I want my share!

What is a stock? What is a share? Are they interchangeable, and who even cares?

Well, Debbie does … asking on the Share Your Number community forum:

I understand why you would need to have a good idea of the value of a company if you plan to buy stock in that company – But I don’t understand (and I’m sure this is stocks 101) how that translates to the price per share.

Even though this blog isn’t about Stocks 101 … there are plenty of other places on the web to find that sort of info … this does open up some interesting questions:

For example, even though I owned some of my businesses 100%, they were structured with lots of shares (usually between 100 and 1000).

Why?

Well, ‘just in case’ …

… it makes it easy for banks, partners, JV’s, partial sales, etc. to buy in – just transfer them a % of the shares: if you have 1,000 shares (or 100, it doesn’t matter … larger numbers just have more divisors and the ability to make finer and finer ‘cuts’ of the company value) and they are buying 40% of the company, you just give then 400 (or 40) shares.

Simple!

If you want to be sneaky, you create two classes of shares: A (say, 600 of the shares) and B (the rest), with the voting rights going to the A stock, which you – naturally – keep. You get to sell 40% of the company to some sucker and keep 100% of the control (actually, 60% still should give you majority control, so it’s not such a big deal, anyway)!

Unfortunately, for my New Zealand Joint Venture (fancy term for ‘partnership’), where I owned just 40% of the stock, that wasn’t possible … and, for my US JV, where I ‘controlled’ the company with 51% of the stock, there were so many “by unanimous agreement” clauses written into the shareholder’s agreement, I couldn’t blow my nose without seeking my partner’s approval, first

So, the first lesson we learn about stock is that numbers and/or percentages CAN matter less (or more) than you think … it’s all in the fine print

Public companies are the same, except that they are usually (a) huge, and (b) divided into LOTS of small pieces (1,000,000+) so that people can buy very small chunks of the company, and trade them very easily i.e. for small sums of money.

These shares/stocks are traded on public stock exchanges, which are heavily regulated to make up for the fact that ‘idiots’ like me buy small pieces of businesses without the effort or forethought that they would put into buying the WHOLE business: we take all the risks without any of the business controls.

Stupid!

And, that’s why the stock market is more akin to a casino than to ‘real’ business or investing … we have no control, and only limited understanding of the underlying business that we are – in effect – buying into.

Now, here’s Josh to answer the second part of Debbie’s question (“how that translates to the price per share”):

If you think a company is worth 1 billion and there are 100 million shares outstanding, the price you think the shares are worth are 10 dollars each. Of course you want to wait until you have the opportunity to pay less then this.

So, if you would be willing – that is, if you were Warren Buffett instead of Jane Doe – to buy the whole company for $100,000,000 and it had 1,000,000 shares, then you should be willing to buy one (or each) share for $100. Except, Warren reads the financial reports and calls the shots, while we read Money Magazine and wait patiently (what other choice do we have?!) for our dividend check

This leads to some other key numbers:

In a private company, we have sales and profits.

In a public company (i.e. traded on a stock exchange), we also have sales (or ‘revenue’) and profits (or ‘earnings’), but we can now also divide each of those by the number of shares available to come up with numbers like Revenue per Share and (more importantly) Earnings Per Share.

Also, if we COULD buy the whole company for $100,000,000 and it had a 25% profit margin, then for each $100 share we buy, we would expect $25 in company profits … which means the company is now selling for a Price/Earnings Ratio of 4.

Which leads me to the Grand Mystery of the Stock Market:

If a P/E of 4 is right on the money for a private company (they typically sell for 3 to 5 times annual profit/earnings) why is a P/E of, say, 15 for a publicly traded stock the ‘norm’ and a P/E of 8 to 12 times earnings so damn cheap that even Warren Buffett might buy the stock by the truckloads?!

[AJC: I know the answer ... but 'knowing' doesn't make it right ... do you know the answer?]

So, Debbie – in case you’re worried about asking a 101 question – please remember: there’s no such thing as a bad question, only a bad answer

Diversification [does NOT equal] Bankroll Management!

Even though guys like Tom Dwan (a.k.a. Durrrr) can run up a $200 starting bankroll to over $10 million in 3 or 4 years playing poker online, I don’t recommend this as a serious ‘investment’ strategy!

Nor, do I recommend simply dumping your entire portfolio (401k included) into just one stock pick, as Josh has done ….

