1. Companies can only survive in the long run by selling products and services with low margin profits.
2. Companies cannot sell high quality products and services and make enough profits to survive in a highly taxed competitive markets.
3. Companies are forced to resort to refined, difficult to prove deceptive advertising in order to maintain profits.
4. Industries are forced to lobby congressmen, senators and heads of departments and committees in Washington to minimize legislation that would force companies to spend money to improve products and services.
5. Consumers are forced to buy inferior products and services, while the media (status quo) makes sure that voters don’t elect representatives that would legislate minimum national quality standards for products and services in the United States.
6. New companies in new industries do make huge profits by selling high quality products and services for a few years until the system catches up with them and they are forced to cut corners. Top investors are aware, for example, that Microsoft has gone in that direction already while Apple or Google are still resisting.
7. Maverick investors who know the above analysis is true, investors such as Warren Buffett and myself, avoid creating diversified portfolios with many ‘losers,’ and choose instead to create ‘concentrated positions’ portfolios with a few ‘winners.’
8. If every investors chose only ‘winner’ companies, the economy will collapse from lack of enough economic activity.
9. Caveat emptor, the above statement is a concern for economic planners, not the concern of individual investors.
10. Prediction: A few ‘winners’ will soon be ready for an IPO. The smart small investor can ride to riches on the coattails of instant billionaires.
Enjoy! Read my books!
GM filed for Chapter 11. The ‘fat cats’ recovered their losses, the small investor lost it all. Don’t you think Congress should legislate that if a company listed on the stock exchange files for reorganization, investors that hold less than $25,000.00 in common shares should be paid before a judge signs the reorganization order. It is not only fair, it is good business. Millions of small investors will infuse money into the economy without fear again.
He ‘floated’ his stock while everyone else was in liquidation. What was his name? Please respond on Twitter.com/drkinarthy. Be my “follower.” No, he wasn’t Jewish.
Yesterday, CNN’s Larry King interviewed Donald Trump on the phone:
“What’s your take on the economy?”
“The stock market recovery is too far ahead of the economic recovery.”
Donald Trump became my idol, alongside Warren Buffett, long before he wrote the book Think big and kick Ass.’ These two giants of investments got what it takes to estimate future earnings. In my 2 books on the psychology of investing I wrote, “Consider taking your money out of the stock market in 2011 or 2012. Why?
If I was only trying to be funny, like some folks on the tube, I would say, “It’s boom or doom, it’s lust or bust. Take your pick.” Hell, nuts, it’s a serious business when hard-working Americans are suffering, while pessimistic CEOs run a weak economy while optimistic investors run a strong stock market:
1. There is no economic reason for the stock market recovery as of Christmas 2009. It is purely psychological, and a ‘bubble of doom’ is forming like a lava dome over a volcano ready to burst. Sooner or later, investors will be ‘busted’ without economic recovery coming in time.
2. Economic recovery will not come in time because Obama is a ’sweet nice social fellow’ who helps bankers – and ask nicely for help in return – no clout, no understanding of behavioral economics.
3. With no credit because of bankers intransigence, and a looming inflation because of government borrowing, keep making your money with a market ‘exhuberance,’ but be ready to exit before the bubble of doom bursts.
4. I don’t have the audacity to say, ”My books on investing and Obama” have the answer. They don’t. Buffett and Trump can estimate events better, but I am not far behind. 
Yes, big time! Obama is naive. He does not understand Behavioral Economics. He thinks that his sleek brand of Social Influence will work on shrewd bankers. His speech on CNN on December 16, 2009, after his meeting with the CEOs of Wells Fargo, Bank of America and others, indicates so. Sure, the president has charisma, but bankers respond only to power. They will not extend credit to small business owners unless the law forces them to do so, or the feds raise interest rate so landing can compete with buying cheap properties, paying old debt, giving bonuses to retain top executives, or investing overseas. Obama is naive to think that anything but law enforcement can make a big difference! This is unfortunate for the small business owner and the small investor, but especially the small business owner who can’t get credit. Behavioral economics states that banks that were helped by the tax payers to recover from their financial crisis, will help the tax payers to recover from theirs only if compelled to do so by law!
In my book The Psychology of Investing During the Obama Years, I caution small investors about keeping their money in the stock market after 2011 and 2012 unless Obama changes. As CEO of the country, he must accept that creating and enforcing behavioral economic contingencies is more effective them social influence and pressure. Research in social psychology indicates, time and again, that people respond better to powerful leaders than to likable leaders. You do not bail out anybody unless they sign a contract what they will do for you and what will be the consequences of not doing it. This is behavioral economics. This is contingency management. This is the good life! This is Darwin! This is nature! This is God! It works!
On December 31, add up all the grocery receipts that you signed during the year, and all the receipts that your husband signed for groceries. Assuming that the number of items ‘average out,’ chances are that your total bill be higher than his. You spent more money for the same items than he did. In general, men get more ‘bang for the buck’ than women, and rich people get more ‘bang for the buck’ than poor people. You’d think it would be the other way around.
