Extra Credit Assignment Two ECON 1

1) Warren Buffet

2) In Memory of My Father in Law

3) We the People

4) Addendum: Contrarian Investment Strategies

Part One: Warren Buffet    

Warren Buffet: One of the Most Respected Economists of Today, with a Unique Perspective for Investment

Kevin Horvath

Saint Leo University

ECO-201

Dr. Steve McQueen

Warren Buffet is viewed as one of top investors and economists of modern day. Forbes Magazine ranks Buffet as the Worlds Richest Person for 2008, with a net worth of $62 billion. Buffet’s entire fortune was created through investments, mostly public companies, which were available to any everyday investor. Buffet has a unique approach to investing, looking more into the fundamental values of a company, which is often overlooked in the stock market. Buffet is more of a realist, rather than an illusionist, when it comes to his rational for investments. He believes in two rules: #1-"Don’t lose money; #2 Don’t forget rule #1. Warren Buffet’s success in investment has been demonstrated through the years in his strong practice of common sense, strong principals of investment and leadership, and his sound views of today’s struggling economy. (Heller 2000, Lohr 2008)

Warren Buffet was born in Omaha, Nebraska. He was the son of a stockbroker and Congressman. Buffet continues to live and work in his hometown of Omaha, and has earned the affectionate title, "The Sage of Omaha". He chooses to stay in the Midwest as he figures it shields him from the Wall Street madness. Buffet earned his economics degree from the University of Nebraska, furthering his knowledge of economics at the Wharton School of Finance in Pennsylvania. Upon obtaining his master’s degree at Columbia Graduate Business School, he became highly exposes to the works and theories of Benjamin Graham, which would essentially build the foundation for Buffet’s future investment principals and ideas. It was in 1954 that Buffet moved to New York to work for Graham’s investment company, Graham Newman Corporation. Two years later, Buffet moved back to Omaha and started his own successful investment partnership. He proceeded to do this until 1969. (Warren Buffet Secrets)

It was because of Buffet’s success with his own firm, that in 1965 he was able to become the largest shareholder, 49%, in Berkshire Hathaway, a textile company. Buffet allowed the clients of his firm to invest in his newly acquired textile company. The early years of owning Berkshire Hathaway were not very successful; manufacturing costs were on the rise as well as imported textiles becoming dominant in the market. This is when Buffet began to implement the principals he had learned under Graham. (Kilpatrick 1992) Buffet organized for the company to buy out two Nebraska based insurance companies, National Indemnity and National Fire and Marine Insurance. Buffet had a large interest in insurance companies for investment. Insurance companies generate large amounts of cash that often lay dormant. This allows insurance companies to invest money to make more money over what it brings from the insurance business. Keeping in mind that the investment money needed to go into liquid assets in case of insurance claims, Buffet opted to invest into stocks and bonds. This would set the stage for Buffets future investments. Berkshire Hathaway would continue to acquire insurance companies such as Geico Corporation, and Buffet would use the enormous cash flow from the premiums to further his stock investments. (Heller 2000, Warren Buffet Secrets)

Warren Buffet has some unique views of stocks and investment. Some of the key points he has made are: "Think of stocks as a business". He feels that owning a stock is much more than owning a piece of paper, but owning a small part of a business. "Increase the size of your investment". He feels that people should not over diversify and should do their homework before investing. Most investors, he feels, should only invest in five to ten securities. (Heller 2000) "Reduce portfolio turnover". This means less capital gains tax as well as the additional fees and costs for transactions. This is further helpful, he feels, because an individual does not have to keep checking their stocks on a daily basis. "Develop alternative benchmarks". Buffet feels that investors need to stick to the fundamentals for investing. "Learn to think in probabilities". He feels that an investor should look at the five to ten year growth of a share price, rather than the short-term growth. "Recognize the Psychological aspects of investing". Buffet feels that investors need to make rational judgments based on the fundamentals, not emotions. "Ignore market forecasts". He feels that more focus needs to be put on efforts of isolating and investing in shares that are not being valued by the market. Finally, Buffet feels that an investor needs to "wait for the fat pitch". He feels that investors should avoid mediocrity, and treat investment as if it is the last one they will ever make and will need it to last a lifetime. Investors really need to be sure this is the stock they want to buy. (Davidtan 2008)

One of the many talents of Warren Buffet is his ability to choose undervalued stocks. He feels that a market value of a stock significantly diverges away from the intrinsic value of a company. Buffet believes that there are three primary factors in identifying an outstanding company. It must be simple and understandable, have a consistent operating history, and have favorable long-term prospects. A good example of this is his investment in Coca-Cola. Coca-Cola is not new to the soft drink market. He believes it is a stable company that could further grow into new markets and shows good potential for long-term growth. Furthermore, Buffet has a clear understanding about the company’s product as compared to say a high tech robotics company. Buffet feels that an individual must do research on a company as well as incorporating their own personal experiences of their product or service before investing. (Heller 2000, Warren Buffet Secrets)

Buffet believes in looking at a company in a sense of real value combined with the intangible assets. "Businesses logically are worth far more than net tangible assets when they can be expected to produce earnings on such assets considerably in excess of market rates of return". This can be explained by taking an example of two companies. Company A has a net worth of $100,000, $40, 000 of which is tangible assets. Company B also has a net worth of $100,000, but it has $90,000 in tangible assets. Both companies make $10,000 a year. If both companies wanted to double their earnings, they would have to double their investments in tangible assets. Company A would have to spend $40,000 to add $10,000 in assets; Company B would have to spend another $90,000 to add $10,000 in assets. Company A would have a far better chance to increase real earnings than company B would. (Warren Buffet Secrets)

Buffets concept of looking at intrinsic value involves buying the share at a fair price. Buffet feels that investors are better off buying stocks in a great company at a fair price than buying stocks in a fair company at a great price. The true intrinsic value of a company is measured by its inflows and outflows discounted at the appropriate interest rate. This technique, originally defined by John Burr Williams, is referred to as the discounted cash flow, or DCF. Buffet tends to invest in companies that are well managed, consistent, and easy to understand, as it is not easy to predict future cash flows. Buffet looks not necessarily just that a company grows, but that returns continue to grow. Buffet puts a high emphasis on being patient when investing. He feels a person should be prepared to wait forever to buy the right stock at the right price. (Hagstrom 1999, Heller 2000, Warren Buffet Secrets)

Buffet feels that whatever company one chooses should also be a brand name that is a non-commodity company. Commodity companies sell products that are indistinguishable from other services or products. He feels that a company like this can be highly vulnerable to competitors and may not be able to maintain their profits with increasing inflation.