… even though both Tom and Josh are both ‘big winners’ … so far

That’s why I recommended – for those amongst my readers who insist on traversing the high-wire of their financial life (there ARE rich prizes at the other side, IF they make it, so who am I to say “don’t!”???) – a simple three-part strategy to protecting their finances, by taking:

1/3 of any ‘windfall gains’ for spending (presuming that the speculation activity is their primary source of income);

1/3 of any ‘windfall gains’ to fuel a parallel ‘passive income’ investment strategy; and,

1/3 of any ‘windfall gains’ for their trading activity (this could be trading stocks/options; developing or flipping real-estate with little money down; etc.; etc).

If the person has another (reliable) source of income, then any ‘windfall gains’ can simply be split 50/50 between ‘speculation’ and ‘passive investments’.

Of course, this will slow down growth, which is why Josh still wants to:

Go 100% 401k and 200% brokerage … [because] sometimes the opportunity is so obvious and risk so low

Spoken like a true Most Probably Will Go Broke Someday Trader!

This strategy is just there to protect the Josh’s of this world in the unlikely event that they should miscalculate ever so slightly

Look, I’m not going to attempt to teach anybody anything about trading, but it’s always good to remember: it takes just ONE bad piece of news on a ‘volatile stock’ (bad ceo, drug that doesn’t get FDA approval or shows unexpected adverse side-effects, law suit) to override the fundamentals.

It’s the equivalent to a ‘bad beat‘ in poker (a.k.a. ‘variance’) … they are inevitable in poker – and, I would argue, also in trading – and you survive them by good bankroll management …

… after all, there are still Enrons out there that people are trading up every day

On the other hand, Jeff throws a curve ball:

How to Go from $52,000 to Retired in 5 Years?

Phil Town (author of Rule # 1 Investing) talks about his approach to Value Investing as a way to achieve a minimum (presumably, long-term) 15%+ compounded return in the stock market.

On his blog he recently fielded a question from a reader who asked:

What does poker have to do with investing?

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Warning: This is a High Risk Post … it’s only for those poor misguided souls who INSIST on speculating (be it: stocks, real-estate, FOREX, commodities, etc., etc.) … don’t do it! But, if you MUST try to gamble your way to a fortune (admittedly, it has – albeit RARELY – been done), at least read on ….

______

I have a confession to make: I love playing poker.

I had never played a hand – nor gambled at all (I hate any game where the casino odds are even 1% or 2% against me … why throw money away?!) – but, then I arrived in the USA and turned on the television just as Chris Moneymaker was bluffing Sammy Farha on his way to making history at the 2003 World Series of Poker  …

… it was like meeting the eyes of a woman across a crowded room; it was (I am ashamed to admit) ‘love’ at first sight

Which brings me to the Universe’s Cruel Joke, and it goes something like this:

I exclusively play No-Limit Texas Hold’em but met a friend who is one of the world’s top Pot Limit Omaha pro’s … in fact, I now take tennis lessons with him. This (not him!) convinced me to give the game a try, so I throw $40 (being sensible, no need to throw ‘real money’ away) into an online table while I’m chatting to a friend over the ‘phone and what do you know, I’ve made $200 about 3 minutes later!

This is a game I could grow to love, so I proceeded to lose $4k over the next few weeks, playing my usual limits …

… oh, I know this is just ‘variance’, because I’m in with the best hand almost every single time

Which brings me to Josh:

Josh is one of our 7 Millionaires … In Training! and he intends to make his money trading according to a system that he has been developing for trading pharmaceutical stocks. I have high hopes for Josh, and he will probably end up with his own hedge fund, if he survives his good luck.

You see, Josh has just hit it big – and sudden – as, he explains:

My net worth increased over 1200% on May 7. Check out my networth profile I updated recently.
https://www.networthiq.com/people/jaushwa

[I put] the whole 401(k) and personal brokerage account into a penny pharmaceutical stock, (avg price was around .0475 cents.) Today it closed at .82 cents. The stock is TTNP, Titan Pharmaceuticals.

Adrian, when are we starting MM-201, I’m jumping out of my skin here?

As I said to Josh:

If you MM201′ed any harder, you’d burst

You see, it’s easy to make money when you find a stock that climbs straight up like Jeff’s Hornet on full after-burners, it’s MUCH harder to:

a) Repeat until rich, and

b) Keep it, once you’ve made it.

What has this to do with poker? More importantly, what does poker have to do with investing?

Well, if you are a trader/speculator … everything!

