Sell Low Buy High

Jim Cramer doesn't know what he's talking about.

Big surprise there. For years he's been telling his viewers to buy when the market is high, and now he says sell, when the market is low.

In the HBO show Deadwood, they have a name for people that follow the masses and let their emotions make decisions - Hoopleheads. In Deadwood, all the Hoopleheads pannic when they think their gold claims may become worthless. The non-Hoopleheads remain calm, and buy up gold claims on the cheap from the stupid Hoopleheads and later make fortunes.

Clearly, all Hoopleheads should steer clear of the stock market, in bad as well as good markets, because their lack of logical/critical thinking skills is sure to earn them fat losses in the long run. Please-- name someone who has made a fortune buying high and selling low. Here's a tip for the Hoopleheads: do the opposite of what Cramer says, and you may actually make some money.



What Cramer, and others like him do, is play on their viewers emotions and make cash selling ads on their shows. According to the New York Times, since the financial crisis has started, the number of Cramer's viewers has doubled. That must be good for Jim's portfolio! I don't normally like to give investment advice on this blog, but here's some for the Hoopleheads: Watch Oprah instead!

And please remember, no one knows what the market will do in the short term, all we do know is that the markets are forward looking, they are predictors of future earnings, not present. We also know that long term investments in stock markets are historically an effective method of building wealth. Don't lose that confidence, and above all don't panic.

Don't Wait for Birds!!!!

Some good news has risen from the mess: The Ted Spread is moving in a direction we can enjoy.

Another piece of good news, the Oracle has spoken, and it said:

"...if you wait for the robins, spring will be over..."



If you get to read the article, you'll see Buffett is very optimistic about long term market returns, which should be a relief to most, since this is the guy who knows more about markets (there is no better way to say this) then anyone else ever on Earth.



As a side note, I've stopped following the day to day, moment to moment, moves of the market. This is something I would recommend to anyone with enough money in the market to make it important to them.

Bullshit

Am I the only person out there that thinks this slide is about 90% bullshit? Is this not a reverse bubble? Will anyone out there stand up and tell me there are not Hedge Funds and other large pools of cash making big dough selling the market short?

I have big concerns, but I am optimistic. The index to watch now is the Ted Spread, see the link the below. For those of you not in the know, this is the difference between the rate banks will lend to each other and the rate they can borrow from the U.S. government.

Ted Spread on Bloomberg

Watch this thing, right now, its WAY OUT OF WACK. Until it straightens out, we will continue to have major major bad stuff happening. When the spread starts to level off and better yet narrow, look out here comes the big rally and hopefully you can be a part of it.

P.S. I am going on record here as a proponent of financial industry regulation. I think anyone who works or has worked in financial services knows (whether or not they will admit it) regulation is a necessary tool that serves the public interest.

what do you know

I would not have believed the credit crisis would have gotten this bad had I been told. I felt like a housing downturn was certainly coming, but could not have predicted this catastrophe. That said, I do believe the entire mess is oversold and likely to recorrect in the opposite direction once investors realize and get comfort that the bailout is working, and I do believe it will work.

Has anyone heard the term "recession" recently, it seems to be noticeably absent from the conversation taking place on public radio and in the newspapers. Can we finally say it has arrived? I think the sooner that happens, and once investors realize that its not over and we will go on living and making a living, the market will recorrect. The amount of uncertainty and fear priced into the market at this moment is beyond measure. Be brave?

I have been looking for another house, as an investment or to live in and rent my current house. There are definitely some serious deals out there. I can offer cash, no financing, and am relatively fearless when I see a giant mess. Just to give you an idea, I have been seriously looking for about 4 weeks, and have seen two houses I was interested in (my criteria is extremely tight) made one offer and lost.

I will go ahead and be brave, since if things get worse it wont matter anyway. Another sign we are near bottom, the Oracle is making serious moves, that more than anything gives me comfort. If I had those resources I would do the same, but I don't. The biggest move I could make at this point is new house.

