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Richard's Wisdom

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Richard’s Thoughts on Preparing for Tough Times

Richard’s Comments

 

When times get tough and markets head south, investors must deal with three major enemies. Here they are, and I'll list them --

 

(1) Debt.

(2) Leverage.

(3) And the corollary -- the inability to remain solvent as prices head down.

 

Me, I'm at the other extreme. I grew up during the Great Depression. I saw too many financial tragedies during those days, even among my parents' many upper middle-class friends.

 

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Richard’s Thoughts on What Works

Richard's Comments

 

WHAT WORKS? Background, statistics, theories, rumors, cycles, and God knows what, you name it – will any of these really help you make money in the market?

 

Honestly, I’m just not sure. In fact, I sometimes think that all kinds of economic studies and theories end up costing you more money than they’re worth. The reason – once you develop a theory about what you think the market will do, you have a mind-set. And a mind-set can cost you in the investing business. It can cost you because even if your theory or mind-set is correct, your timing may be, and very likely will be – wrong.

 

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Richard’s Thoughts on Compounding

Richard’s Comments

 

The real winners on Wall Street are the silent compounders. These are the rare people who have a strategy, extraordinary discipline and unending patience. These are people who understand the "magic" of compounding and the concept of risk management.

 

There are a number of ways of compounding your way to riches. Buy a basket of "safe" stocks that pay dividends, buy preferred stocks, buy bonds, buy anything that throws off money and won't go bust, and keep buying those items and keep reinvesting the dividends or interest.

 

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Richard’s Thoughts on Level Setting Expectations

Richard’s Comments

 

It was a good week for stocks, but the advance was not based on great values, it was based on expensive stocks becoming more expensive. In this kind of environment, the question becomes (at least for me it becomes) – "If I want to participate in the rally, how much do I dare risk?" Ah, that's always the question when stocks are in an historically expensive area. Because expensive = high risk.

 

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Richard’s Thoughts on Dow Theory Conclusions

Richard’s Comments

 

The stock market loves to keep us confused and guessing. How typical of the market to rally during the days following a Dow Theory bear signal. We might even get a full correction coming up, but I doubt it. The market takes in ALL available knowledge, weighs that knowledge, and then, in due time, comes up with a conclusion. I take the recent Dow Theory signal as a "conclusion."

 

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