You see, poker is a high ‘variance’ activity – that means that there is both a skill and luck component – but, you may know this as high risk / high reward. And, the best friend of the professional poker player is not skill … or even having luck on their side … it’s bankroll management.

At its simplest, ‘bankroll management’ means not allocating too much of your bankroll (i.e. capital) to any one session, and walking away when you lose that … at its most complex, it can involve a whole set of rules, such as Chris Ferguson’s poker bankroll management system …

… Chris is a top poker professional who – as his own ‘grand experiment’ – set out to make $10,000 starting with just one penny. Even though he had great skill – far greater than any of his opponents at the levels that he was playing at – he knew that he needed to protect himself from that devil known as ‘variance’ (i.e. sheer bad luck):

Here’s how he did it:

Starting with nothing but a Full Tilt Poker account, Chris played in Freerolls until he earned enough to graduate to games with real-money buy-ins. From that point on, he adhered to a strict set of guidelines to build up his bankroll:

• He never bought into a cash game or a Sit & Go for more than 5 percent of his total bankroll; the only exception was at the lowest limits: he was allowed to buy into any game with a buy-in of $2.50 or less
• He didn’t buy into any multi-table tournaments for more than 2 percent of his total bankroll; the only exception was $1 MTTs
• If at any time during a No-Limit or Pot-Limit cash-game session the money on the table represented more than 10 percent of his total bankroll, he had to leave the game when the blinds reached him

Getting started wasn’t easy. In fact, it took more than seven months of steady play until he got his bankroll to stabilize at about $6.50. Undaunted, Chris maintained his discipline and dedication and continued with his challenge. Then, on November 26th, 2006, Chris made a major breakthrough. He turned a $1 tournament buy-in into $104 in prize money when he finished second in a 683-player tournament. Even with that huge bankroll boost, it still took Chris nine more months of hard work to reach $10K. But because he strictly adhered to the bankroll management strategy that he’d set for himself, Chris achieved his goal the following September.

Besides the sheer similarity in Josh’s and Chris’ graph, there are clear parallels between poker and trading … if you still can’t see them, stop and play a little $1 / $2 no-limit hold’em online … you’ll begin to see my point, pretty soon

What has this to do with personal finance??!

Well, for traders and speculators,’bankroll management’ – which we call Making Money 101 – is also the most important skill that you need to learn so that you have a base to work from and a fall-back …

… if you are still not 100% convinced, I would encourage you to grab the book about Jesse Livermore – The World’s Greatest Trader. I want you to see that he became rich and broke FOUR separate times (then, blew his own head off) … I don’t want this to happen to you.

Once you really FEEL this, read on – otherwise, just bookmark this post and wait … nothing produces discipline better than the inevitable major loss …

OK, if you are now TRULY ‘on board’, I want you to break your ‘windfall’ into three easy (well, equal) pieces:

1. Trading Account: do more of what you just did, and hope to repeat (just remember NOT to put all of your position into one investment … ONLY invest into one ‘event’ what you would be happy to lose 100% of without suffering unduly)

2. Passive Investment Account: Buy a rental; or buy/hold ‘boring stocks’ that you would be happy to own forever … fight the urge to trade these stocks!

3. Savings Account: This is what you live on (assuming trading is your major source of income), keep this in cash or CD’s. I told Josh to use this as a deposit on his own condo.

When you lose 1. (almost all poker players – and traders – lose their ‘bankroll’ at least once in their lives … some MANY times a.k.a. Jesse Livermore) forget about ever ‘dipping’ into 2. or 3. to try and ‘catch up your losses’ … it won’t happen(!): you will simply have to go back and build up a new trading account from scratch … just like you did when you first started out.

Always remember this ‘3 easy pieces’ approach to windfalls and you won’t ever go [completely] broke …

Rich 1; Broke 0; Head [Intact] – not a bad scoreline

Does technical analysis even work?

Rick is skeptical about the value of technical analysis:

I would be very skeptical that technical analysis works- here is a link discussing the controversy:
http://en.wikipedia.org/wiki/Technical_analysis#Empirical_evidence
I’ve never heard of anyone getting very rich from technical analysis. Plus neither Peter Lynch nor Warren Buffett believes in it.
A web site that tells you when to buy/sell stocks strikes me as too good to be true. Let’s say that you had a stock purchasing system that WORKED- would you
A Make it available to the world on a website/write a book and make $1M
B Keep it secret, start your own hedge fund and make $1B.
I’m guessing A wouldn’t be too likely… Also if you did have a system that really worked then making it widely known will cause the system to be useless. Why? For every transaction there must be a buyer and seller. If many potential sellers see a “buy” signal at the current prince they will demand a higher price to sell driving the price up. Similarly, if many potential buyers see a “sell” signal at the current prince they will demand a lower price to buy forcing the price down. The final result is that the pool of believers in the system will force the actual price to agree with the system’s prediction of a fair price.

