Happy! Happy! Joy! Joy!

Happy, Happy, Joy, Joy!

Happy, Happy.......uh, why did the music stop?

Early next year, this is what may happen once individual investors and consumers realize that they have been duped by B-squared, Ben Bernanke.

He and his colleagues at the Fed Reserve have been speaking out and making comments suggesting a further rate cut. This has led to mass buying of stocks across the board. Now, realize that most of the smart money had been buying under the radar before these guys decided to pipe up (usually at the insistence of the guys at places like Goldman Sachs, Lehman Brothers, etc. the guys who are the primary advisors to big, smart money).

Now that the "news" is unofficially out that the Fed has all but decided to cut interest rates, everyone else is in a feeding frenzy to buy, buy, buy. Where do you think the supply of shares is coming from? I won't answer that; I will let you come to your own conclusion.

What will happen come next year, consumers and individual investors will realize that the latest round of rate cuts will further erode the buying power of the dollar (inflation) and gas, gold, and everything else will renew it's march up in price.

How far down will the price of oil and gold "correct? Well, some of the analysts that I know are calling for oil to drop to $70 and gold to "retest" $650. I SAY THAT THEY ARE WRONG!

Why?

Well, we are having this rally in stocks due to rate cuts. Rate cuts are inflationary. Inflation also means that the Fed must pump up liquidity. This means that the printing presses must continue running. Gold, silver, and oil are inflation hedges.

The #1 job, as the Fed sees it, is to prevent the economy from going into a recession. We may or may not already be in one. Recessions are tough to say that you are in it. They are usually declared once they are half over. But of course, depending on what you do, and what your outlook on life is, you may be in a perpetual recession (I know that is nobody that is reading this, otherwise you wouldn't be reading this). There can be no inflationary slowdown while all of this is going on. The Fed only cares about keeping back inflation. Wall Street is appeased because it gets short term profits from all of the activity.

But here is the rub, if you inflate too much, too fast, a recession will become a self-fulfilling prophecy. Consumers will say enough and stop buying in the amounts that they are buying.

Remember, salaries are not keeping up with the REAL inflation rate (not what the government tells us) AND credit is tightening for consumers. This will cause a slow down in consumption of non-necessity items. This could take us to recession.

Credit for investment purposes (real estate and cash flowing businesses) is still readily available because banks are in the business of loaning out money, after all.

And for stock market investors, I would not be making bets on the general market, but this volatility will lend itself to many, many special situations.

Stay tuned because I will have a very special offer for all of you in time for you to start your portfolios off right in the New Year.

Notes From the Underground:
Dow: 13,390.25 +78.52
Oil: 89.50 -1.51
Gold: 783.60 -12.30
Silver: 13.93 -0.35

To Your Investing Success,

Patrick

I'm Confused...

What is the Fed doing?

The markets got hammered all of the past 2 weeks and on Monday. Today and yesterday the markets went gang busters on the way up!

Several factors are at play to explain the sharp upswings that we are experiencing. One being the mini-correction on the price of oil that may or may not continue. I know that one of my colleagues that is looking for a correction all the way back to $70/barrel before bouncing back. He may get help in that prediction from OPEC which is starting to discuss increasing production. Increased production equals lower prices. I feel that a correction is due, but the days of cheap oil are over. If not now, the next bounce from the price of oil WILL get the price up and over $100/barrel.

Another factor are the sovereign funds (surplus funds of a country used for investment) and foreign corporate investors are actively looking to purchase assets here in the U.S. Just look at Royal Bank of Canada's buy out of Commerce Bank and the recently 4.9% stake that the government of Abu Dhabi has purchased in Citigroup.

But the big reason is the Fed. Fed Vice Chairman (B-squareds right hand man) Donald Kohn was speaking in front of the Council on Foreign Relations that the recent financial volatility has reversed the improvement seen by the markets in recent weeks and could eventually squeeze credit for individuals and businesses and that "the tight financial conditions of the banks may merit offsetting policy from the central bank."