For the stock market, I am simply playing long term odds, like a decades long game of black jack, no 10 points cards for a while, so they must be on their way! Right? Just stay at the table.

Find a REO bank owned property

For those of you who missed the real estate bubble or just got priced out for whatever reason, you may want to think about buying a REO property. REO stands for "real estate owned" as in owned by the bank that loaned a debtor money to purchase the house. When the borrow stopped paying, the bank repossessed the house, and now it is listed with a regular real estate agent. The lucky break for the new buyer is this: Banks are not in the business of owning real estate, and further they need that cash to satisfy reserve requirements! Check out these links:

citimortgage

countrywide bank

bank of america

To give an example, I recently helped a friend find a REO prop owned by a local Maryland bank. She got a contract on the house for no joke 100K less than a comparable house in the same neighborhood. I am now wishing that I bought the place myself, and am sort of hoping her contract falls through!

Is Hillary Sabotaging the Election

So here is how I understand the current state of the Democrat's nomination process: Barack Obama has finished the show, there is no way possible (mathematically) for Hillary to take home the prize. So why is she still running? That seems the be the question everyone is trying to answer.

The popular opinion is what Hillary's camp is saying, which is "Hillary is the better candidate, more likely to defeat McCain in the General Election, and that the super delegates can still hand her the nomination." But what everyone knows is they won't.

So why is she still running? Here's another scenario: Hillary runs the democratic party into a divide (she is already doing it), Obama of course still gets the nomination, but the party is so split and its member so disillusioned, McCain pulls out a victory. Four more years of Bush policy, and Obama is a failure. So what does Hillary's camp do?

They keep campaigning, for four more years, Hillary get the nomination in 2012, and since we have had twelve years of Republicans, Hillary sails to an easy will in the general election!

I hope I'm wrong.

Go Chicken Little Go!

So what do we do now that the sky has finally fallen?

Work hard? Work differently? Keep going like we always have? One item I can confidently advise - save your cash. For one, you may need it. You may lose your job for circumstances beyond your control, and be caught with no income for a while. Two, if you don't lose your job, without cash you will lose some opportunities that have begun to pop up, and will continue to surface over at least the next year.

For example, in my lovely Charles Village neighborhood, there is currently a very large, 3 story, zoned for 3 units, right on a prime Saint Paul block, but does need some work, home for sale. It's been on the market for about 25 days, and sold a year ago for $410,000. Since then its been foreclosed on, and now the bank is trying to sell it for $299,000, and guess what, nobody's buying. I even looked at it.

The problem is the price. It's too high. Hello out there, the sky fell, didn't you see it? Apparently everyone else has.

There are other good "REO" deals right in my neighborhood (REO stands for Real Estate Owned, as in, real estate owned by a bank), and nobody is buying those either. The agents are practically begging buyers to come and take a look.

And it's not only real estate where I expect to see deals to be had over the next twelve months. I would look out for deals on all types of big ticket consumer goods, like cars, appliances, big screen televisions, and pool tables because all the fun expensive stuff will go on sale. It's sad, but ebay and craigslist will also see increased traffic, as people start to sell the big ticket consumer goods they bought when everyone else did, and now they're broke, just like everybody else. If you've got the cash, you'll get the deal.

This isn't only because the stock market is in the tank, or because of the increased difficultly in obtaining financing. These properties are sitting on the market because people are scared. They are scared of the uncertainty that lies ahead. They are scared of $5 gallons of gas, and $6 gallons of milk.

But I don't think the sky falling is anything to be afraid of. In fact, I think it is something to welcome. Go ahead, exhale, the party is taking a break. Now's the time to run to the bar and grab a drink, while the line is short, and if you have to go, go to the bathroom now, because pretty soon everybody will be back and you'll never get in!

Remember the last time the sky fell? The last time the party took a breather? It started in the very beginning of 2000, the Nasdaq bubble? Remember? Funny how the world has such a short memory.