Rick might be a little surprised to know – given my recent posts, apparently condoning technical analysis a lá Phil Town – that I tend to agree with him!

Firstly, keep in mind that I am on record as stating that I am not the ‘go to’ guy on any specific form of investment (perhaps some on business, less on real-estate, even less on stocks, and so on) … my ‘expertise’ (more like ‘passion’) is in the overall strategy of wealth-building, and showing how these individual pieces fall into place.

Also, I am a ‘value guy’ … I love to sniff out a bargain – be it a business, property, or stock – and pounce, and am a fan of Phil Town’s valuation methods (although, I will point out my ‘issues’ with his methodology in a future post).

And, I agree in principle that if you COULD:

a) Identify a stock that was under-priced, and

b) Avoid the market dips by selling out (then rebuying)

… you would increase your returns and – MUCH more importantly – avoid holding onto an under-priced ENRON … one that you thought was cheap but some disaster strikes that the ‘big Boys’ get wind of early.

In principle, that is

Look:

1. There have been successful traders, but none that I know of with longevity; it’s a speculation / business … so, if you are prepared to take the chance on the big run up – then sell off – PERHAPS, just perhaps, you can make it big? Jesse Livermore did it 4 times (before putting a gun to his own head when he crashed for the 4th time).

2. Phil Town suggests that the ‘big guys’ (the huge mutual funds) put so much money in/out of the market that they have to make their move over a number of weeks to avoid the sudden price movement that you suggest. IF this is true and IF you can use technical signals to tell you when the run up/down is occurring, then Phil says that the smaller investor can use these signals to move instantly (in 8 seconds, v the ‘big guys’ 6 weeks).

… and, I have certainly used Phil’s methods to suffer ‘only’ a 15% loss when the rest of the market soured by 50+% (and, you need to remember that I have been actively trading since the crash UNTIL it bottomed and have been in cash since for reasons unrelated to the market), so my personal experience is that the ’3 indicators’ ARE useful.

The catch is, I don’t know why, because they are all PRICE indicators, not VOLUME … in fact, volume only tells you of an increase in activity, there can be no net buying/selling because there are two parties in every trade (the ‘hint’, I guess, is in the price … it goes up/down according to market sentiment).

So, I am a fan of ‘value investing’ (if you can find the right way to reliably value a stock and can then find one that is way under priced … I believe that this happens often enough to make it useful) and am experimenting with the technical indicators to get in/out, but am – like you – skeptical, but not complaining while I am getting positive results …

… but, please DON’T read this post, I am planning to start my own hedge fund

This week’s Carnival of Personal Finance is out; we’re buried in their list somewhere ….

The Dean of Wall Street

Five Cent Nickel (after inflation, it’s only worth a penny) uses these wise words of Warren Buffett’s teacher/mentor – and the ‘father’ of Value Investing (the art of buying a stock for less than its ‘real’ or ‘intrinsic’ value) to teach us about the value of index funds:

The recommendation to track an index rather than pick stocks may sound somewhat surprising coming from the man who wrote one of the most well-respected books ever written about picking stocks. However, as more and more investors are learning every year, index funds make a lot of sense compared to the alternatives.

5c’s heart is in the right place, but it’s not what Benjamin Graham was suggesting at all; he simply suggested that analysts and untrained investors should invest via Index Funds …

… then dedicated his life to teaching others (and, practising what he preached) how to select common stocks that will give better than average results.

The trick is that you need to become a trained investor to do so … it’s a business and like any other business, it requires training, dedication and a certain degree of risk-taking (although, I fail to see how suffering a 15% loss – as I did – while the indexes all lost 50+% is more risky?!).

Phil Town reportedly turned $1,000 into $1,000,000 using Grahamesque ‘value investing/trading’ techniques, and Warren Buffett created a $40+ Billion monolith using similar techniques … and Graham himself made millions. And, studies have shown that this is due to skill, not luck (as is the case for most successful ‘businesses’).