In English what he just said was that the down swing of the market in recent weeks offset the improvements that the markets made from the February drop AND that the tighter policies that the banks are putting on loans may require that the Fed lower rates.

Basically, the Fed is more interested in propping up the financial markets (particularly the stock market) and preventing a recession than in keeping the consumer from racking up higher debt loads and from rising inflation.

This is nutso thinking!!!!!!!!!

Now, while it is each individual's personal responsibility to stay out of bad debt, it is absolutely ludicrous to purposely inflate the price of goods in order to prevent recession.

Why? You might ask.

Because by triggering inflation through the printing of money (which essentially is what the Fed is doing by lowering rates) the Fed may cause a short-term spike in the prices of financial assets such as stocks, in the long run it will cause an even greater recession than if it would have just let the recession happen!!!!

Besides, isn't the loosening of the reigns of the printing presses and of credit what got this country in the condition it is in right now!?!?!?!

You know the whole "credit crunch" "mortgage mess" thingy!

Laissez faire (let the economy run its course) is a thing of the past both literally and rhetorically...Oh, those were the days.

The micromanaging of the Fed is going to make things worse not better. And even though it is now Ben Bernanke at the reigns...it will be Alan Greenspan's lasting legacy.

Notes from the Underground:
Dow - 13,212.47 +254.03
Gold - 802.50 -11.50
Silver - 14.40 -0.16
Oil - 92.04 -2.38

To Your Investing Success,

Patrick

Vice is Nice!

You know the Fund, the one that invests in booze, gambling, tobacco, and aerospace and defense. Basically, if it is non-PC, it is fair game for the guys at The Vice Fund (VICEX). The fund that does well even when the market tanks.
This fund has done 21.7% annually for the last 5 years. It is up over 23% this year.

How does the Vice Fund put up these numbers?

Well, you can't stop people from drinking, gambling, and smoking no matter what the economy is doing...and since most of the big booze and tobacco companies are also diversified into food, well, people still need to eat.

Top this off with the wild card play of aerospace and defense, which mind you, even when not in a war, new equipment needs to be bought and old equipment maintained, you have the makings of a portfolio that can kick ass!

The industries that the Vice Fund invests in Alcohol, Gaming, Tobacco, Defense are all considered defensive stocks. When the market gets unpredictable, institutions and smart investors flock to these stocks with the money that they keep in the stock market.

Oh, and by the way, because these industries are generally CASH COWS, they also pay NICE DIVIDENDS! And anyone who has spoken to me about stock investing knows how much I like that!

However, I am generally not a fan of mutual funds because of their costs both published and implied. However, sometimes exceptions have to be made. Even after subtracting published expense rates of 1.75% and implied expenses like trading and taxes that can take the overall expenses to 4%, you must admit that when you are returning 21.7% annually over 5 years, a net return in the high teens is not something to sneeze at when investing in stocks.

Besides just watching and listening to the guys at the Vice Fund and talking about the Vice Fund is well, FUN!

You see, these are the kinds of stock investors that I study. Guys that return over 20% on a regular basis like clockwork. These are also the insights that I will be passing along to you through www.UndergroundInvestingForFunAndProfits.com in the coming weeks and months. So go register for regular updates as well as special updates as more resources are added to the site. Coming plans include a hard copy newsletter, a stock selection service, and much, much more.

To Your Investing Success,

Patrick

Yes, Virginia, Dividends DO Matter!

Happy Monday to one and all!

While at the gym this morning, I watched a news item about today being Cyber Monday. The first business day after Black Friday. While many people were out shopping on Friday for Christmas gifts, there were many who do not (yours truly among them). However, a new trend has emerged that today, Cyber Monday, is the biggest sales day online.

It is estimated that 75% of all office workers will shop online today, WHILE AT WORK! So, while nothing gets done of Friday because everyone takes a day off of work, nothing gets done today either. So, if you are not among the shopping AND you cannot get your work done because certain items are being delayed because of Cyber Monday shoppers, then don't join the ranks of the unproductive; bone up on your financial education.