Buffet states:

Where costs and prices are determined by full-bore competition, there is more than ample capacity, and the buyer cares little about whose product or distribution services he uses, industry economics are almost certain to be unexciting. They may well be disastrous." (Warren Buffet Secrets)

Buffet feels that with a non-commodity company, there is no real competitor; customers need the product or service that is offered. This gives retailers little choice but to continue stocking an item or customers will go elsewhere. Buffet states regarding non-commodity companies: (Hagstrom 1999, Warren Buffet Secrets)

This philosophy holds true in the investments held by Berkshire Hathaway with companies such as Coca Cola, American Express, The Gillette Company, H and R Block Inc, as well as Well’s Fargo and Company being some of its primary investments. All of these companies have a unique or special product or a brand name that is dominate in its market position. It is because of this that there is customer loyalty, with customer loyalty comes repeat customers. (Hagstrom 1999, Warren Buffet Secrets)

Another important attribute of a company to consider before investing, according to Buffet, is the money management. Buffet believes that excellent profits are a result of good management. Buffet looks at several key factors such as "return on equity", rather than the earnings per share. "Owners earnings", this is the share of profits that belongs to the investors. "Profit margins", he feels these must be high to be successful. Finally, Buffet feels that a company should have a "return on reinvested profits", there should be a dollar of market value for every dollar reinvested. Buffet feels that most public companies fail on at least one of these. (Heller 2000)

Buffet believes that the secret to success in business is not with higher intelligence, but in the usage of intelligence. Rationality is perhaps the biggest factor in making an investment effective. IQ and talent are the horsepower of a motor; the true output of the motor, however, is in how efficient it works. (Heller 2000)

Buffet foresaw the poor economic climate of today as early as 2003. He recently warned that:

Buffet believes that the recent $700 billion bailout must be done. He trusts that the government intervention was necessary to aid in the rebounding of the economy. He further showed his faith in the economy and government’s intervention by investing $5 billion into Goldman Sachs Group. He felt, despite the poor economic conditions, Goldman was well capitalized, and by investing more money into them, it would ease investors’ concerns about its relatively high leverage ratio. This leverage money can then be utilized to boost returns. (Luhby 2008)

In a recent article in the New York Times, written by Mr. Buffet, he emphasized the importance of buying American Stocks. In this article, he again reiterated that although they will suffer "hiccups" in their earnings, the long-term prosperity of the United States lay in the sound companies. He believes that most major companies will be setting new profit records 5, 10, and 20 years from now. He states, "Be fearful when others are greedy, and greedy when others are fearful". (Buffet 2008) Buffet further emphasizes that people should not hold cash equivalents to feel comfortable. He further expresses that in the long-term, with the intervention of new government policies, and the long-term stability of the US markets, equities will far outperform cash over the next decade. (Buffet 2008)

Warren Buffet has a unique approach to investing in companies. He believes in more of a long-term benefit by making common sense investments in companies with genuine value. Warren Buffets multi-billion dollar fortune is one of the wonders of today. His fundamentals of investing focus on reality and not fantasy. Buffets simple rule is to not invest in something unless it is worth buying. Warren Buffets success demonstrates that utilizing these basic concepts can help investors come out ahead even in a down economy.　

Buffet, Warren E. October 17, 2008. "Buy American. I Am". New York Times. Retrieved November 17, 2008 from 

http://www.nytimes.com/2008/10/17/opinion/17buffett.html?_r=1&pagewanted=print

Davidtan. July 19,2008. Think Like Warren Buffet". Davidtan.org. Retrieved November 17, 2008 from http://www.davidtan.org/think-like-warren-buffet/

Lohr, Steve. October 6, 2008. "Like J.P. Morgan, Warren E Buffet Braves a Crisis" New York Times. Retrieved November 17, 2008 from http://www.nytimes.com/2008/10/06/business/06buffet.html?pagewanted=print

Luhby, Tami. September 24, 2008. "Buffet’s Berkshire Invests $5B in Goldman". CNNMoney.com. Retrieved on November 17, 2008 from http://money.cnn.com/2008/09/23/news/companies/goldman_berkshire/index.htm?postversion=2008092320

Part Two: In Memory of My Father-in-Law

Extra Credit

I have been reading recently that many companies are throwing out their employee 401K plans. I want you to realize that in some ways this might be a mixed blessing. Before I go on with this introduction, my main goal is to take the mystery out of the Stock Market through what Benjamin Graham calls, "Value Investing". We are in a very opportunistic time now that recession has been established since late 2007. We entered into a recession and, if you will note, how the stock market tanks every time someone yells out "Recession". All Stock Prices plummet and even the prices of the best US companies go lower and lower as every newspapers and TV mention that word.

The first premise of "Value Investing" is a simple one that most millionaires learn after their first bankruptcy or two and before the knowledge of this principle begins to sink in. Two of my examples took them until their mid fifties before "Value Investing" became their mantra. What goes on in a person’s mind when a "Speed Bump" in life is struck hard, is what I refer too, so when a person receives lemons he or she learns a valuable lesson in life or how to make lemonade.

I want to introduce to you my father-in-law, who is at present 87 years old and suffering from dementia and at present, is living in a retirement home. I don’t wish to bother you about Grant Frost in his present life, but what he did as an investor, that’s what I wish to share. Well, Grant became a "Value Investor" at about age 55 when he was forced out of his job to retire from Spreckels. This is probably a story that most of you understand or, if not now, you might experience it some time in the future.

Grant was a Spreckels’ engineer and created and maintained most of their sugar refining buildings throughout the west. Due to cheaper sugar coming from outsourcing such as Brazil and other countries, Grant was laid off in his late 50’s when Spreckels went into receivership. Like many people during our own time, he lost all of his retirement benefits. After the monies were all tallied, all that was left over, Grant was unlucky after some 30 years of undivided Spreckels Inc. service, to receive a small retirement check; a gold watch, which he still wears today. As you can relate, this was an inglorious send off, as many individuals who are not CEO’s with golden or even silver parachutes, receive today.

In spite of this bad news, and with some hope Grant turned bad times into an advantage through applying "Value Investing". I am not suggesting that you grieve but take notice that Grant Alfred Frost did not live as a pauper but through smart investing in the market he left multimillions of dollars to my wife and her other two sisters. The "how" is what’s important because in many ways Grant Alfred Frost thought like a miniature Warren Buffet. He even looks and used to talk (before dementia); a lot like Warren does as you hear him talk on TV. Grant was a self made millionaire who learned the ropes of "Value Investing". Before experiencing dementia; was a "Value Investor" and became one, once he was handed his pink slip and a $5,000 retirement check.

But I offer another quick example as to how I was personally introduced to "Value Investing". When I was 18 years old I had a friend named Paul Lum, who was Chinese and who came to the US when he was in his 30’s. He worked on the railroad cooking for crews and eventually bought a restaurant while he was in his 40’s. After about 5 – 10 years, as his restaurant became more established, Paul began day trading in the stock market. He, using his Buddhist philosophies, would buy and sell just like he was playing a game of Mahjong. He lost so much money he told me that he almost lost his restaurant. It wasn’t until Paul was in his late 50’s and almost losing his own business, when "Value Investing" enlightened him. I want you to envision Paul; he speaks English with a broken accent, can only read the Stock Market headlines and, he never bought Benjamin Graham’s book that Buffet applied.

Here was a typical day with Paul Lum. I enter his restaurant. He pulls out his newspaper and begins to shop for BARGAINS. Here is a man who barely spoke English who through applying "Value Investing" in his own way, after he saw the light in his late 50’s, became a multimillionaire. Paul died at an age of 96, so he had 40 more years to add to his stock trading portfolio. Here is a man with no US education, who could barely speak English and could only read the stock headlines. It was all instinct to Paul because he never read "Benjamin Grahams" book. He, like George Soros, felt it in his gut and experienced his own "Value Investing" knowledge in the University of Hard Knocks as a boy detainee in a Nazi Concentration camp. George, the third wealthiest man in the world, who I admire, and who achieved a Ph. D. in economics from the London School of Economics before building his very own "lemonade stand", called the Quantum Investment Fund.

