish you with full detailed information of the Ambassador to enable you open up communication with him at once. This transaction will only last for 3 working days once you declare your interest.

     Finally, you can reach me on this email

Kid: He actually put his email address in there Homer!

Homer: Yep, how else is he going to separate the fools from their money? Go on kid.

Kid: Well, he goes on to say

      "...I hope you will keep this information highly confidential.

     Best Regards,

     Andrew Young"

Kid: Wow! this is unbelievable. Do people actually believe this?

Homer: All the time Kid. Did you notice this fellow misspelled "confidential" and "Ambassador"?

Kid: Now that you mention it...

Homer: That's a tell right there. This stuff is poison Kid and I suspect it was sent out to 30, maybe 40 million email addresses.

Kid: Unbelievable. Do you think somebody took him up on it?

Homer: Sure thing...

Kid: That's horrible!

Homer: That it is Kid. Well got to move along, just wanted to share with you what we talked about the last time. These scams are alive and well. You gotta be careful. I'm going home now Kid.

Kid: Hey Homer before you go, how come I didn't get one of these?

Homer: You're just lucky I guess.

Be sure to check other HOMER Archives for past conversations

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June 30, 2005

Homer's Hot Tip

Volume III, Number 7

Homer: How you doing Kid?

Kid: Not so good Homer.

Homer: So what else is new! What's the problem now?

Kid: You know Homer, you just don't take life seriously.

Homer: At my age Kid, I don't have to. So what's troubling you? You look like you lost your best friend.

Kid: I am really perplexed. The price of oil is going through the roof. Congress instead of working on our behalf is divided over every major issue that comes up. It is as though there was no election. And, I keep getting bombarded with calls to invest in the Real Estate market and buy condos in Miami, Las Vegas and New York before they're even built. I also keep hearing about these fabulous invitation letters from overseas asking folks like to help them get money out of the country and they'll split it with you. I keep waiting for one but I don't ever seem to be that lucky.It all seems to be happening at once.

Homer: Troubled times Kid bring out the cockroaches from the woodwork. You just have to step back and try and take the long view above and over the topics. Then and only then can you find a comfort level for what you want and perhaps need to do. Otherwise, you will be second-guessing yourself all day, every day.

Kid: That's easy for you to say, you're so rich, you can afford to lose a few bucks here and there. My wife and I are just trying to get enough set aside to make it through retirement comfortably.

Homer: Why retire? Never mind, you wouldn't understand. Let's see if I got this straight. You think I am so rich I can afford to lose money. Correct?

Kid: Correct.

Homer: And, as a result I can therefore also just make any stupid investment I want and hope that something turns out. Correct?

Kid: Correct.

Homer: That's not me you're talking about Kid, that's yourself. That's what you want to be and that's how you act when it comes to making investments.

Kid: No way!

Homer: Way.

Kid: You mean I'm like that and you're not?

Homer: Afraid so.

Kid: Oh, I feel sick.

Homer: OK, take it easy. Come on over here and sit down, shut up, and listen.

Kid: but...

Homer: Zip it, I'm going to tell you a few things and I want your undivided attention. Got it?

Kid: Got it.

Homer: Fine then, let's take the last thing you said of note and start from there and work our way back.

Kid: Great, I'd like that.

Homer: There is a group of international scam artists, who acting as a group or with a front man, prey on people intently greedy to make money for nothing. First, you need to know, there is no such thing. Let's imagine you get an email from a man or women overseas claiming to be either some mucky-muck in the government or a relative or a banker or a lawyer of someone who represents someone who has either died or is a fugitive from a repressive government.

The one thing they have in common is they all claim to have oodles of money and they are just dying to give it to you. They may claim it is squirreled away in a bank no one knows about and they need your help to get it out. They are willing to give you for a little effort, a giant share of it just for helping them. Sometimes they will even send you money as they did a women in Hobbs, New Mexico not long ago. As part of the deal she would have to send some back. Trouble is the money they sent her was in the form of a bogus cashiers check drawn on a bank thousands of miles away.

The credit union that she banked at did not become aware of the scam until no funds came in to cover the check after they had already released funds to her and she had sent funds to her contact. The credit union is left holding the bag and the women says she didn't know. Actually she should have known since no one gets anything for free. In this case the culprit was allegedly looking for a wife and she fell for it hook, line, and sinker. All she would have to do to keep part of the money was just help him out and he would join her in America shortly.

In other cases, the magic money takes on the aura  that someone has died and nobody knows the deceased had allegedly hidden money and put it away in a secret bank account no one knows exists. They want you to share with them by you claiming to be the heir. Thus you lie. Then you send them money to get the money. Happens every day and must be quite successful judging by the number of people complaining to the US government that they have been scammed. One judge noted that people seem quite eager to engage in an illegal act to get big money.