******************************************************************************************

Now, I also want my stock portfolio, particularly the core portion of my portfolio, to be productive just like employees. You see, I look at stocks like a look at properties. I want to form a core group of dividend paying stocks (rent) and then round out my trading with short term plays and options (flips and wholesales).

And yes, those dividends do indeed matter!

According to research conducted by Jeremy J Siegel, Wharton Professor and author of several stock investing books including The Future For Investors, reinvested dividends account for 97% of the total return on stocks. Capital Gains account for a mere 3%! Professor Siegel's researched covers all of the stocks that traded on the exchanges going back to 1871. Going back 50 years, when ranking stocks by dividend yield, the top 20% (meaning the stocks that paid the highest % dividends) return 14.3% annualized while the 20% of stocks with the lowest yields (meaning that they paid no dividends) return 9.5%. This is quite a difference. In fact, on a $1,000 investment made in 1958, the dividend portfolio would have grown to $462,750; while the non-dividend portfolio would only have accumulated $64,930.

So, YES DIVIDENDS DO MATTER!

In fact, dividends will matter even more NOW! It has been shown through numerous studies that dividend paying stocks perform even better in down markets than they do in up markets relative to other stocks. So, for this purpose dividend paying stocks act as protection in a down market. Dividend paying stocks are often purchased by institutional investors in large quantities when they feel that the market is about to go into a poor performing environment. This is what is known as a "flight to quality." When the market is down, my investments still SHOW ME THE MONEY! And often, when investors start to return, they are typically buying dividend paying stocks first.

Buying on top of buying leads to higher stock prices.

Notes from the Underground:
Dow 13,003.15 +22.27
Gold 826.60 +3.50
Silver 14.81 +0.02
Oil 97.47 -0.71

To Your Investing Success,

Patrick

Lessons From A 3-Year Old!

Jen and I just got back from Thanksgiving with her family in Scotch Plains NJ.

All 30 of them!!!

I loved every moment of it.

Particularly spending time with our nieces and nephew. Yep, just one nephew among 18 nieces and cousins under the age of 16, poor guy.

This morning was the best though!

Our niece, Dominique is all of 3 years old AND a story teller.

She woke Jen and I up by sneaking into our bedroom and bombing us (jumping up on the bed unexpectedly)!

She proceeded to take the next 30 minutes and tell us all about Casper the Friendly Ghost to the point that we believed that she actually knew him personally and he was real. She knew him personally! Now, we know that Casper is not real, but the story that Dominique was telling us was believeable.

This is what we all must be doing on a day to day basis. Telling stories about our products and services AND making it sound like our buyer already has the product or service that we are offering. If you own a business, they are YOUR products and services. If you work for someone else, they are still YOUR products and services and the amount that gets sold determines your bonus, commission, and sometimes even if you get to keep your job! If you are a real estate investor, it is YOUR real estate that you have to sell to a potential buyer, or to the bank for financing.

Now the difference between Casper and our products and services is that our products and services are real. So, how do we make them seem more real to the person on the other side? That is where marketing comes in. We need to go out and find a way to market our products and services more effectively BOTH online and offline.

The best way to do this is to make it personal is to market you first. For example, look at what I am doing here on this site. My picture is here (a better one will be up soon), I talk about my family, I give you my take on my product (investments), and so forth. I do this all of the time. I do it here online at www.UndergroundInvestingForFunAndProfits.com , I do it at virtually every business and networking event that I attend, and I even do it with family and friends. Basically, be yourself but don't be afraid to promote yourself.

You see, there are lessons to be learned from our 3 year old nieces.

To Your Investing Success,

Patrick

Short Day - POST TURKEY

I do not know about you, but I had a bit too much turkey yesterday and I am stuffed!

Fortunately, I am on Weight Watchers (WTW - $48.25 +0.77) Core program, so I can eat as much turkey as I want! I can eat as much meat, fruit, and veggies as I want and not have to count it up. I was still able to have a decent amount of stuffing and even a slice of pumpkin pie! I said a slice, not the 3 or 4 that I would have had in the past. I have lost 26 lbs. in the last 6 months. I love those guys.