Here was my private tutor, Paul Lum. As a young man interested in the Stock Market, several days a month I would sit down and listened to him talk on his investment philosophy. Every time we would meet, he would pull out his newspaper. He would read the paper and then say, "Look XYZ Company into bankruptcy, today I buy". I would see him 2 to 3 weeks later. He would open the paper and read another caption. Paul would say. "Look Steve, ABC getting millions (billions today ~ from the Government or some other company); today, I sell". Here is "Value Investing" in a nutshell. Buy on Good News and Sell on Bad News. That is what Paul taught me.

What I am suggesting to you is this. In China there are two characters that represent Chaos or Crisis. The first is disaster and the second is opportunity. I lived in a country for several years where the Chinese dominated the business world there and they always seemed to see opportunity while others only saw disaster. The US Government and the IRS both have allowed us all one silver opportunity by setting up an individual ROTH IRA. I have one for me and one for my wife.

Just as in a marriage, no two people think alike and, that is OK with me. I let her have the joy of being a capitalist in her own way. In fact, I let my wife use www.weseed.com to purchase very her own stocks. She will enter stores at Christmas and throughout the year and watch how the employees act to determine whether or not a stock is worthy of her investing. Then she will enter the site www.weseed.com and look at the prices to see if their value is less and if the store is running ship shape, then she puts in her stock orders. She in her own way is into "Value Investing" but not into the rational way of investing as much as I. But that is OK - she receives joy from becoming an owner in US businesses from her very own perspective and, there is nothing wrong with the way my wife invests.

Let’s face it, each of us has to find our own way as we become capitalists in the US Stock Market and, as I admire her way of investing in her own ROTH IRA, she admires my "Value Investing". My approach is much more of a mathematical process than hers where I go through the present price and examine the price of a stock a decade or so in the past. My idea is that what happened in the past, over time, will repeat; let’s say in another 10 to 15 years.

Getting back to the way I like to invest: I wish to talk a bit about Benjamin Graham, of whom Warren Buffet has been one of his greatest students. The Intelligent Investor by Benjamin Graham, first published in 1949, is a widely acclaimed book on value investing; an investment approach Graham began teaching at Columbia Business School in 1928 ….. Famous investor and billionaire Warren Buffett describes it as "by far the best book on investing ever written". (see Wikipedia link below).

To sum up what "Value Investing" really means in a nutshell, imagine the real value of a company or companies with whom you invest. Don’t put a dollar value on them. Just view their services and what they have to offer on a company by company basis and invest only in companies that you believe in. Become a detective as you watch out for those companies which offer real value to their customers. However, your edge is that you know because of hard times, their stock price is so low due to FEAR that you can now buy it for $.30 – .40 on the dollar.

Let’s look at how this works using a simple analogy of what represents "Value Investing". Let’s say you enter a super market and you notice that the apples that you like and that used to cost $1.00 a pound all of a sudden are marked down to $.30 a pound. Do you think well there must be worms or they fell from the trees so there are bruises in those apples so I am not going to buy any, nor do you take a whole shopping cart back home? You do a little investigation and you find that in Washington, apple farmers had a bumper crop, so as a "Value Investor", you realize that bad news for farmers as their profits drop, will become good news for you later on.

So as a "Value Investor" of apples here is what you proceed to do. When other people don’t want to buy the apples for $.30 because of fear that there might be something wrong, here you become a greedy "Value Investor" and begin hoarding boxes of apples. The reason being is that you know you can take these apples home and put them into a refrigerator for a few months. In your mind you envision a cycle, knowing that in a few months more apples will go out of season. Eventually the price of apples could rise to over $1.50 a pound and the apples you bought were $.30 a pound. Once the store offers the apples at $1.50 a pound, you now go back to your refrigerator and re-sell the apples back to the store for $1.00 so they can sell them for $1.50 a pound. Voila, you became a "Value Investor". In fact, Warren Buffet says, just a few people understand "Value Investing", so becoming a contrarian both in business and in lifestyle is becoming to you.

Today’s market is very much like the ocean. Just as the ocean water rises and falls, so do company stock prices. So "Value Investing" says well a boat is a boat whether the water is high or the water is low. Or, a company is a company with all of its assets whether the economy is good or it is bad. All that changes is the price. However, due to FEAR in the market when the water is out and the boat can’t get out of the harbor then it is a time to purchase the boat from a "don’t wanter". Someday the water will rise and I’ll resell the boat for a higher price.

A "Value Investor" realizes that the value of a company is always there and knows how UP and Down cycles work. So even if today the situation looks bleak, "this too shall pass". If you wait long enough just with simple buy and hold policies, a time will come when the water will rise again so we can re-sell the boat or stock for a lot higher price.

Or in using the case of the Stock Market, as it falls within time maybe 5 to 10 years Stock Market prices too will rise and so we can turn around and sell our stocks at a profit. Well that is what Grant Frost and Paul Lum did as "Value Investors". I want you to see even with the demise of your 401K, that you can still take advantage of the stock market by becoming a "Value Investor". Please view any of the links below, if any of them help you great, if some do and some don’t, that is OK too. Like I said about the way my wife invests, it is not the same as mine. Each of us might choose a different approach and that is OK with me. As long as you invest in US stocks with your ROTH IRA that is all I ask.

So here I am with a simple ROTH IRA and I too read in today’s paper, which offers a boom of "Bad news", so I hear Paul’s voice echoing in my head, "Today, I Buy".

Enjoy the Stock Market and let your new found knowledge by using the Internet to explore "Value Investing Stocks" that are selling for $.30 on the dollar, introduce you to a learning curve and personal power you have never before imagined.

I wish you all the best in your life and thank-you for all the work you did in BUS 650 this term.

Dr. Steve

Spreckels:

http://www.spreckelssugar.com/history.php

Auto Industry Bad News and What it will do for the Gov’t 25 Billion bailout:

Ford:

http://autos.yahoo.com/articles/autos_content_landing_pages/775/ford-says-ceo-will-work-for-1-to-get-loans/

http://news.yahoo.com/s/ap/20081202/ap_on_bi_st_ma_re/wall_street

GM:

http://adage.com/article?article_id=132883

http://biz.yahoo.com/ap/081202/autos_ceo_travel.html

401 k Demise:

http://www.theindustryradar.com/Retirement/?CFID=305680&CFTOKEN=36526120

http://mobile.ljworld.com/news/2008/oct/28/latest_bad_news_401ks/

Benjamin Graham and the Core of Value Investing:

http://en.wikipedia.org/wiki/The_Intelligent_Investor

Warren Buffet Style Investing Program costing $99 a year. If you don’t want Charles program but it is worth just listening to his video as he points out what Value Investing is.

http://www.hiddenvaluesalert.com/index.aspx?page=videoshv3&em=

Two Websites towards building your personal ROTH IRA accounts:

www.weseed.com

www.bigcharts.com

PS Maybe I need to sell ads on my EXTRA DQ’s seeing that high school teachers are into the Marketing business ~ Have a laugh! Dr. Steve

http://www.usatoday.com/news/education/2008-12-01-test-ads_N.htm?se=yahoorefer

Part Three: We the People

Extra Credit

Our Forefathers came to America and when they saw the Statue of Liberty in the NY harbor they recognized the reason they left their foreign soil to come to America was all about "We the People". The problem is that "We the People" need to step up to the plate and become "We the Capitalists" if we expect to remain free and reduce dire recessions.

I am asking students to　do 3 things for extra credit to help boost up your Mid Term and Final Grade Scores. I think that this approach will be a lot more fun than the previous extra credit assignment I gave. This assignment is much more hands on and it will help you learn how to invest in the stock market and invest in your own retirements. I wish everyone in our class to be engaged in this Extra Credit assignment because you will learn so much about economics and yourself by applying this simple exercise. That is why I am adding this Extra Credit exercise to all my economic classes for which I teach.