I've said it before and so have many others: Get greedy when everyone else is scared.

Delayed Gratification

Some of my earliest and clearest memories are of visits to my father's parents' house. My grandfather had a club basement, complete with real oak panelled walls, a gas fireplace, a built-in couch with a large back-lit photo of Capri behind it, and a glass block bar with multi-colored lights inside. My grandmother liked to bake, and she was somewhat famous in their town for her pound cake. It was so good it'd make a grown man cry. Or at least beg.

She made the icing too, and it was just like fudge, only it was icing. I would eat large amounts of this cake whenever we had occasion to visit them. The cake part was good, better then I knew at the time, but for me, the real treat was the icing, which I would eat last.

I was born with the concept of delayed gratification. I always saved my best assets for another time, for a time when they would become more valuable, or more sweet.

I really never had to learn this behavior, or if I did, I taught myself, because I'm not too sure my parents ever learned it, at least not as well as me.

How do you teach this? I don't know that, but I am sure it can be learned. How many 'successful' friends do you have that you know didn't save a nickel a of that 100k they brought home last year? What did they do with it you ask? Maybe they can't answer that, but I can tell you: They devoured it, like a freshly killed animal they dragged back to their cave. They brought it through the darkness of the cave, over to where their families, friends, and other tribe members waited by the fire. Then together, they tore it apart, raw. Then it was all gone.

What is it worth if you don't save any of it? Lots, if you're only here for a moment. But you're not here for a moment. If fact, with modern science, you may be here for a very long time, longer than any previous generation. So get to it, go out and save, leave the leg, freeze it, save it for the winter, it will be cold, and you WILL be hungry!

"Be fearful when others are greedy, and be greedy only when others are fearful." Warren Buffett

Amen.

Hope for the Same

My first official tax season is coming to a close. I of course have a few clients who have yet to bring me their info, and some who have only brought me some info. For the year, I am going to get modernized with some software updates, and also get together a mailing for next year to current clients. I can also now begin to focus more energy to getting our home improvement business up and running.

I have one client who I've agreed to work with who really needs me to do the write-up work for throughout the year. She is one of those clients who went to art school but thinks they understand accounting anyway, seriously. It's going to turn her return into a nightmare. I have been coaching her somewhat on bookkeeping, but to date she insist on taking care of it herself. This is going to be tough, she is unreliable, but can pay the bill. Honestly, if she wasn't a close friend, I wouldn't be working with her. I guess I'll do my best, and hope for the same.

As far as working for myself, all I have to say is: its hard work and its scary, but dam it sure beats sitting in the office with the chumps! (Did I mention that, for now at least, I am still sitting in the office with the chumps?) I am, but I am working my way out, creating my own path. So for now I'll do my best, and hope for the same.

Crazy People Have Tax Returns, Too

Crazy people have tax returns, too, or so I have learned. Yesterday I had to turn away a return. Sorry, but I'm looking for good long term clients, and I am in a position to wait for them. It was a tough decision, I don't want to turn away work right now, but I realized that if I am not willing to turn away clients who I have no interest in working with, what is the point of being my own boss?

This week I think I have three individual returns to do, which should work out well. Not much work, but all good people, good long term clients.

I also have a plan to call a friend's father who is a CPA, retired from his full time job, and does returns during tax season, makes like 60k a year just doing that. I need some business guidance, some questions answered, maybe find out what kind of continuing education he participates in over the year.

More (some) Success

As I'm sure I said in an earlier post, I finished my first paying return two days ago. I also got contacted by yet another person today about taking care of their 1040. Tomorrow I have some write up work to do, a return, and thats all. I will likely make more this week doing accounting than I normally do at the 9-5. All I can think is, keep it up and get out of that 9-5! FYI, it's 1:30, I'm up drinking wine, had dinner with a friend earlier, and I have work to do tomorrow, work that pays quite well!, and work that will be done on my own time (after the gym) and in my pj's should I choose.

