Jan

4

DawnLet me start out by saying: 2007 was the worst year in my investing career in terms of performance relative to the market. But I am very positive about the future. Maybe I'm not smart enough to see all the bad news coming down the pike and all the gloom and doom it portends. But I can't help myself — maybe I'm cursed with a never ending positive attitude.
 
An article I was reading today mentioned that the loss of jobs last month was the worst since August of 2003. When one looks at the S&P on that date, you find that it was at 990. Today it sits at 1424. If you had bought into that "news" and held the S&P through today, you would have gotten an 8.2% return on your money, not including dividends.
 
Another bright side of increased unemployment is that employers have the opportunity to hire better employees. As a small businessman, I can tell you that as much as everyone likes hearing about low unemployment, there are problems associated with it. It's hard to hire good help when it's an employee's market. Potential employees can really ramp up their asking price and make it difficult for the small guys and "up and comers" to hire good people.
 
Another positive by-product of higher unemployment is that it releases trapped assets. Just as the death of a deer releases assets into ecosystem by feeding predators, scavengers, and fertilizing the ground at the point of death, as well as making more food available to other deer in the area (deer that are healthier and have more life and vitality ahead of them), releasing employees from the shackels of their current employment frees them up to succeed elsewhere.

Here's how. An employee can get stuck in a rut at a job. Eventually, a lot of employees change their work habits so that they do just enough to not get fired, and the employers pay them just enough so they don't quit. Not exactly a recipe for success! Further, sometimes, employees get complacent in their jobs and develop a fear of leaving and trying out their new great ideas. Most people have a modicum of creativity in them, and most people have, in their lifetime, at least one good/great idea that could not only make the world a better place, but could enrich their lives too!
 
But because they are complacent in their jobs and have developed a certain lifestyle as a result of their income, they are fearful to strike out on their own and make a go of it. They are fearful that they could lose what they've worked so hard to get.
 
Maybe they're fearful that they'll lose their home — which leads us to the subprime situation. Many people have lost their homes in the last year, and according to reports I've been reading, many more are likely to lose theirs this year.
 
What a great opportunity!

This economic contraction will force these people to use the power of their minds to create the money that they need get back what they had before. You see, once someone has a taste of a higher standard of living, he wants to keep it! Many of these people are going to now be forced to start their own businesses and implement those good/great ideas!
 
Many of them will use this opportunity to go back to school to further their education and better themselves to get that higher paying job! Many will take jobs at small businesses that they may viewed as too risky to work for in the past. And as we all know, small businesses offer greater freedom of thought and opportunities to be creative than do rigid established corporations.

The greatest wealth is created during the bad times. It's easy to make money and create wealth when things are going well. Think about all the wealth that was created just 10 short years ago with the dotcom explosion. Where are all those people today?
 
Economic contraction is creating opportunities for each of us to create real wealth for ourselves.

Does it bother me that 2007 was my worst year? Sure. But only for a minute! I can't afford to waste time having a pity party. I have to use the power of my mind to figure out what I could have done differently and falsify my previous belief structure and figure out how to create wealth for my clients and me. As a result, I have been spending money like crazy, dipping deep into my nest egg to improve myself, and hiring good people, even offering equity positions to some of these people in the different companies that I own. You see, I want to surrond myself with great people who will see the world differently than I, help me see where I — and now 'we' — can do better for my — now 'our' — clients. To create wealth for them, for me, and for my new employees and partners.

Maybe I'm crazy for doing this. Maybe spending my modest nest egg and giving away equity positions will break me. If that happens, I will be disappointed. But only for a little while.
 
You see, I'm not worried about losing it all (I've already had that happen to me in my life). I got it all once, I remember how I got it, and I'm more than capable of getting it all back!
 
The world is full of opportunity. Every contraction is filled with opportunity. 2008 will be a good year!

Steve Leslie writes:

Employment numbers can be misleading.

1) Backward looking and unstable.
2) Seasonal.
3) What does it truly measure, i.e, who is unemployed?

Someone once said “it is a recession when your neighbor is unemployed; it is a depression when you are.”

The unemployment rate is at 5%. Oldtimers will remember that 5% used to be a magical number that meant the job market was at full employment.

Thirty year mortgages are 5.5-6.0% for those who can get them. This number used to be very desirable.

The Fed has a scheduled meeting this month. Of course they do not have to wait until then to act.

This is the worst start to the year since 1932. The worst start of the S&P since 2000. NASDAQ had a terrible six days in a row.

A bad week by any measure for longs. One monkey does not close the show, however. Long way to go, over 360 days left in the year.

When fear sets in, time gets compressed.


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