Procedure 1 for Extra Credit Assignment

1) I will list 13 stock　presentations (see top panel in www.weseed.com) and have the student’s email me back　which 5 companies that they choose to monitor for daily price activity. My goal is to get them to view　all　13　firm categories of products and or services.

2) Keep track　3X a week, 5 stocks that come from 5　different areas of the 13 stock categories　in www.weseed.com and send me a graph of their tracking results over the next 6 – 8 weeks. You can choose to change a stock or two after the Mid Term and substitute it for another and track its price up through the Final exam. However, I need the dates and the term that are the same so a student won’t submit old graphs after doing it once. Use a scanner to scan your charts and dates and email to my email address both during the mid term and the final.

http://www.hiddenvaluesalert.com/index.aspx?page=videoshv3&em=

Here are the Two Websites about building your personal ROTH IRA accounts: I want you to pretend you are building your accounts by using these two Websites to make your "make believe" stock purchases and follow their price movements over the term.

Stocks that You might wish to purchase: www.weseed.com

Stock Pricing "3 times" a week and Graphed: www.bigcharts.com

1. My preferred method so you teach yourself how to do "Value Investing" on your own.

Go to www.weseed.com

Here is an example of the "Value Investing" process I would like you to follow as you examine 5 stocks, 1 stock in each of the 13 stock categories. Let’s start with "Auto Stock Market", the button on your left.

Once you open it up you will see about 20 different auto offerings. I would like you to CLICK on GM at the top left hand side.

2. The first question to ask is, has this company been around longer than 10 years? The longer it has been in business and, even better, the more consistent are its profits the better.

If you want you can peruse the GM information and it even provides GM’s website so you can go directly to it. It does the same for all the companies on this website which, will pretty much look the same. At the site there is also a red, yellow and green button to help you choose a stock where, choosing a stock in green is preferred to yellow and red.

3. Next Go to www.bigchart.com and hit Enter.

You will need to get familiar with each stocks symbol and write them down so each time you return to www.bigcharts.com you can enter each stock symbol and follow the steps here that we will go through.

Once you enter the symbol GM, click on the button INTERACTIVE CHART (Red) on the far right side.

What you will notice once the screen comes up are:

Last Price $4.90

52 Week Range 1.70 to 29.44

Both the last price and the 52 Week Range will change all the time so don’t get too worried about these prices right now. What you are searching for is simply the price of a stock that is closest to the 52 Week Range low of let’s say, $1.70. When choosing stocks this way it is commonly referred to as "bottom fishing". You want to purchase a stock, as a "Value Investor", that is out of favor with the stock investing community, but is still a solid stock. Because all stocks go out of favor now and again and once it returns back in favor after a few years, it will return back again to its higher price and your account will appreciate with time.

For a quick diversion, the idea of Warren Buffet is, that if a person chooses a solid stock with growth, each time there are stock splits, the stocks that you hold for years will continue to grow. That is why Warren is very choosey, to only choose stocks with good management and continuous earnings. So stock splits, growth and appreciation, he will ride over the life of the company.

Needless to say, you want to purchase a stock that is closer to the $1.70 and not to the $29.44. You are searching for Bargain Basement Prices of solid companies for your stock purchases. However, as long as it is close to $1.70, but a little higher, that is OK. Because hopefully, you have bought it at a price during a rising market.

I want you to see this process as the ocean, where the tide rises and falls. You want to buy only when the ocean tide is low and, a stock price is low. And then sell it, once the price goes higher. Or in the case of Warren Buffet don’t sell; just keep hanging on to it. If it is a growth stock and has great earnings, its stock will continue to split and its value and, your account value, will continue to rise with it.

4. This is the last stage of the "Value Investing" process. What I want you to do while in

www.bigcharts.com is go directly to CHART OPTIONS. Scroll down to Decade years, Re-Hit or Refresh by hitting the button DRAW CHART in orange. After you will see "1 Year". Scroll down to DECADE and then re-hit the Interactive. Sometimes an error will come up; if it does then I will return again and do it later. Sometimes it works and sometimes it doesn’t. Keep trying until it does. During my investigations, I have found GM at the 5 year level @ $60 and at a decade level of $100. What this shows me, is the potential growth of GM if, the market turns and if, GM can return back to its days of glory.

PS: If you are lazy, then just purchase "True Value" website for $99 a year and follow some of his stock choices. However, for our class exercise, I would rather have you do your own detective work. However, for your exercise, I only want you to use this site to obtain more stock choice examples that, www.weseed.com might have not considered.

Warren Buffet Style Investing Program costing $99 a year. If you don’t want Charles’ program but, it is worth just listening to his video link below, as he points out what Value Investing is.

http://www.hiddenvaluesalert.com/index.aspx?page=videoshv3&em=

For further detective work buy a Wall Street Journal or, better still an Investor Business Daily and search for all stocks, both in the Wall Street and NASDAQ markets. 　

My Grandmother emigrated from Belfast, Ireland and brought my Dad who, at that time, was 5 years old. The story goes that Maggie, my grandmother, was a very spiritual woman. She, for some reason, had bought tickets using Robert her husband’s wages for passage to the America’s. She and my Dad Cecil were two of those coming to America.

Robert had just spent 6 months of his wages to pay for both of their passages. Well, for some reason or another, Maggie got so involved in saying her goodbyes to all of her friends, by the time she made it to Belfast to get onto the ship, it had already left port.

Robert her husband was angry with Maggie. He complained that all of his 6 months earning were lost because there were no refunds for those who missed passage.

Needless to say, a month later both Maggie and Robert, reading the Newspaper couldn’t believe their eyes. The ship that Maggie and Cecil my dad were to obtain passage on, was the Titanic. Robert’s song changed as he realized that his wife and son could have been lost, if they had been trapped on the Titanic.

The main reason I want to tell you Story 1 ~ Why Do We Give our Total Trust to the Experts? It was experts who created the "Unsinkable Titanic" with very few boats on deck in case it sunk. After hitting an iceberg more than ½ of it travelers, which could have included my grandmother Maggie and my Dad Cecil could have died.

Why have we still not learned that only by becoming more knowledgeable of our own world, (or more specifically the Stock Market) will the concept behind "We the People" or better still "We the Capitalists" ever work? With so much information becoming available from the Internet, it is our responsibility, to become more informed, responsible citizens. Hence, this is why I created for you this "Extra Credit" assignment.

A unique situation exists between where I live in Saint George, Utah, in the south west corner of the state of Utah and just down the road from Las Vegas, Nevada. In fact, most of the John Wayne movies were shot in the desert next to Saint George. Because we don’t have snow, many people from Salt Lake City travel 250 miles to stay in Saint George during the winter, to get out of the cold and into some sort of "no snow" relief, where they can hike, bike and play golf during the winter months.

Well, half way between Saint George and Salt Lake City there is a unique gas station. You drive up to a gas station pump and out comes a man or a boy, who immediately begins to pump your gas, cleans your windows, checks your oil if you ask, while you step out of your car to get a soft drink while you wait. One of the reasons that this gas station still exists, is because people like this service half way with 2 hours left to make it to Saint George. They don’t want to gas up their car and are willing to pay more for gas to have someone else do the pumping in the cold while they go into a warm C-Mart, and use the restrooms and get something to eat and drink. Welcome to the gas station attendant service of 50 years earlier. This was the gas attendant service most people had received along the famous US Route 66.