By all means, realize that you don’t have the skills and stick to Index Funds … because, if you DO want to invest in stocks, these experts are telling you that you MUST first acquire the skills.

Another sensational headline

Motley Fool are masters of the sensational headline; case in point: their blog shouts Avoid the Mistake That Cost Buffett 8 Years of Better Returns, which turns out to be a reasonable discussion of technical analysis v fundamental investing a la Warren Buffett:

Technical analysis is the practice of predicting where stocks will trade based on charts of historical pricing and volume information. There’s a certain logic to it. Stocks trade based on supply and demand, which is greatly influenced by investors’ attitudes about the stocks. The charts should reflect those attitudes and might predict where the individual stocks will go.

But Buffett discovered one small problem. Technical analysis didn’t work. He explained, “I realized that technical analysis didn’t work when I turned the chart upside down and didn’t get a different answer.” After eight years of trying, he concluded that it was the wrong way to invest.

So, what does Warren say is the right way to invest?

Well it would be unfair of me to steal Motley Fool’s Thunder [ AJC: see I, too, can write clever headlines ] …

… instead, I want to point you to an even better strategy for small-time investors who can hop in/out of positions far more nimbly than Warren Buffett:

Combining value investing with basic technical analysis as touted by Phil Town of Rule # 1 Investing ‘fame’. Phil reportedly turned $1,000 into $1,000,000 over 5 years using these strategies, so maybe you can, too?

I didn’t have this same kind of success (with stocks!), but I did only start to use these strategies as the market crashed 50+%, yet my loss (including doubling my risk by using margin lending) was a 15% loss in the US (on approx. $1,000,000 invested) v a 60% loss in Australia (on approx. $750,000 invested) and a 80% loss in the UK (on approx. $3,000,000 invested) where these techniques were NOT used.

Before you say “what a dope”, my UK ‘investment’ was actually part of my buyout, so I had no choice … but, Australia and US were my [stupid!] decisions to invest at the peak

So, a 15% US loss should actually be read as a 35% ‘gain’ over the market, thanks to these tools …

Here’s what Phil Town has to say about sticking to his technical analysis-based buy/sell signals:

For all you arrows users (Investools or Success): I buy with three greens and it’s amazing how many times I regret it when i jump the gun and buy with two.  So three green.

And I get out when the stock stops going up and I get two reds down below.

And, here’s how to combine the two:

- Select a stock based upon sound fundamentals: i.e. is it trading below its long term value?

- Buy when the ‘technicals’ tell you that the major fund are beginning to buy in and sell when they are beginning to sell out.

IF this works for you (and, it has worked pretty well for me), it allows you to rid the short-term ‘waves’ in a stock’s price …

… but, you sell out for good, once your ‘value analysis’ tells you that the stock is no longer cheap.

Guaranteed Returns?

In choppy and down markets it’s natural to be nervous … so, it’s no wonder that investors start to look at funds that purport to ‘guarantee’ your initial capital, your return, or some combination of both.

I have a close friend who is a financial adviser, who works strictly on a fee basis, yet his practice is associated with the products of one major insurance and fund management company.

He was telling me of the rise of these Absolute Return funds that work on the basis of not only guaranteeing the original amount that you invested, but also lock in your returns to date …

- in other words, if you invest $1,000 this year and the market falls, the fund guarantees to pay you back at least $1,000

- then next year is a good year for the market and your fund increases by 10%; now the fund guarantees to pay you back at least $1,100

- but, next year there’s another market crash and the market drops by 15%; but, the fund STILL guarantees to pay you back at least $1,100

- if you remain with the fund and the market eventually totally recovers, as soon as the fund value rises above your new $1,100 ‘guarantee’ then so does your return.

There have been plenty of systems that have produced similar results … they usually do this by some combination of insurance and/or derivatives (e.g. stock options). In fact, you could replicate some of these results for yourself simply by buying the right type and duration of stock option along with the underlying stock (or index).

The problem is that all of these end up costing you money: the insurance premium and/or options are bought out of your initial (or ongoing) investments. The ‘cost’ of these ‘guarantees’ comes as some combination of increased fees or reduced returns when compared to a similar fund that does not offer the ‘guarantee’ …. it’s that simple.