But what it really was about was spending time with my family, finally settling in and watching The Shaggy Dog (Tim Allen) with my 11 nieces, 1 nephew, my dog, and my sister-in-laws 2 dogs. No other adults, just me! Pure joy, set me back to when I was a kid. They love their Uncle Patrick! They also keep asking about when Jen and I are going to add to the list of cousins with one of our own. I tell them that we are just waiting now, the adoption can happen anytime between know and the end of next year. Good Times!

On to today.

On a traditionally light trading day, the Dow finished up 181.43 points from Wednesday's disastrous close. The Dow did this in spite of Gold rallying back above 820 and the Euro reaching yet another all-time high compared to the Dollar.

Today's up day is a complete mirror image from the rah-rah days of the past. Normally, bulls (those who are playing into a market rally) would take a shortened day like today off, leaving the bears (those who think that the market is overpriced) to have their way for one day. Well, since the bears and short-term opportunists are the ones making money these days, they took the Friday after Thanksgiving off. The bulls needed to go to work today!

But investors are learning quicker than they used to that they need to have the ability to make money regardless of market conditions. That is why many people are trying to learn how to make money in commodities, Forex (currencies), real estate, options, and stocks. These asset classes all have trends that play off of and counter one another. And one of my missions is to bring you the best educational opportunities in each of these key asset classes, as well as some business skills.

I am a real estate investor and a stock portfolio manager. My primary expertise is in stocks and options. I know many experts in all these asset classes and will be bring them to you in the coming weeks.

Since today is a shortened market day, I will stay short also and end our conversation here.

Notes from the Underground:
Dow - 12,980.88 +181.43
Gold - 824.00 +26.40
Silver - 14.72 +0.32
Oil - 98.19 +0.90

To Your Investing Success,

Patrick

Happy Thanksgiving!

Happy Thanksgiving to One and All!

There is a lot to be thankful for in this life and we should all take time every day, not just today to give thanks.

A simple thank you to someone who is doing you a favor, or performing a service for you would suffice.

My contractors, vendors, and clients all get simple verbal thank yous every time that I speak to them and they seem genuinely touched when I tell them.

Give your loved ones a hug every day too. It will make your relationship closer.

If you are not the touchy feely type, then just nod your head and say something nice.

Being thankful makes both the giver and the receiver feel better.

And lastly, many of us talk of it, but how many do it...Give to Charity!

My favorites are the Twilight Wish Foundation and the Lower Bucks Family YMCA. Not only do I donate to them, but I also sit on their board of directors.

Today is the day of feasting and thanking with family and friends. Tomorrow, we will be back Underground finding the dirt, news, emerging strategies, and investments that anyone can execute.

To Your Investment Success,

Patrick

$100 OIL!!!!

We could hit $100 oil...Today!

After closing at $98.03 in New York yesterday, the price Black Gold peaked at $99.29 in overnight trading. This morning oil opened at $98.63 in New York, however, with today and then Friday being light trading days due to the Thanksgiving Holiday volatility will reign.

Also, remember, that overseas trading has no holiday. They will continue to trade the gooey stuff overnight.

Then there are the concerns that China and India's rapid development and increased demand will put further strain on oil supplies. Refineries are already starting to complain that they aren't getting enough of it. They have exhausted the surplus that has kept gasoline prices at the sub $3/gallon mark.

Currently, oil producers are pumping 85 million barrels a day out of the ground. The US Department of Energy says that consumption is between 85 and 86 million barrels per day. And remember, they are the government, they are here to help, and I have a few grains of salt to throw at their numbers.

On a positive note for the stock market (it needs a few hundred of these right now), it looks like the Fed may be cutting rates again due to what they perceive as slow growth. 2008 forcasts are showing US economic growth between 1.8 and 2.5%. They are also saying that inflation will fall to between 1.8 and 2.1%. Remember that inflation never falls...it just goes up at a slower rate.