So, the moral to this story is just don't do it. Throw the email away and pray that someone else is not so greedy they fall for it. I have been told that it is not illegal for them, the culprits, to ask for the money. And once you have joined their enterprise, you become a co conspirator.

You talked about real estate purchases before construction was complete. I believe that is what you were talking about?

Kid: Yes

Homer: So you want to be Donald Trump? Look, the game is fast and furious and if you read the recent issue of Time magazine this kind of activity is fueling an overpriced market. I know of folks who have bought a condo in the morning on a new project in Miami for half a million dollars and sold it for three quarters of a million by late afternoon. Those kind of numbers are very attractive. Somewhere along the line someone is going to get burned and that someone is likely to be you.

This is high stakes. There is no credit check required. A small deposit holds the property and you then have all the rights in the world to sell it as you wish. First you have to know the inherent value. Trump's stuff sells out in a day. You have no chance on getting your hands on any of that. It goes to Trumps closest friends and associates. Then the speculators roll in as noted and folks like you come in on the second or third level. By this time the property has appreciated in a matter of weeks to two or three times its original appraised value. Now who in their right mind would do such a think unless it wasn't driven by greed.

I have no sympathy for those caught on the end of the stick when the market dries up. That could be you. Then there is the so-called foreclosure market. Properties are being foreclosed every day but you have about a snowballs chance in Hades of getting a property and turning it around for an instant profit. What happens is the property goes to auction and if it is a decent property the bank holding the mortgage will not sell it but turn it over to a broker to get the best price. You have no chance unless, again, you are an insider.

You mentioned Congress too?

Kid: Yep.

Homer: No comment.

Now the last item is oil. I told you a few months back what was going to happen. Wake up and realize that the more demand there is, the higher the price will go. People either have to start driving less, buy smaller, more fuel efficient cars instead of the gas guzzling SUVs and trucks that are all the rage, or they can count on $3.00 a gallon before you can snap your fingers. In fact in some places it already has hit $3.00 a gallon.

What does a smart investor do Kid? A smart investor looks to see what fuel alternatives are out there, what manufacturers are positioning for the higher prices, and what companies will profit most by the increases in crude oil either by offering alternatives or whole different modes of transportation. To sit around and fret over the inevitable price increases is a waste of time.

Start by looking for the alternatives that will make your life and ours easier and less dependent on oil. The fact that we are held hostage by the oil cartels is a travesty. When you and a lot of other folks demand something new and better, then the oil industry will react. Until then, they are content to keep drilling those wells and charging those "oh I hate to do this" prices.

Kid: But it will kill our economy, don't they see it?

Homer: They see it and it won't kill our economy. People are flexible. They will adjust. The experts know this and they are counting on it to justify the ongoing hike in prices. They know very well that when demand and consumption lessens, the high prices will lessen. Folks will lose their resolve to do something about it because the price is down and the cycle will start all over again. They have us over a barrel Kid,

Kid: Would you buy oil stocks?

Homer: Absolutely not. I don't like being held up or joining the bandits. The industry has sat for years on technology that could have increased fuel efficiency and create less dependence on oil. They could have built more refineries to make the better fuels and chose not to in order to cut costs. They have blighted the landscape in America with unsightly and poorly maintained pump jacks, polluted our water systems, and thrown enough carcinogens into the atmosphere to permanently stamp a generation with multiple forms of diseases, most notably cancer. Studies can not be conducted long enough to determine the liability and by the time it does they figure we will have moved on to other forms of fuel and those responsible will have long since died off. It's a perfect Catch 22.

Kid: What's that?

Homer: Look it up.

Kid: You're on a roll Homer, why are you so upset with the oil industry.

Homer: Because for 50 years the industry has thought of nothing but itself, nor long considered the consequences or the fact that our dependence on oil would be a threat to the very things we believe in. Not only is our national pride and health at stake but so is our very survival as a nation. Hopefully, we have those who will stand up and say we aren't going to take it anymore and find a way for us to use our resources to overcome this dependence. In the meantime the oil stocks and those related to it will do very well as long as the price of a barrel of crude oil keeps going up.

Kid: How high is that Homer?

Homer: $70 a barrel.

Hope I helped clear some things up for you kid. Now go out there and buy a hybrid vehicle and do your part to lessen our dependence on foreign oil.

Kid: I have a million more questions Homer...

Homer: All in due time Kid, all in due time.

