Wednesday, April 7, 2010

Juggling Dynamite

"If money is your hope for independence, you will never have it"
Henry Ford

In Juggling Dynamite, a book by Danielle Park.

Have you ever had your bank or broker call you to tell you that you have too much cash (not invested)? It certainly did happen to me. She explains why they do that (because if you invest in their stuff, they earn management fees). She goes on at length to explain what is wrong with this industry. How promised returns of 8% are simply not possible (Hello Madoff clients?)

Have you ever been told that you should not time the markets? Certainly happened to me too by the people who held my money.

The author says you should time the markets.

Beware the investment sales industry. That is one of the chapters of this book, and how right it is.

Juggling Dynamite was written by Danielle Park, an investment advisor that appears on BNN from time to time. I usually agree with she says and her frank manner attracted me to read her book. I was pleasantly surprised.

Watch video (March 31) : discusses end of quarter, market looks like 2002 and 2007 market, we should not be here back so fast. It's frustrating, markets will not keep going up like they had, bong yields increasing, causing higher mortgage rates. We could see negative GDP growth even by Q2. She mentions RSI levels too high!

The book discusses investments in general. However, it also touches on other important topics, for example, what is really important in life and how to be happy. Usually most people equate having lots of money wit happiness. A mother of two children, Ms. Clark teaches a course to teenagers, I understand as a volunteer activity. He describes in a chapter how in a class he for else privileged kids she asks them to list their goals in life. The vast majority say money or getting rich.

He explains nicely what is wrong with this. She was a lawyer earning 6 figures, working hard, and acquiring all the nice things most people want t buy, nice cars and great big houses, until she decided to quit.

The book was written in 2006. She repeatedly describes the excessive amount of debt and credit of those times and how it would end up badly. She explains why you should not use buy and hold.
She writes about market cycles, and how we are in a bear cycle, a 20 year one!

Some quotes from the book:

Don't allow others you sell you investments.
Would y0u reply on the advise of people paid to sell you things?

In the final stage of the classic cycle stocks, bonds, commodities drop together all over the world

Page 177: "Yes, we do have to time the markets". Golden words. Do not believe the silly stats the bank tells you about being invested. They assume very long time frames (20 years or more), and that you life style does not change. It does, people marry, have kids, buy houses, kids go to university, etc, etc, etc.

Ms. Park also discusses the usual stat of "if you miss the top 10 days in the markets", and how much BS it is. Do you ever see the bank tell you how much you will save if you missed the worst 10 days?

On stock recommendations

If someone suggest you should buy a stock and they say "take a look at this stocks", "I have already bought some". Do not walk, run!

"These words should set off alarm bells to anyone wishing to keep their
money intact"
"once every sucker has been sucked in, there is no else to buy"

"Buy, hold, and perspire is not a good solution during cyclical bear


Ch 1.: The Truth About Human Nature

Ch 2. Benefiting From Market Cycles

Ch 3. The Truth About Asset Allocation

Ch 4. Beware the Investments Sales Industry

Ch 5. Mutual Funds and Management fees

Ch 6. Fundamental Analysis And Stock Prices

Ch 7. The Media

Ch 8. About Risk

Ch 9. About Borrowed Money

Ch 10. About Income

Ch 11. Timing Markets

Ch 12. Pursuing the Brass Ring

Ch 13. Building and Preserving a Rich Life

Ch 14. Takeaways

There are a couple of typos in the book ("principle" is used instead of principal), but it is a great read.

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