Again, are you willing to believe the Fed's numbers when the price of gas is breaking $3/gallon, heating oil is supposed to be 25% higher than last year, and wheat has tripled in the last four years (but producers of foodstuffs have not acted accordingly, yet).

Wall Street did not like the Fed projections. Combined with higher oil prices, the credit crunch, and how it is affecting financial stocks, the Dow is down this morning at 12,925.77 DOWN 84.37 points.

That is all that I have. There are many, many buying opportunities out there. I am going to ferret them out and get back to you soon. Look in your mailbox for updates and notice of these opportunities soon.

Notes from the Underground:

Dow - 12,925.77 -84.37
Gold - 802.50 +12.20
Silver - 14.48 EVEN
Oil - 98.63 +0.60

To your ultimate investment success,

Patrick

Yoda is at it Again!

Alan Greenspan was on Fox Business Network recently pitching his book and looking back at his career as the Federal Reserve Chairman, defending his actions and blaming the current situation on everyone and anyone but him.

Then he closed the interview with the following:

Fox: “So why do we need a central bank?”

Greenspan: “Well, the question is a very interesting one. We have, at this particular stage, a fiat money, which is essentially money printed by a government, and it's usually the central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or currency board or something of that nature, because unless you do that, all of history suggests that inflation will take hold with very deleterious effects on economic activity...There are numbers of us, myself included, who strongly believe that we did very well in the 1870-1914 period with an international gold standard.”

Fox: “We did well without the Federal Reserve. People forget that.”

But he also says in the interview that the housing and credit crunch, the upswing in commodities, and inflationary pressures were NOT a result of his lowering rates down to 1%, jerking them back up, and jerking them down again and cranking printing presses at the Fed, but rather a delayed reaction to the Fall of the Berlin Wall and the Soviet System. !@#$!@#!$%$ What? If anything, this should have brought commodity prices DOWN since the former Soviet countries hold some of the most lucrative mineral and energy mines and fields, in addition to being the #2 producer of many agricultural products, including wheat! He says that the decrease in rates was merely a coincidence.

Let's see, US government coming out of recession, new consumers and goods coming to market, need to stoke the fires of economic growth? Don't all of those signs usually lead to a decrease in rates? Oh, and he is not the cause for the printing presses running either. There was no mechanism for him to stop. !@$@@$@#! He WAS the mechanism by being the Chairman of the Federal Reserve, the MOST POWERFUL CENTRAL BANK IN THE WORLD!!!!

Oh, and by the way, the Dow is was back up over 13,000 this morning after dropping 218 points yesterday. At its high, the Dow was up 120 points. It has since given back almost all of its gains.

Notes from the Underground:

Dow - 12,959.75 +1.31
Gold - 792.90 +16.10
Silver - 14.136 EVEN
Oil - 97.18 +2.54

Patrick

WARNING: READ THIS AT THE BREAKFAST TABLE AT YOUR OWN RISK!!!!!

Well, you are reading this, which means one of two things:

Either, you listened to me and you are reading this at Starbucks with Double Dolce Latte Supremo Thingo Thingy Venti with Extra Whip OR

You did not listen to me and you are sitting at your desk reading this.

Well, if your are among those who did not listen, go ahead and READ this NOW...then PRINT it out and READ this AGAIN TOMORROW MORNING over a traditional American breakfast of bacon and eggs with toast.

Those that did not follow instructions (probably most of you ) missed out on a good breakfast, but not a GOOD ECONOMIC LESSON!

This is my Bacon 'n Eggs Economics Lesson of the Day:

Start by drinking your Orange Juice. Orange Juice is up 19% for the past 12 months AND growers expect a shortfall of 10% in this year's harvest. Have you seen the price go up in the supermarket yet?

Your Cornbread and Toast is next, slap on some butter if you need to. If you are on the Atkins Diet, don't eat, but this is important to you as an investor. Corn costs 15% more and Wheat is up 61.7% in 12 months!!! Corn is being used as a substitute for wheat in feed grain because Russia has been limiting exports on it's wheat...this tied in with the ethanol boom has caused greater demand and tightened supply for these two commodities.