You can provide yourself a similar – or better – result at far less cost: buy a low-cost Index Fund and wait 30 years to cash it out; I can virtually ‘guarantee‘ an 8.5% minimum return

A strange conjunction of posts …

I was skimming through the alltop.com listings of personal finance blog titles as I do from time to time, when I came across these two posts  on Ranjan Varma’s blog:

Timing the Market is Nonsense

and

Quantum Gold Fund Gives 29.7% Return

I don’t know about you, but I rolled on the floor laughing … if you don’t see anything ‘wrong’ with the juxtaposition of these two headlines you’re wasting your time reading my blog

But, it’s the first article – on market timing – that I want to talk about … because there’s an interesting (and very short) ‘slide show’ embedded in it that I want you to see:

http://www.slideshare.net/thinkingcarl/average-is-not-normal-presentation?type=presentation

There are two points that the slideshow ‘author’ makes that I want to discuss here …

Average is Not Normal

The creator of the slide show suggests that in the last 80 years the stock market has “averaged” a 10% return, but in only 2 of those years has it actually returned anywhere near 10%

Timing is Everything

The slide show creator then uses that data to (erroneously, in my opinion) reason that timing in the stock market is actually critical … for example, would you want to start investing here?

or, here?

So, where would you rather invest? Come on, be honest?

Before I tell you where I would invest, let me tell you where the real big bucks are to be made …

… the real money is to be made in the second chart; investing at the peak of the market!

But, it only works if you can recognize the peak:

Jesse Livermore, the legendary trader of the 20′s and 30′s reportedly made and lost a fortune 4 times before he (understandably) blew his own head off. One of his greatest profits came when he SHORTED the market on the day of the famous stock market crash that heralded the beginning of the Great Depression. We’re talking so much money that the President of the USA called him to beg him to stop because he was singlehandedly making the market crash worse!

Given that I’m not Jesse (and, neither are you) my answer is:

I don’t care …

… you see, whether the curve is up in the beginning, smooth all the way, ziggy zaggy every which way in the middle, I only care what my starting and ending numbers are. And, what I do know is that, over a 30 year period (based upon ANY continuous 30 year period starting on any day that you care to name in the past 75 or so years … INCLUDING purchasing on the day before the greatest stock market crash in history … the one that saw the beginning of the Great Depression), the stock market will NOT give me less than an 8.5% return.

So, I will only buy stocks for 30 years as an investment (or less, if I feel like gambling) … or 20 years, if I only need a ‘guaranteed’ 4% return …

If the market happens to ziggy zaggy up in the right ways, and I’m lucky enough to get somewhere near the averages, well, there’ll be some extremely happy charities and surviving family when I die

Time to hop back in?

Fortune Magazine publishes the above chart and says:

There should be a rational relationship between the total market value of U.S. stocks and the output of the U.S. economy – its GNP. [Warren Buffett] visualized a moment when purchases might make sense, saying, “If the percentage relationship falls to the 70% to 80% area, buying stocks is likely to work very well for you.”

Well, that’s where stocks were in late January, when the ratio was 75%. Nothing about that reversion to sanity surprises Buffett, who told Fortune that the shift in the ratio reminds him of investor Ben Graham’s statement about the stock market: “In the short run it’s a voting machine, but in the long run it’s a weighing machine.

Now, I don’t have a crystal ball, but it appears that most of the world’s greatest Value Investors (a technical term for ‘cheapskates’) are hopping back into the market, as this article – this time from Forbes – says:

Over the past several weeks, more and more of history’s most successful investors have turned bullish. Warren Buffett, John Neff and David Dreman–all of these gurus and others have said that they are now in full buying mode. Even Jeremy Grantham, a notorious bear, has said that stocks are cheap, as cheap as they’ve been in two decades, in fact.

I’m wondering: if you were prepared to buy when the market was high and people were beginning to speculate whether it would last, why wouldn’t you be prepared to buy (and hold for the long-haul) now, when the market is closer to the bottom than it was then?

I have some money that I can get an immediate 33% ‘kick’ by moving it from the US to Australia (due to favorable exchange rates), yet I am sorely tempted to keep it in the US and trade options with it, as I feel that there will be great volatility between a Dow of 8,000 and 9,000 … the time when traders make (and lose) fortunes.

Not suggesting that you do the same, but I am suggesting that if ever there were a time to buy (for the long-term), it might be right now … there might be deeper bottoms still to come, but there will be higher, highs as well … by buying and holding now, you will ride out those bottoms (if they come) and guarantee that you will reach the highs (when they come) … how can that be a bad thing?