The truth is that both men and women don’t get the ‘bang for the buck’ they could. The reason is that neither was trained in ‘comparative shopping.’ Our society is a money wasting ’coupon society,’ not a value oriented society.
My suggestion is: Listen to CH every day. He’s got some good tips (this is not a commercial).
When I was young, I had lots of girlfriends but no money. I married at 32…. couldn’t give up the ‘field’ that easily. The other day I glanced at an old album. Pretty Betty in shorts was leaning on my second-hand bike, sweet Ann and I were strolling on a dirt road, I was kissing Gina on a rock, 30 pictures in all and none even near a car. Barclay’s Bank in Tel Aviv did business but not with poor kids. My first car was a 54 Chevy that I bought for $300 in 64 when I got to America.
The other day I bought a brand new Toyota Avalon, the second most expensive car after Lexus, but the young ‘chicks’ to fool around with in the back seat are long gone. At 73, after prostate cancer treatment and 4 kids, my beautiful wife is relatively ’safe.’
I write my story because if you loaned me the money to buy a red convertible in Tel Aviv 1959, I would have had a ‘blast’ and I could easily paid you back the loan today at 10% interest per year. Are you listening, loan officers, why don’t you loan money to poor promising intelligent young men to be paid back half a century later? Why not? You’d make your money and you’d make a lot of young people in India happy.
Money has an unfortunate relationship with love. When you are young, you have one, and when you are old, you have the other.
Telling you about a counseling case I once had may help you understand why you lose money when you suddenly come to a lot of cash in life. My patient lost half his $1,000,000.00 that he won in a California lottery before he found the wisdom to seek counseling.
“My problem wasn’t my friends or relatives that suddenly became friendly. I loaned $10,000.00 to my cousin to start his business, I gave money to grandma, I said “no” to a few others.”
“How did you lose half a million?”
“I listened to the ’sharks,’ who showed up in my life as sleek as bankers and lawyers with irresistible offers to triple my money within a year or two.”
My patient was breathing heavily, visibly upset talking about it. I brought him a cup of coffee. “George, you were…”
“I was greedy,” he interrupted… “and stupid, “how can I forgive myself?”
“You will forgive yourself. You were not stupid or greedy. Your problem was that you suddenly had a million $$$ without the preparation you needed to think like a millionaire.”
“You mean having a million $$$ doesn’t make you a millionaire?”
“That’s right, and being a millionaire doesn’t mean you have a million bucks.”
“Wow!”
That counseling session occurred 30 years before I wrote the book The Psychology of Investing. If it happened today I would have said, “George Tweedie, read my book. You need to think like a millionaire, act like a millionaire, wear expensive clothes, drive a fancy car, and relate to people from a position of authority.”
“I think I got it, Dr. Kinarthy, scary indeed, if I don’t think like a millionaire I may lose the other half a million.”
I wonder where Mr. Tweedie is today? Many lottery winners become poor again – some even buying lottery tickets after the big winnings have already been claimed (or stolen).
A long time ago, before I wrote two textbooks on behavioral investing, taught a workshop, started the V-BIC club, had a website, and another website, or got rich, my broker GMB at Morgan Stanley laughed and said,
“Eli, you can’t be serious about Google. First, I couldn’t get you the IPO price because you are not on the list o VIP investors, and second, you want to gamble a $100 per share on two college kids?’
“I know, Ben and Jerry ice cream make more sense than Page and Brim Google.”
“Ben and Jerry make money, isn’t that the name of the game?”
“No, Barry, BLASH is the name of the game.”
“What?”
“Never mind.”
That was the day I stopped listening to conventional thinkers. I couldn’t get GOOG for $90 so I got it for $130. You know the rest of the G story. Barry retired. Guess what he would say today if I told him that I am watching the Twitter bird like a hawk? He’d probably say, “What’s wrong with getting a nice field mouse like Pinnacle Micro?” Jesus said, “They not know what they do?” Did he mean the Romans in Judea or the New Yorkers on Wall Street? See you folks on Gore’s superhighway.
Dubai World, the government’s flagship holding company can’t pay its bills after building a ‘Paradise’ for tourists. Global stock markets fall, gold rises, European stocks are shaken, and the world’s financial markets are trying to cope with a crisis they know nothing about its psychology.
Dubai is an oil poor country surrounded by oil rich relatives who build a lavish life style for themselves. When you are poor, living among rich relatives, you will borrow and borrow and build and build, pretending that you have wealth too. You don’t study behavioral economics, so you don’t understand the social and financial ‘vacuum’ you are creating, but you believe you do. You don’t treat money with respect because you don’t know that money is alive in its own way. You see it only as a commodity to acquire so you could continue to build, In short, you act like the sub-prime mortgage lenders in News York who’s short sight brought on us the severe recession of 2008.
Is there a way out?
Yes, the Dubai lesson is that all governments should learn to effectively regulate financial landing and borrowing.
Would it happen?
Probably not, unless you study Shakespeare, “Neither a borrower nor a lender be,” Baron Rothschild, “It isn’t enough for you to love money – it is also necessary that money should love you,” or the Irish proverb, “Money swore an oath that nobody who did not love it should have it.”