You want eggs? 33.7% in 12 months. Milk? 21%. Primarily because of higher grain and corn costs to feed the chickens and cows, in addition to higher fuel costs to run the farm and ship to market.

For the meat lovers, bacon and ham prices should be seeing hefty increases for the same reasons.

We are beginning to see increased costs for our breakfast at the supermarket, but nothing near what the commodity costs have increased. When the price at market starts reflecting the commodity costs...look out!!! Is this an opportunity? Think about it and send me your thoughts.

Let me add this - as the dollar drops, our costs for these goods are going to increase, HOWEVER, these goods cost less in foreign countries where these goods are being bought with foreign currencies. Do you think that there is opportunity yet? Send me your thoughts.

NAMELY INDIA & CHINA!!!!! These 2 countries comprise 40% of the world population and guess what? The growing affluent and middle classes in these countries are moving AWAY from their traditional vegetarian breakfasts AND turning toward American breakfast foods!!!!

So, increased demand is going to have to be met with more supply & higher prices...this equals more demand for manufacturers and distributors of food, as well as equipment makers to the food and farming industry. NOW, DO YOU THINK THAT THERE IS OPPORTUNITY? Send me your thoughts.

Guns, Grub, and Ground (in this case Grub) are just as important investments in the stock market as dividend paying stocks are.

Where is the Economy Heading? Follow the Transports.

Have you ever wanted to read a crystal ball, read the tea leaves, consult an astrologer, etc. to find out what the direction of the economy is going to be?

Well, you don't have to go that far. You can have something much, much more concrete.

Some months ago on Jim Canale's Real Estate Lifestyle website forum, I wrote about the troubles that YTC, the former Yellow Transportation was going through with lower shipping volume and higher fuel costs. The CEO was making the case that the Fed did indeed need to lower interest rates because the economy was at the beginning of a period of increased inflation AND lower economic output. Well, today FedEx came out with lowered expectations on future profits because of....you guessed it, lower shipping volume and higher fuel costs.

Lower shipping volume indicates that there are not as many goods being produced by manufacturers which leads directly to lower profits for everyone. When combined with higher transportation costs, profits all around drop for everyone. The transportation companies, the manufacturers, and the financials. The financials get hit because if their is less economic output, companies are less likely to borrow for expansion that is not needed.

This has been reflected by the drop in the Dow Jones Transportation Index which has fallen some 950 points since its July high to 4563.84. A 17% drop! This is much greater than the 7% drop in the Dow Jones Industrial Average.

So, follow the transports as a leading indicator on the economy.

For now,

Notes from the Underground:
DJIA - 13,176.94 +66.74
Gold - 793.60 -19.40
Silver - 14.483 +0.031
Oil - 95.10 +1.67

Dow Jones Transports - 4,563.84 -74.85

Patrick

Leaving $30,000 On The Table? You Are If You Aren't Jumping At These Deals!!!!!

Today is Real Estate Day! So all that you are going to see are the deals that me and my friends have available RIGHT NOW!!!!!

Both deals are in Philadelphia, one is a rental that is actually 2 properties in one deal. The other is a rehab & flip in an up and coming neighborhood.

Both deals can be seen at www.cheapassrealestate.com. When you register for your password be sure to put my name in as the referral. This tracking is vital to seeing what marketing is working and what marketing is not. This is a vital business lesson for you as well. Tracking what is working and what is not working WILL add to your bottom line almost immediately.

Here are the properties.

3453-3455 Braddock Street in the Harrowgate section of Philadelphia. For an approximate investment of $120,000, an investor will reap $34,600 in equity and cash at refinance, in addition to $321/month in positive cash flow. Who would not be interested in an infinite return after refinancing for that kind of dough?