I only share this "old style" gas station with you because thanks to McDonald’s and all the other Franchising ideas, "Doing it Your Way", has slowly evolved into our own US culture. We no more let the gas attendant or the garage owner pump our gas and clean our windows, or check our oil as we did in the past.

I remember my Dad telling me his own story of when I was a boy about all those ruthless Garage Owners who were "experts" and, would when checking the oil of travelers, would find problems under the hood. Soon the owner’s car would have to be pushed into the garage to fix some unknown mechanical malady. My father would say, "My car before was OK, but after the garage attendant, in so and so city, opened the car hood, my car began to sputter".

His only explanation, after paying the man a lot of money, and expecting a wonderful distress free vacation was, that so and so in that city, was a crook. Well, in those days many garage owners, by a quick slight of hand gesture while examining a non resident’s car for oil, created problems like the one that happened to my Dad and, would find his or her car in the garage paying some exorbitant fee for unnecessary work.

Well, that simple story suggests, that’s what is happening with so many CEO "experts" and even the "Union" bosses and their greed, like those gas station attendants, getting under the hoods of our US economy and its corporations and selling the US farm. As many of them have taken over corporate America today they, out of greed, are selling American business from under us. Many of these self serving individual’s are causing "We the People" to lose our world position in business.

I believe that the only way we can take it back, is by us in America, becoming "We the Capitalists" and not just consumers. For too long we have let the Experts run our affairs, but now we need to become Experts too, and savvy investors to "Take America Back". This is a war that might be even bigger and more important than either wars of both Iraq and Afghanistan because this is an invisible war being waged on US soil.

In economic theory, imperfect competition is the competitive situation in any market where the conditions necessary for perfect competition are not satisfied.

Forms of imperfect competition include:

Monopoly, in which there is only one seller of a good.

Oligopoly, in which there is a small number of sellers.

Monopolistic competition, in which there are many sellers producing highly, differentiated goods.

Monopsony, in which there is only one buyer of a good.

Oligopsony, in which there is a small number of buyers.

There may also be imperfect competition in markets such as the five sited above. These have become a part of US business due to buyers or sellers lacking information about prices and the goods being traded. It is this lack of information that causes people to not have the necessary information to make their own personal decisions which requires the need of experts to fill in the gap. But as information becomes readily available then imperfect competition evolves into perfect competition and where the age of financial experts is no longer necessary.

As for the need in the past for experts, investing has been dominated by a few people. Hence, many brokerages have been advisors to the public because the public was not able to receive information readily or in quality to make good investment decisions.

However, due to the personal computer and the Internet, these two effects have made stock values and quality investment information quickly available to all. Also, with the reduced brokerage fees and online assess ability, it has allowed everyone of us to become knowledgeable and make our own direct investment into the Stock Market and become in charge of our very own personal retirements accounts.

I would say, that what is holding most people back today from personal investing is not availability of information and the individual assessment of the market, as much as lack of information due to people not realizing its availability or in many other cases, it is simply due to procrastination. Let’s examine three stages that have transpired over time and how they have affected most of us, who I hope, are soon to become serious US investors.

Due to the depression, many of our grandparents believed that it was only through Big Business and Big Government that there was any salvation. After the depression without work, large corporations provided them with work that many felt was meaningful at the time, in many manufacturing centers such as Detroit, Chicago and New York or the northern regions of the US where natural resources where plentiful. Many of them looked forward to retirement and used the corporation pension promises to make their retirements possible. However, now that Big Business has in many ways, moved its jobs and resources from the US into cheaper waters, has the idea of Big Business become a little shaky? In fact, the people running those businesses, CEO’s and private investors today, not only from the US but now with Saudi and Chinese interests, and with dollars to spend in the US, many of our businesses have become owned by foreigners.

Now, with so many Big Businesses, that believe cost reduction to be their sole solution and, by laying off so many of its workers as they moved to foreign waters, they have caused a lot of grief to us Americans. What was left for individuals to do was to enter a new age of the entrepreneur. Those without jobs began to create industries or begin to work for small entrepreneurs. Because of their anger, many of them began to purchase products and services from foreign vendors. In fact, because Big US Business was more into dropping costs than improving product quality, it caused many American’s to no longer trust US business or purchase American products. It was this act of abandonment that caused a lot of hurt feelings and resentment for Big US Business, that many of us have still not made it through the 5 stages of mourning and acceptance.

Before the Internet there was never any such thing as perfect information. This allowed such "Robber Barons" to exist and be the dominant players in US business. However, through the invention of the personal computer and the Internet, it allows every small investor with a computer and a Roth IRA and a few Internet tools, to become "little" Warren Buffet investors. Yes, I look at Warren Buffet as an example of who we Americans need to become like. Today, our businesses no longer want us to have retirements, so it is causing us to enter a new phase of individual ownership which I refer to as "We the Capitalists" era. We have to discover a new way of personal empowerment by becoming owners of US Business. It is not only about our retirements but is a bigger deal than that, because once we take the helm is when we can take our US interests back.

This new phase suggests due to the Internet we individual now have lower transaction costs towards retrieving and exploring corporate information. The Internet has created a level playing field where it is not only the rich and the famous who become investors in American business, but it is now available to all of us. The thing is that we have to begin to see our power as individuals becoming like miniature "Warren Buffets" as we take on our new role as investors in US business. Yes, the power can return back to the PEOPLE.

Not everyone can enter Stage 2 and become an entrepreneur, because it takes special skills and a lot of capital to do, but every American man and women with a Roth IRA, a computer and the ability to use the Internet, can become a direct investor in US business.

Over time, every man, woman and child, can become a Capitalist and take the US back, 1 investor @ a time. I believe that our backs are against the wall and the only way we can take US business back is by each one of us becoming directly involved by investing in US business.

So you say it is not possible. I tell you that it is just as the "Coase Theory" suggests, that private property rights makes a tremendous difference in how people act. Once people become owners in US corporations, they can become not only richer, but can choose those CEO’s or so called expert’s themselves. Instead of the expert’s creating greed and havoc on the system and, raising their salaries much higher than the workers, and once US companies are owned by individuals, rather than foreigners, we will see a whole list of improvements that will follow.

Needless to say, once American’s own US business and begin to believe in even small ways that their ownership is being felt in the boardrooms of US companies, is when we will take back America and not let these greedy experts, who only think of themselves, sell the US from under us. Taking Back America can only happen as we in America believe we have become the owners of US corporations.

Only by making these companies, private property to us US small investors, will these companies pay attention to our interests. Only when we invest in US companies, will we once again begin to buy American goods and services and, return to the US that we enjoyed when we bought America first, just as we did in the 1950’s.

I specifically want to discuss the rudiments of "Value Investing", so you can see how this approach towards personal investing in a ROTH IRA is achievable to every investor.

Getting back to the way I like to invest. I wish to talk a bit about Benjamin Graham of whom Warren Buffet has been one of his most notable students. The Intelligent Investor by Benjamin Graham, first published in 1949, is a widely acclaimed book on value investing; an investment approach Graham began teaching at Columbia Business School in 1928 ….. Famous investor and billionaire Warren Buffett, describes it as "by far the best book on investing ever written". [Wikipedia (see link below)].