Be sure to check other HOMER Archives for past conversations

______________________________________________

May 23, 2005

Homer's Hot Tip

Volume III, Number 6

Kid:     Homer you got that list?

Homer: What list?

Kid:     That list you offered me at Christmas and the gift that came with it.

Homer: Oh, you mean my Fail-Safe Investment Strategy?

Kid:     Is that what you call it?

Homer: That is just one of many names. Really it’s the invention of one of the greatest traders on Wall Street.

Kid:     Better than you?

Homer: Yep, a lot better than me. He was uncanny. Made his money trading stocks. Died a multimillionaire. Had he lived, he’d have been a billionaire. Taught me everything I know.

Kid:     You mean like you’re trying to teach me?

Homer: Well I wouldn’t go that far! But, close. Look Kid write these down. These were the top five performing stocks of the Dow Jones Industrial Average as of the end of 2004. So if you followed my advice you would have bought each position in equal dollar amounts although the number of shares in each would, most likely be an odd number. Then if you had played the scenario out as I have often suggested, you would have put equal amounts into each stock position each month. Since I have no way of knowing if you followed my advice in that regard, the only thing I have to go on is if you had invested in the top five Dow Jones Industrial Average stocks and stopped. This, of course, would have cost you compounding, reinvestment of dividends, and being able to purchase some shares at a lower price. This last action would have lowered your overall coast if the stocks dipped and by buying every month would permit you to profit by the rise as well.

So let’s assume you did not do anything but buy and hold.

Kid:     That’s what I do Homer, that’s what I always do.

Homer: Dummy!

Kid:      Homer!!!!

Homer: Forget it kid, you can lead a horse to water but you can’t make it drink.

So lets say you purchased these five stocks as I suggested on the first day of trading of the New Year at the then current price and bought $50,000 worth and  $10,000 in each position. This is what it might have looked like

McDonalds                MCD          32.06   312 shares   10,002.72

Exxon Mobil              XOM           51.26   195 shares    9.995.70         

Johnson & Johnson     JNJ            63.42   158 shares  10,020.36             Boeing                        BA            51.77   193 shares    9,991.61

 Home Depot               HD            42.74   234 shares  10,000.16

     Total investment would have been approximately     $50030.26

Forget about the transactions costs but I’ll be generous and say you paid up for the odd lots (shares purchased that add up to less than 100) plus your broker fees. So, we can figure additional costs of approximately $250. Total cost to you $50,280.26.

Kid:     OK where would I stand today?

Homer: If you bought McDonalds your stock value would be less now. The same is true for Home Depot. However the rest of the portfolio went up.

These are the closing prices and value as of today.

            McDonalds      $31.32    312 shares   $ 9,771.84

            Home Depot      39.96    234 shares      9,350.64

            Exxon Mobil      54.75    195 shares     10,676.25

            Johnson & J       67.26   158 shares     10,627.08

            Boeing               61.64   193 shares     11,695,52

This brings the total current value to    $52,121.33

Kid:     Well that’s not so hot!

Homer: Excuse me? Hot? Who’s talking about hot here. We’re talking about preserving capital and making money. Considering the Dow Jones Industrial Average itself went down 259.45 points since the end of 2004, it  seems to me to be pretty significant. Since these stocks make up that component, at least three of of the five are bucking the averages.

Kid:     I just don’t see how this can work for me.

Homer: Kid, you keep kicking a gift horse because your so, how can I put this, GREEDY.

Kid:     What? You have to insult me because I did not do this and, yeah, sure, I haven’t made any money. In fact, since the first of the year I have been taking a bath with the losses I have incurred. I guess maybe you are right. I am too impatient. I am too greedy. So what do you suggest? Do I go out and buy these stocks and sit.

Homer: No. You wait till the end of the month when we can take a six-month reading on the performance of the Dow Jones Industrial Average components. We find the top five again based on their performance for the first six months. Then we dump those positions in our mini portfolio that have not kept up and replace them with the new BIG guys on the block. Then we wait only one quarter (three months) the next time and we do the same thing all over again. In the meantime we add whatever we can each month in the way of additional investment funds equally for each of the five stock positions.

Kid:     You’re talking about trading.

Homer: hmmm. That’s an interesting concept. Wonder if Bernie Barauch would approve.

Kid:     Who’s he?

Homer: He WAS the greatest Wall Street stock trader ever.

Kid:     You’re kidding. I thought Jesse Livermore was.

Homer: Livermore committed suicide. I think that cut his greatness in half.

Kid:     Surely there were, and are, others. George Soros comes to my mind.

Homer: Soros? Perhaps. But one comes to mind that only the big guys knew. He was an old friend and mentor in my early years. Now, he gets to watch the money game from a high altitude perch in the sky.