5340 Wakefield Street in an up and coming neighborhood in the historic Germantown section of Philadelphia. An approximate $130,000 investment will reap a $36,551 profit upon resale.

www.CheapAssRealEstate.com provides complete turnkey solutions to investors looking for consistent profits in the real estate market. Included in the deal includes a contractor with a guaranteed not to exceed price, a realtor to handle both the purchase and sale of the property, title insurance search, facilitation of financing if needed, a property manager for rental properties, and a project manager (for an added fee).

The services and solutions provided allow YOU, the real estate investor, to work ON your business, NOT IN your business. It allows more time to pursue more deals and business opportunities, more time to spend with family and friends, more time to travel, whatever your dreams allow for you.

Until next time.

Notes from the Underground:
Dow - 13,110.05 Down 120.96
Gold - 793.60 Down 19.40
Silver - 14.40 Down 0.629
Oil - 93.75 Down 0.34

Patrick Clark

PS www.CheapAssRealEstate.com should be on your favorite list of websites. They provide a continual stream of profitable investment projects for the real estate investor. I have purchased properties from them for my own real estate portfolio.

GET PAID to ride out volatility!

Volatility increased in the markets again today after recovering from a roller coaster Monday and Tuesday. The day was pretty serene for the most part with the Dow hovering just above flat. Then at the end of the day there was a 75 point sell off.

What must be remembered here is that the market has been all over the map this past month (not to mention all year) and traders are skittish about holding on to gains for very long. If they have them, they are locking them in by selling them.

On the stock front, I have a pretty easy solution to how I handle this kind of market and skittish traders in particular. One, I hold dividend paying stocks. I GET PAID TO WAIT THIS MARKET OUT!!!! I hold dividend paying stocks for the long term, I hold BIG NAMES in there respective industries. I hold stocks that are paying out at least a 3% dividend and have the financials to grow the dividend whenever they choose.

The dividend gives me the ability to reinvest in other opportunities as they spring up in this volatile market.

For example, I am actively buying I-Shares Silver Trust (SLV) to hedge inflation. Silver and gold prices have recently pulled back due to profit taking (essentially, I am taking advantage of a dip) and the brief idea that inflation (according to the government's numbers) ain't that bad.

Remember, the Fed is LYING to you when it comes to inflation. Food and energy is not included in the number. The CPI is due to come out tomorrow and we will see how much of a fib it is this month.

I am also buying silver in particular because it is selling at a great discount to gold. Traditionally, gold trades at 17x silver, so with gold at $817/ounce, silver should be trading at $48/ounce. Instead it is hovering just about $15!!!! This is a great buying opportunity for silver which in addition to being a hedge to inflation and a precious metal used in jewelry, is also has many industrial uses and is in great demand in China and India whose economies are growing by 10% a year.

So, you could be buying silver directly, or you could be buying a paper certificate that trades on the New York Stock Exchange.

Until tomorrow, which is THURSDAY.

Notes from the Underground:
Dow - 13,231.01 -76.08
Gold - 817 +19.80
Silver - 15.03 +0.46
Oil - 93.99 -0.10

SLV - 149 +0.33

Patrick

PS THURSDAY is REAL ESTATE DAY, so draw your own conclusions to the theme of tomorrows post.

Follow the BIG MONEY!!!

How should you play the Credit Crunch?

Follow the BIG MONEY!

When I talk about BIG MONEY, what am I talking about?

Two men.

Warren Buffet and Wilbur Ross.

Everyone knows who Warren Buffet is. Mr. Buffet is the 2nd richest person in the US behind Bill Gates and the 3rd richest in the world behind Gates and Mexican entrepreneur, Carlos Slim.

Wilbur Ross may not be on your radar. Mr. Ross is a multi-billionaire investment banker who specializes in bankrupt and distressed securities. If he were a real estate investor, he would be the equivalent of a foreclosure and preforeclosure guru investor. Mr. Ross made his fortune buying steel, mining, and auto parts companies that were either in or facing bankruptcy, replacing management, and turning the companies around.

What are these two guys doing with banks and mortgage companies during the credit crunch/crisis?