To sum up what "Value Investing" really means in a nutshell, imagine the real value of a company or companies with whom you invest. Don’t put a dollar value on them. Just view their services and what they have to offer on a company by company basis and invest only in companies that you believe in. Become a detective as you watch out for those companies, which offer real value to their customers. However, your edge is that you know because of hard times their stock price is so low due to FEAR, that you can now buy it for $.30 – .40 on the dollar. I was able to buy up the Donald’s Trump Entertainment or TRMP for $.24 a share, which I will explain these advanced trading techniques to reward those students who successfully at the end of the term complete this Extra Credit class.

Let’s look at how this works using a simple analogy of what represents "Value Investing". Let’s say you enter a super market and all of the sudden, if you like apples, the apples that used to cost $1.00 a pound, all of a sudden are marked down to $.30 a pound. Do you say, well there must be worms or they fell from the trees, so there are bruises in those apples, so I am not going to buy any nor, do you take a whole shopping cart back home with $.30 a pound for apples? You do a little investigation and you find out, that in Washington, that apple farmers had a bumper crop. So as a "Value Investor" you realize that bad news for farmers, as their profits drop, will become good news for you later on.

So as a "Value Investor" of apples, here is what you proceed to do. When other people don’t want to buy the apples for $.30 because of fear, that there might be something wrong here, you become a greedy "Value Investor" and begin hoarding boxes of apples. The reason being, is that you know you can take these apples home and put them into a refrigerator for a few months. In your mind you envision a cycle, knowing that in a few months, more apples will go out of season. Eventually, the price of apples could rise to over $1.50 a pound and the apples you bought, were $.30 a pound. Once the store offers the apples at $1.50 a pound, you now go back to your refrigerator and re-sell the apples back to the store for $1.00, so they can sell them for $1.50 a pound. Voila, you became a "Value Investor". In fact, Warren Buffet says, just a few people understand "Value Investing" so, becoming a contrarian both in business and in lifestyle, is becoming to you.

But what is really important about Buffet lifestyle is that he drives a Lincoln and only invests in America products. So as you begin investing in US companies, you too if the price and quality of a US product are similar to a foreign product, you will begin to buy America products too. Why? Because it keeps your companies profitable as US citizens have jobs so they can purchase products from the US firms that you own. Just imagine if all of us lived the "Buffet lifestyle", firm layoffs and recessions would not be as severe.

Today’s market is very much like the ocean. Just as the ocean water rises and falls, so do company stock prices. So "Value Investing" shows that a boat is a boat whether the water is high or the water is low. Or, a company is a company with all of its assets, whether the economy is good or it is bad. All that changes is the price. However, due to FEAR in the market when the water is out and the boat can’t get out of the harbor, then, it is a time to purchase the boat from a "don’t wanter". Someday the water will rise and I’ll resell the boat for a higher price.

A "Value Investor" realizes that the value of a company is always there and knows how UP and Down cycles work. So even if today the situation looks bleak, "this too shall pass". If you wait long enough, just with simple buy and hold policies, a time will come when the water will rise again, so we can re-sell the boat or stock for a lot higher price. Or in using the case of the Stock Market, as it falls within time, maybe 5 to 10 years, Stock Market prices too will rise and we can turn around and sell our stocks at a profit.

This might be a negative example of the Imperfect Competition theorem and, not that I want to use Al Qaeda but the idea of everyone becoming a Ben Laden by giving his or her life to a cause bigger than oneself, is not only intriguing but is also possible among people with little hope in their lives. Not that direct investing in the US is becoming a suicide bomber. But the idea of Coase, is that even in countries where people feel they have little hope, believe in a cause to make their wishes known by creating a negative externality to the enemy through their death of themselves and a large number of the enemy, not only for themselves but for it all encompassing affects. Ben Laden taught that it was their simple death that would make a huge difference to the Al Qaeda cause.

Notice how because plastic explosives and simple and cheap ways to create bombs, the transaction costs in such situations become low enough, due to the technologies of war being cheap and easily available, that individuals can do evil acts in behalf of what they might think is their salvation. Thus blowing them-selves up was only assessable due to low transaction costs, to be their only solution to retaliation for the misery in life that they felt. This becomes, in a warped sense of ownership, a cause that they believe in and feel they can commit just to set the record straight. Needless to say, it is this sense of ownership that even takes over negative interest, such as suicide bombers and, they try to make their warped philosophies known.

Think about it if even 20% of US households who couldn’t become entrepreneurs, but instead, could become direct investors in US Corporations. Just image the impact. Here are two great example.

Example 1 ~ Ending World Hunger

Lynn Twist, in her book "The Soul of Money", suggests that it isn’t big money or the mega rich that provides her "World Hunger", all of its funds. The majority, or about 80% of its money to provide food for the people in Africa and other war torn areas, comes from middle class families. It is "we" collectively that feed the poor and not the rich.

Example 2 ~ Obama Run for President

In fact, the reason that President Obama received more money to win the election than Senator McCain, in the 2008 election was because of the money Obama received from individuals like you and me. In fact, Senator McCain, with all the money he received from US corporation’s with Corporate agenda’s, couldn’t put a dent to the money that President Obama raised from simple folk like you and I.

If we provide more money to organizations such as "World Hunger" and if we can elect a President of America, we can surely take America back through direct investment in US Companies.

I really think our Founding Father’s saw what would happen to America down the road, is why they had a bigger picture of who we are and who we could become, than we have of ourselves. The reason we haven’t done this sort of thinking before is because as economists say, "We the People" didn’t have Perfect Information. It was the few or the "Robber Baron’" class that hoarded information from us. However, because we have been excluded so long from our own power base we don’t believe we as individuals have the power to create major change. Today, we have this ability right now at our finger tips.

Yes, with the invention of the personal computer or cell phone, coupled with the Internet, now Perfect Information is available to everyone. There are stock market sites and even cheap brokerage houses that make stock ownership available to everyone. With a Roth IRA any individual can create his or her very own retirement next egg without the blessing of Social Security or the company with whom he or she works. It is simply a process of recognizing our own individual power that will make the real difference.

Once "We the Capitalists" come into our own and we become miniature Warren Buffets, is when we will be able to take back the US from foreigners and build those corporations the way we want them. I believe the last stage of democracy is when we the people can take over US business and no longer allow the greedy few experts their dictatorial power.

I want you to take the time to listen to Warren Buffet talk. Imagine you having this same attitude as Warren Buffet that you carry around with you every place you go. Just imagine, with your very own modest retirement account, you might not become rich but you can still become comfortable and, can actually retire on it some day. You don’t need a government or even a corporate handout. That is what learning to invest in US business can do for each and every-one of us who learns how to become a miniature Warren Buffet by becoming a capitalist with not a negative Al Queda, but a positive US agenda.

Only If "We the People" Can Become Knowledgeable of Economics and Become "We the Capitalists" Who Understand How the Market Works by Learning How to Invest in the Market, Will We Ever have a Chance to Ward off Future Recessions.

I believe that Real Democracy will come only when you and I realize that we collectively have the power to take over the major US businesses away from the greedy few where we can take over and run American business. The thing about America in relationship to all other countries is that we believe in "We the People", and other countries only believe in their leaders, which is the bedrock of our democratic philosophy. Only by taking back our own US corporations can we save the US from being taken over by foreign interests or being sold down the river by Greedy CEO’s who only want to sweeten their own personal interests.

1) "Understanding Economics" Reduce Greed and Fear from our Lives The reason we experience fear in our lives is because we are letting the Experts make our own decisions. We need to find ways where we can create direct involvement in US businesses through our own investing. Then we can take responsibility for how we not only spend, but who we choose as the CEO’s within our companies and leaders in political circles too.