Kid:     Who was he?

Homer: His name was Paul Herbert Hester. Someday I will tell you all about him. He was one of the sharpest, if not the smartest, stock traders of his time.

Kid:     How about telling me about him now.

Homer: Not now Kid, later.

Kid:     Where are you going?

            Homer! Homer!

Wait up.

Be sure to check other HOMER Archives for past conversations

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April 20, 2005

Homer's Hot Tip

Volume III, Number 5

Homer: How come your hangin' around my door at this hour of the evening? -- NOTE it's 8pm EDT.

Kid: Why, what do you mean Homer?

Homer: Well, where do I begin? Your on my porch; you look like you been pacing back and forth; you look a little, shall we say, dazed, and you usually have the courtesy to only bug me during the day. So what's up Kid?

Kid: It's the Pope.

Homer: The Pope?

Kid: Yeah, well I mean Popes.

Homer: You mean you are going through all this because of the Pope? Which one? John Paul II or Benedict XVI?

Kid: Both.

Homer: Your loony tunes Kid.

Kid: No, no, here me out. I been trying to figure out how to phrase this 'cause I know your Catholic and I did not want to offend you. So I have been pondering for sometime how to ask it?

Homer: How the death of one Pope who was loved by the world and the installation of another one, unknown to most, except for the instant media analysis put upon us, is going to impact the stock market, right?

Kid: Oh, wow Homer, that's a big load off my mind. I'm so....

Homer: Nothing.

Kid: Excuse me?

Homer: I said -- nothing. The fall of one and the rise of another will have no impact. And if it does, ever, it will be a few years down the road when he passes on and another takes his place.

Kid: You're kidding.

Homer: Nope, not kidding.

Kid: Well, the market has been going up and down like a yo-yo this whole time.

Homer: Uh-huh, so?

Kid: So? It's not supposed to do that!

Homer: Why not?

Kid: Because it's too unsettling.

Homer: Sure, it could be particularly to those who cared about John Paul and those who respected him for his peacemaking and love of everyone. Regardless of who or what they were in life or death, gut wrenching events like this to many would not affect the markets. If you think that it does or should, you are being fooled and pulled by the forces of the market that influence those who will make short term instant decisions in reaction to the immediate events as the event may look overwhelmingly ominous whether that event really plays on the markets or not. Then the real issues that really influence the long term stability or instability of the markets ply their way through the smokescreen, sometimes undetected, even by the most astute observer.

Kid: Can you translate that Homer?

Homer: Sure. Be unemotional.

Make your decisions based on what is really happening, not on an instant event and not on what you would like to happen or others say will happen. Observe without emotion what is really happening. More clear?

Kid: I think so.

Homer: Good.

Kid: So....

Homer: Later Kid, it's past my  bedtime. Good night.

Be sure to check other HOMER Archives for past conversations

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April 5, 2005

Homer's Hot Tip

Volume III, Number 4

Kid: Homer, why you flying the flag at half staff?

Homer: In memory of the Pope, John Paul II. He was a great peacemaker and beloved by many in the world both Christian and non-Christian.

Kid: It indeed is a sad time Homer. Coming right on the heels of the senseless life and death tragedy of Terri Shiavo in Florida, it seems like a very bad couple of weeks. Then just today Prince Renier of Monaco dies too. What do you make of all this?

Homer: If by your question you mean what will the effect be on the stock market, I am fairly confident that the affect caused by anyone, great or small, would have little, if any, long term sustaining impact. The Market they say has a "mind of its own".

Kid: So you don't see any impact on the world's equity markets?

Homer: Absolutely none at all.

Kid: Wow, I thought that at the least there would be a big sell off and we could jump right in and buy up the bargains.

Homer: Well, at least your thinking Kid, even if it is a false sense of  confidence.

Kid: Is there anything I should know?

Homer: Got any ideas? That's usually your department -- you think up the questions and I answer them.

Kid: Well, here's one for you. What about investing in bonds or a diversified portfolio of stocks and bonds to hedge our bets. It seems to me we should be able to hold onto our money easier and make some as well.

Homer: Versus what?

Kid: You know Homer, versus just having a stock portfolio.

Homer: I see you have fallen hook, line, and sinker for the conventional "risk adverse" thinking from the goof balls. They suggest that to stay relatively risk free you have to parcel out your money among bonds, stocks and anything else a broker can sell you just to be safe.

Kid: Yes sir, that's it exactly.--safety of principal and of our investments.

Homer: You been had!

Kid: Excuse me? Are you saying this kind of thinking is wrong.