For starters, Warren Buffet, through his company Berkshire Hathaway, is buying significant chunks of companies like Bank of America and Countrywide that have the bankroll to hold off the worst and then rebound when the market recovers. In the case of Countrywide, Mr. Buffet also used his influence with Bank of America to buy Countrywide convertible preferred stocks.

What is convertible preferred stock?

Convertible preferred stock are stock that pay dividends, have no voting power, but the owner can convert the preferred stock to common stock at any time. This means that once Countrywide rebounds, Mr. Buffet can convert to common stock and collect a huge capital gain. This particular deal pays a 7.25% dividend and allows the holder of stock to convert to common at an $18/share cost basis.

Wilbur Ross takes a much riskier, but much higher collateralized position on his subprime investments. Mr. Ross typically buys the debt of his target investments. Why? Because when these companies go into bankruptcy, all power shifts away from the stockholders and into the hands of the debt holders. When this happens, Mr. Ross typically organizes the rest of the debt holders, goes to the bankruptcy court, and becomes the new owner of the company. He then either brings in a new management team to turn the company around, or begins selling off pieces of the company, keeping the juiciest pieces for himself. In the subprime situation, Mr. Ross isn't even buying the debt of companies such as American Home Mortgage. Instead, he is buying their mortgage assets directly. In doing this, he is buying their most valuable assets, which are the only assets that AHM has that are worth anything, so that AHM can pay off its creditors as well as it can before silently disappearing. The advantage to Mr. Ross is that he is shortcutting the bankruptcy proceedings all together and getting the ASSETS that he wants in the process.

This situation is happening every day for us as real estate investors today.

I recently had a discussion with one of my realtors. He was telling me that he is being shown REO packages and packages directly from the mortgage banks ranging from several properties worth $500,000 to $2,000,000 in total all the way up to packages of properties worth $1 Billion in total. These packages are being divvied up and offered to individual investors at 30, 40, 50, 60 cents on the dollar. You should be calling to real estate agent to find out if he has access to them. If not, you should be calling other agents so that you can create your own fortune and get your piece of what Warren Buffet and Wilbur Ross are already enjoying!

Notes from the Underground:
Dow - 13,161.99 +174.77
Gold - 804.20 -1.60
Silver - 14.55 -0.16
Oil - 91.19 -3.43

Until Tomorrow,

Patrick

PS I have properties available on a regular basis for real estate investors. For a list of properties, go to www.CheapAssRealEstate.com and register for your password and put down my name as your referral.

Welcome!

Welcome to Underground Investing For Fun And Profits!!!!

This blog is a place for exploration and discussion of serious investing topics in a fun, light hearted way.

Why should we be cold like Wall Street on a snowy February morning?

We are all here on this planet at this time to enjoy long, healthy, productive lives...not slog through and kill everything that moves so that we can eat.

Wall Street is not here for you! The Federal Reserve is not here for you! Corporate America is not here for you!

BUT we can use what they are telling us both directly and indirectly to our advantage in our businesses, our stock investing, and in our real estate investing. And I am here to help you navigage through and pick out what those "tells" are that you, me, us can take advantage of...I will interpret and weed out all of the jargon that you are bombarded with on a daily basis.

The bottom line is, you just want the best moves for you and your family in regards to the business and investment moves that you make. And to do that, you already know that you need to know how stocks and other paper assets, real estate, and business interact with each other and with the constant economic and political data that comes out. Otherwise, you would not be reading my blog!

Well, I welcome you.

In the coming days, weeks, months, there will be many improvements made to this site. It will eventually become a full blown website complete with access to data, articles, links, webinars, and teleseminars to help you improve your financial education and your investment performance.

I will introduce you to my advisors, mentors, and colleagues who will add there ideas to mine in terms of where the markets and the economy is heading and what you can do about it.

For now, subscribe to the blog my placing your email in the box to the left. This will allow you to receive notification when I post the next entry as well as to give you updates to site enhancements.

I look forward to telling you about my investing philosophy between stocks, real estate, and business.

Notes from the Underground:

Patrick