2) Why Recessions? ~ Oil Becoming Energy Independent of Foreign Oil. The Saudi’s created the Oil Embargo, of both 74-75 and 2009 Recession’s by reducing oil production and artificially raising oil prices to such high levels. Only by the US becoming self sufficient in Energy can we reduce Recessionary times. If enough of us become more involved in US Business, we can begin to invest in companies that will make us Green and let us become more self-sufficient of our own energy needs and less dependent of foreign sources. The idea of using up their oil first has come at the detriment of OPEC through the pump controlling our own economy.

3) Ending Wall Street and the 2001 Enron and 2009 Mortgage Fiasco ~ Introducing www.weseed.com so everyone can become a Capitalist learning "How to Invest in the Stock Market" and not handing it over this responsibility to the Experts and Reduce Greed and Fear of the Experts (Who Make INFLATED SALARIES) and who. if they are GREEDY, create HUGE Up and Down SWINGS in Our Economy. Another site of interest is www.bigcharts.com to do your own personal research on firms which you would like to purchase stock for your Roth IRA.

4) Take advantage and invest in the next growth stock areas such as the Green Revolution and Yoga and other more recent lifestyle and cultural changes. Investing in companies that are in a growth mode can add a boon the price of your future stock choices.

Many of you might think that this is stretching it a bit but here are the reasons that I believe we all must become capitalists. I have ten reasons as to why we need to become owners in American Business. Only if we become direct rather than indirect owners in American business can we begin to turn America around to maintain its # 1 Status in the world. So here are 10 important reasons why every-one of us needs to become his or her own capitalist.

I believe it is going to take each of us to dig deeper than just being a consumer where we are all enlisted in becoming owners in US businesses. We tell CEO’s that they need to be honest and not to give themselves such huge salaries but only if we can become shareholders in American businesses and get ourselves into their boardrooms will US business change. If we can take on this responsibility where "We the Capitalists" can even go in and fire CEO’s who are not doing their job with enough of our voting by blocks. The more of us who can become direct owners rather than consumers in US businesses we will make a positive change in maintaining US Supremacy in the Global world. I believe if we in America shirk our responsibility of being "We the Capitalists" then China or India or any "Banana Republic" will eventually take over. Even Rome was eventually overrun by foreigners which is happening to us too. I believe only by "We the People", by taking direct ownership in our own businesses can we maintain Global Supremacy. Any less than this we will lose our leadership in global business.

Learning how to become a direct owner or capitalist allows me to put together my very own Roth IRA. I suggest a Roth IRA because it allows a person to pay taxes but allows the capital appreciation to grow over time so, when a person retires, the funds he takes out to support himself, are non taxable. In fact, stocks appreciate in value more than any other form of investment. So using a Roth IRA helps everyone become a capitalist and sock money away towards retirement for a rainy day. Most companies are dodging the responsibility to create person retirement employee accounts. Now it is becoming a personal responsibility and in the long run it will be so much better that you took this upon yourself rather than leaving this important responsibility to "experts".

3. No Longer Relying on Experts and Greed to Dominate but Applying Our Own Knowledge to Take over US Business

"We the Capitalists" is a stronger position than We the Consumers. Gone are the days of Adam Smith with his ideas on Consumer Sovereignty. Galbraith with the invention of franchising in the 50’s suggested that a major corner had turned where it was no longer Consumer but Producer Sovereignty. So it is no longer Consumer Sovereignty but Producer Sovereignty as CEO’s are able to offer themselves huge raises and not be able to have "we the people" object. This is the reason greed has entered the boardroom of so many US companies and the so called "experts" have taken over. Now my Roth IRA, no matter how humble, collectively becomes a vehicle where I believe that today we must become the "experts" and take over the corporations and, as we move in and take direct responsibility in owning our own companies through our Roth IRA’s, over time we will vote in our very own CEO’s and make sure that greed no longer exists within American Corporations.

4. Great for Our Significant Others

Guys being capitalists is not just a man’s world. I have encouraged my wife to look after investing in her very own Roth IRA. Sure, I can feel that I know better and can put my own companies in for her. However, I am urging my wife to choose her very own firms and she chooses her firms a lot different than I do. I choose my firms on how much money I can make in the long run. My wife selects businesses where she shops. That is where www.weseed.com comes in for my wife. At her finger tips she can scan many of the firms where she shops and where she would like to invest. In fact, now when she enters a store she begins to ask do I want to buy its stock and take direct ownership in this firm. Some wives I know will even once they own the business, go directly up to the manager and tell them they are a stockholder and they don’t like this or that and tell him or her what is needed to improve. If things don’t change they will even sell the stock and replace it with another company. Now, with the Internet, finding information on firms and symbols to look up on www.bigcharts.com to find one’s stock value and value over the decade, makes it easy researching a firm. Even with this website financial information can become instantly available.

I know politics is a big issue in the US. Now that I am a direct investor in my own Roth IRA and in United States business, whenever I vote I make sure that I choose a president of United States who will be good for business. Why do I want a president who will increase business? Because businesses hire individuals and, as they hire individual unemployment rates go down. Some men or women running for president know a lot about business, but some don’t. I try to vote for the person who can make a direct input into the betterment of US business because of how he can affect the affluence of most American’s. I believe that party politics has its place, but today we need to find individuals whether as US President, or in Congress and the Senate, or the Chairman of the FED, that know how to keep US businesses alive and well. Leader’s such a Venezuela’s Chavez would simply be bad for US Business. Leaders who have agenda’s other than business, are not acceptable as I cast in my ballot and vote.

I have found a new approach to how to live, now that I am a direct investor in America. Whenever I shop or where ever I go, I now feel my small contribution. The way I buy my stocks is where I invest in many stocks rather than a few. I have created my very own mutual fund of sorts. I now take direct ownership in businesses all around me. Now I feel with my simple means of a Roth IRA that if there are more people like me doing the same activities we all can begin eliminating Apathy and begin to make a direct contribution to the lives of so many other Americans. Through a small means of my direct investment, I am taking responsibility in the lives of so many people as I invest primarily in US firms. I now feel that through my simple ROTH IRA, just like the two examples above, I am causing people to work and be able to provide for their families.

Just imagine what a legacy you will be leaving your family as you invest in US business. Not that your children will see the direct impact you are having immediately, but over time they will take on your example of how they too can take direct ownership in US business and keep making business as a priority in changing their own life and their own worlds. While they are young they might not be as interested, but as they begin having their own families, your example of personal investment will eventually become theirs.

Today, I listen more to Warren Buffet than I did in the past. I now realize why Warren Buffet is not just a household name but his dramatic responsibility that he has taken on to improve American business. I see Warren’s role as our role too. We too, though we might not have the power or influence of a Warren Buffet, if there are enough of us who can gather together and become "We the Capitalists", will make tremendous change in making US honest. We will affect not only business but so many people lives, as Warren has done through the simple means of investing in US Business. I have also decided to not invest as much money in China or India but in US business because I believe that only through investing in US business, will we remain #1 not only in the US but also in the world.

The firms you might personally invest in might be the firms that you believe will make a real difference to America’s health and prosperity. You may not invest in a business that you don’t believe in. For instance you might not own stock in Philip Morris if you don’t believe in smoking. So you won’t buy stock in a firm that promotes smoking whether in the US or globally. I have found that by taking a life stand such as my not investing in Philip Morris because I don’t smoke that I am able to invest in businesses that I believe in. When you buy stocks you too if you don’t feel a firm will make America a better place you too don’t have to invest in them.