Big Week is Here

I've officially got two $600 returns to do this week. Yesterday I spent about 7 hours (plus 3 hours the day before) putting together the workpapers for a 1065 with three partners that I should finish today. I've got two individuals this week as well, and likely at least another two more. I am working very hard, but it is all for me. Every drop of sweat puts cash in my pocket, and equity in my business. What fun. Self employment of any kind is better than any job with a boss. I have a new long term goal: Within 5 years, I want to earn $50,000 during tax season alone. At an average cost of $300 a return, thats 166 returns, I can do it.

Big Week Coming Up?

This week it looks like I have two $600 returns. One is a rather simple LLC return with partners, and the other is a single member LLC. I'm a little concerned about the single member LLC as far as records go, but I'm taking it on a wait and see basis. I also got a call last night to set up an appointment on Tuesday the 25th for an individual, that looks optimistic as well, and of course my mother will be bringing by her tax info on Sunday or Monday.

I think business wise, this season its most important for me to do a good job with all of my returns, and to continue to let people know what I am doing. I know I'll continue to make mistakes, but I will also continue to learn from them.

Burned Today, Lesson Learned for Tomorrow

So when my new client showed up today she had already completed her return, and wanted me to review it for her. I spent about an hour answering her questions, at which point I asked her if she wanted me to take care of the return, to which she replied "would it be less since I have already done this?"

"No." Of course not, I still have to redo the return, and fix all the errors you already knew about but didn't know how to treat, which is my job and why you were going to pay me.

"I guess so," she answered, obviously feeling obligated since she had already eaten an hour of my time. I told her it was her decision, and she could go ahead and finish the return herself if she wished. She did offer to pay me for my time, to which I simply asked her to refer anyone who really did want my help, and wanted to pay me.

Lesson learned, next time I will asked the person I am meeting with, "what would you like me to do?" Before I meet with them. If you would simply like me to answer some questions, and I'd be happy to help for $50 an hour.

On a better note, somebody else approached me at an opening last night and inquired about having me take care of their 1040, at least I thought that what they wanted, I'll definitely clarify before I set up a meeting.

Tomorrow is a New Day

Tomorrow I meet with my first new client in several years. I am definitely nervous, but I think the most important thing is to appear confident, which i can do. It's a simple return, individual 1040 who has some self employment income, probably a schedule C. I'm charging $200, which I feel is a fair price for the client and for myself. I am going to take my time with the return and be very careful (I always am). I'll call the IRS to confirm anything I have the least doubt about. I'm going to have the new client sign an engagement letter, and tell her I need two weeks to complete the return.

My wife actually knows her (she saw my ad on my wife's blog), and she seems like she would make a great long term client. I am very excited. For me, each new client represents me getting 1% closer to full time self employment! All right! It also appears that I have that partnership return I discussed earlier. Apart from the fee ($600), the company has many independent contractors who also need tax work, which represents a good opportunity for my service.

Wish me luck!

I Guess I Will Wait Patiently

Today I got a call from three potential clients who expressed continued interest in tax services, but said they didn't have all their info yet, and wanted to reschedule appointments for a later date. Good sign, continued interest, and my wife got an email from my dinner party contact, reinforcing his interest, another good sign. On the 9-5 front, I got continued reinforcement that this is not the path for me!

Stranger

Remember that ad I said my wife posted on a blog she runs? Well the blog is for artist and gets around 200 - 600 hits a day, mostly locals who know us or know of us through some friend of a friend. I primarily posted the ad to let those people, the people in my extended group of local friends, know that I was looking for additional tax and accounting work. Today I got an email from someone I have never heard of, inquiring about tax work. I'm not sure what to do and this is one of those moments I wish I had a mentor to turn to (note to self, find mentor to turn to in the future). Ideally I would like to build my practice on word of mouth, personal connection basis, and I don't want to take on any pain in the ass clients. On the other hand, I do want to grow my practice. I guess I send her an email and take a chance. I can always say no, I am the boss.