Homer: Absolutely.

Kid: My goodness Homer, that smacks right up against the consensus feeling that this is the only way to invest in the stock market.

Homer: I guess it does now, doesn't it?

Listen Kid , I am going to give you some facts and you draw your own conclusions. If you want diversity, buy a mutual fund. If you want safety buy government bonds. They're the safest thing around. and guaranteed by the full faith and credit of Uncle Sam. However, the income you will derive from them will be miniscule, unless of course, you plan on buying a few million dollars worth.

Kid: Not hardly...

Homer: So, you might want to rethink your thinking in light of the fact that in the past twenty years there have only been three short periods of time when bonds or a diversified portfolio of stocks and bonds actually outperformed the stock market. But the time was so short in duration, the last being right after the market started to go down and down in 2000, that when measured against the performance of the Standard and Poor's 500 Index of common stock, there was no comparison. The profits from the Index so far out shadowed the so called safety net of a diversified portfolio that the only unsafe investment was the one in bonds and that diversified portfolio of stocks and bonds.

Kid: I don't believe it.

Homer: Believe it or be doomed to mediocrity.

Kid: Are you telling me that the only thing I should be investing in is common stock?

Homer: The lights are on!

Be sure to check other HOMER Archives for past conversations

__________________________________

March 15, 2005

Homer's Hot Tip

Volume III, Number 3

Kid: Homer! You're a marvel! How did you know the price of gas would go up by a quarter a gallon in such a short time. Nobody and I mean nobody I know would have believed it. If I had not heard your predictions over a week ago, I would not believe it either. You flat hit the nail on the head.

So what's gonna happen now?

Homer: "Beware the Ides of March."

Kid: What? That's from Shakespeare's Julius Caesar. What's that got to do with anything?

Homer: Simply, be careful.

Kid:  Of what?

Homer: Doing something stupid like running down to the window to place your bets on oil stocks in the Energy sector.

Kid: I won't do that Homer. After I saw your prediction unveil, I went back and listened to what you threw at me. You mentioned Hydrogen molecules. And although I had not a clue as to what you were talking about, I went to the Internet like you suggested. All I did was type in some key words and found a treasure trove of information on alternative energy sources and the leading companies behind the development. 

Homer: So what kind of conclusions did you come to?

Kid: Well, first of all, I'm not going to be buying the Hummer I had in my scope. After I figured out the fuel consumption over a year's time and factored in these new elevated prices, I figured that Hummers, full size pickups, and super SUV's are going to lose their luster in the market before the year is out. It also looks to me from what I picked up on the Internet that energy costs are not coming down but will continuing to go up.

Homer: Another question for you Kid. Why?

.
Kid: China for starters. From what I have been able to uncover, their fuel consumption has just skyrocketed with no let up in sight. And, they aren't the only up and coming fuel gluttons. Add all this to our own increasing consumption and even if we continue pumping oil at record paces worldwide, the price will go up and up just based on the increased demand pressures. As you say Homer, "we can take that to the bank".

Homer: I'm proud of you Kid. You did your homework.

Kid: Another thing Homer. Over Christmas you told me to concentrate on the top five performers in the Dow Jones Industrial Average for the year and to watch them -- buy them -- and sell depending on who is or is not in that top five using your formula.

Homer: And?

Kid:  Well the dadgum DOW Industrials have become hot. So hot in fact, the pros are already talking about a DOW 12000 this year. And guess what?

Homer: What?
 

Kid: Homer's Stock Purchase System really works!

Homer: I take it you started?

Kid:  Yes sir.

Homer: Any profits?

Kid: Your kidding right?

Homer: Yes.

Kid: I've also been looking at the bio industry. Do have a favorite here?

Homer: Genentech.

Kid: Really. Any particular reason?

Homer:  I know the man who helped bring it public and have always followed their development since. I have been impressed with their breakthroughs and research contribution. Anyway, they are helping keep me alive so I think they are on the cusp of the biotech research revolution.

Kid: Well, while I'm at it, and you are willing to actually tell me about a company that you like, how about the technology industry. Got any favorites there?

Homer: Sure. Intel.

Kid: I'm going to have a heart attack. You actually told me!

Homer: Well, I figured you have hung in there long enough and have listened to what I have to say and actually did something about it recently. So, I have less of a problem dealing with your greed factor.

Kid: Greed factor?.

Homer: Yea, the desire to obtain obscene profits instantly.

Kid: One more question Homer.

Homer: Go for it.

Kid: Do you like Martha Stewart?

Homer: I love Martha Stewart but I'm a little old for her.

Kid: That's not what I meant.

Homer: I know. See ya later Kid.