More Hope

Just when I was having some doubts, last night my wife threw a dinner party and it looks like I have another tax client.

I'm Nervous

Today my secretary was asking me about my plans for next year, "are you leaving?" We discuss our shared disdain for the 9 to 5 about every other day. "First I have to decide I will be satisfied earning less than half what I'm earning now," was my reply. To which she asserted "but you'll be so much happier."

I would. But would I be nervous and afraid everyday as well? Am I nervous and afraid everyday now thinking about it while I don't even have the flexibility I am craving? Yeah and yeah.

Then I went to the gym after work. Ran a few laps, took a dip in the pool, then stepped into the huge jacuzzi and let the hot water take over. I imagined what it would be like to be here at 10 a.m., when all the other boys are down in the office sweating in the dry air for that extra money I wouldn't be earning.

So on Monday I am going to call human resources and stop putting money into my 401k, and start plowing every extra dime into my savings account, so I can sleep at night without a cushy job, so I can hit the jacuzzi mid morning.

Another Sign

Yesterday after I arrived at home I was talking 'grow my tax and accounting practice' strategy with my wife. While we were talking, I checked my voicemail on speaker phone and a message I thought was from an out of town friend asking for a favor was actually a person I had never met who had been referred to me for tax work. A message from the Universe, loud and clear.

After going to the gym and working out, I called the prospect back and now have an appointment with them next Wednesday at 4:30. This is more good news.

We also posted my first ad on my wife's blog, which gets about 200 views a day by local artists and aficionados.

Some Pieces Coming Together

Today when I arrived at work at 5:30 am to handle a crisis at a time when most of my friends, family, and other loved ones where still warmly asleep in their beds, I found out that someone in my building has tuberculosis. Not quite the dramatic emergency I had envisioned, but dangerous enough. I was also told that I do not need to get tested, yet.

In other news, I found out I am one step closer to getting a large tax client for my accounting practice. This would go some distance in firming up my commitment to myself to finally take the plunge. I also discussed subcontracting some work from a client, that could likely keep me in regular paychecks while I build my businesses, while allowing me the freedom and flexibility I need for sanity and for business building. (we do only live once) I would, however, not be earning as much (probably earning about half of what I earn now), and therefore would not be able to plow all of that extra cash into investments. But I am confident I can make at least enough to cover my living expenses, and to maintain the same standard of living I enjoy now.

So do I have all the pieces together? Shit, I certainly didn't think trading a lifetime of financial security for the chance to be my own boss would be nearly as scary as this!

Pros and Cons

Today (Sunday) over breakfast and the New York Times I was making a pro and con list of leaving regular employment for the great self-employment unknown when my phone rang with an unknown number. It turned out to be my supervisor at work. Apparently there is some crisis at the office (she would not tell me what it is) which I will be briefed on tomorrow morning when I arrive even earlier than usual at 6:30. I added this to my con list, and take it as a major glaring sign from above that I should leave for the unknown.

Going Out On My Own

Man I haven't posted anything for a while, but I have been very busy. I am a cpa and during this time of year of course I am busy. I have also started a home improvement business with a partner, and have been spending a lot of time getting that together, even before we have fixed a damaged wall or remodeled a single kitchen.

I am truly hoping this is the year that I can leave my government job and be completely self employed. I am getting the pieces in place, but they are not all there yet. My accounting work takes care of about 25% of my expenses, and I am hoping i can make the rest doing home improvements/remodeling. My plan is to expand the accounting services and to get the home improvement business off the ground.

I also have friend who has a successful pet sitting service, and ends up subcontracting much of his work to others because he has too much for him to do alone. I am considering talking to him about picking up some of this work, but I am hesitant because of our friendship.

I am going to keep posting as i make this transition. I'm hoping that by doing this, it will help me process my thoughts, make good decisions, and maybe even get some unbiased feedback.