10. By You Becoming a Secret Shopper or a Corporate Watchdog

You probably have heard of all the emails you receive about you making money by becoming a Secret Shopper. Well, you are making money indirectly by becoming a Secret Shopper or a Corporate Watchdog. Yes it is affecting your Roth IRA if management is not doing things to benefit the consumer. Every time you enter a store that you own stock in the personal are being watched. It is much easier to walk up the manager and tell him or her that you are an owner of this firm and you don’t feel you were treated well. With the Internet and, if you don’t receive the manager’s ear you have access to write a letter to the CEO. If change doesn’t happen, you can always replace this stock with the stock of another firm that you feel is more consumer driven. What would happen to US business as more and more people became owners of US businesses and Secret Shoppers too.

Like I said in 8 above, investing in one’s conscience here as well, I am suggesting the "Jimmy the Cricket" stock selection process or the idea of letting your conscience become your guide, can also become a person’s Spiritual Practice. Owning, rather than just shopping, can even become a more important way to transform US business.

For example, Lynn Twist in her book, The Soul of Money, discusses how, when she went shopping for her grandchild, that she received her very own wake up call. Her son Zachary went on with a list of stores that he wanted Lynn not to purchase products from. She said, "Our trendy national chain store had been known to us for child labor in Indonesia. Another respected department store had no policy against using toxic dyes, and (her son) Zachary didn’t want their money going to support that company… It had taken my son’s wake-up call to see that I had never taken all of those lessons and applied them to the real life. ..It was satisfying to direct the flow of my money and invest it with my own values, allocating it to people and places I felt good about.

Well you can use this same process towards investing with businesses which you decide to own. I want you to move past being a consumer towards becoming an owner and taking on even more responsibility such as Lynn Twist proposed. Imagine, if everyone who invested followed that philosophy, those firms that promote negative social goods would drop out of existence. I remember teaching our kids about such knowledge and, it wasn’t until they owned their own books that they took reading to heart.

I believe that once people begin to own their own businesses and go further than being just a Secret Shopper, that is when the real transformation of American businesses will happen. What other country allows its people to own its own businesses as much as we in America do. I believe that teaching people 1 at a time to own rather than just buy products, will allow us over time, to rebound by beginning to reinvest in America and return to buying American products again. That is the real way we can take back America 1 investor @ at a time. Now you know why Warren Buffet still buys a Lincoln Town Car when he has so many other Global cars that he can buy. Warren invests and also buys American and once we take ownership in America too we will do the same as Warren does.

I hesitated to add this into our discussion but Spiritual Practice influence us now that we are understanding Eastern philosophies and Yoga is becoming more a part of US philosophy. The idea of investing in US business is because in the East, all things are spiritual, even business. Whatever a person does to improve himself or others, even by business, can become a Spiritual Practice. I am quite sure that Jesus, as a carpenter, was well aware of how he, even in his humble occupation brought value; was able to serve others with this following pronouncement:

As Jesus said, "When you have done it unto one of the least of these my brethren, ye have done it unto me." I believe Jesus meant that we need to take ownership of our actions. If ownership means becoming a capitalist in order to own our own lives and bless the lives of others, so be it.

I believe that even as one invests by following his or her own conscience, that Spiritual Practice is administrated in practice rather than in theoretical terms. "We the Capitalist" can also create a spiritual practice as we make investment decisions to benefit ourselves as we also are able to benefit others as well.

Part Four: Addendum: Contrarian Investment Strategies

What is Contrarian Investing? Gaining a Skill of Becoming an Out of Favor Stock Detective

Contrarian investing is a strategy that involves making investments based on factors other than market trends, projections based on past performance, and current industry indicators. Essentially, contrarian investing is choosing to make an investment that would generally be considered to run counter to the usual procedures of investing. This high risk mode of investing is usually entered into with the idea of getting in on a good deal before the rest of the investment world notices.

While on the surface contrarian investing appears to be based more on instinct than factual information, this is rarely the case. Investors who wish to speculate in high risk ventures of this nature usually try to zero in on investment opportunities that are overlooked by others. For example, the contrarian investor may choose to focus on an industry that is not in favor right now, and make an investment in a company within that industry that is stable and doing very well. By choosing to invest in overlooked businesses that are part of an unpopular market sector, the investor stands a good chance of making a significant return on the investment while facing little to no competition for acquiring stocks.

Contrarian investing can take place in both a bull market and a bear market. The key for the investor who employs this strategy is to know when to anticipate a bubble in the market and make arrangements to sell, while at the same time choosing to buy during periods when the market is characterized by a high level of pessimism. This is going against the grain of the market and can be very risky. At the same time, the rewards can be significant.

The concept of investing in opposition by buying out-of-favor stocks usually entails careful research into what the majority of investors are doing and then choosing to look for areas of the market that are being neglected. Once these areas are identified and evaluated, it is possible to determine if there is a significant chance of making a profit by going in the opposite direction of most of the current market indicators. Far from relying on instinct alone, contrarian investing requires the application of logic, gathering of facts, and carefully weighing the chance of return against the potential for risk.

http://www.wisegeek.com/what-is-contrarian-investing.htm

Contrarian Investment Strategies: The Next Generation is another excellent investing book by David Dreman.

Dreman mentions the stock market went nowhere for the seventeen years prior to 1982. This is a reality that many "investors" today can't imagine. Dreman says, "Before all else, a successful strategy requires a strong defense: it must preserve your capital."

Preservation of Capital is a key factor that many ride-the-hot-IPO investors miss. Many investors are seeking excitement in the "red" room of investing. In Contrarian Investment Strategies, Dreman uses a hypothetical example of a casino with two rooms.

One room, the "green" room lacks excitement, but stacks the chances of success in favor of the gambler. Few people are in the green room placing their bets, and the casino manager says it's a good thing, too, because the casino would go broke if people participated.

The other room is active and exciting, but in the "red" room, the odds are stacked in favor of the casino and people tend to lose. Most investors spend their time in the "red" room of investment because they are seeking excitement. Long-term, this fails to build wealth. Dreman introduces investors to the green room of investing-- contrarian investing.

Dreman shows that technical analysis doesn't work. (So, what else is new? We knew this.) But, then Dreman goes on to examine the performance of professional money managers, most of whom use fundamental analysis.

After allowing for the fact that career pressures and short-term performance demands significantly affect professional stock analysts, Dreman concludes professional fundamental analysts are still bound to fail simply because the great majority of people are very incapable of effectively processing large amounts of data and coming to a meaningful and accurate conclusion about the meaning of the data.

Yet, the more specific information investors are fed, the more confident they become in their predictions of a stock's behavior and value. Note, we said, they become more confident, not any more accurate.

Effective securities analysis is impossible due to the scope of the endeavor. For example, Dreman casually mentions of Hewlett Packard, "In 1996, it had revenues of over $38 billion and net profit of $2.675 billion and employed 102,300 people domestically and abroad. Foreign sales in 75 countries accounted for 56% of total revenue." Do you really think you can do fundamental analysis of such a company?

Dreman goes on to show that most analyst's earnings' estimates for the next upcoming quarter are usually off significantly and that valuation methods demanding precision are very dubious.

Further, Dreman notes that often company earnings follow their own random walk and that you can't use the past to predict the future in today's dynamic economy.

So, what's an investor to do? Take advantage of the one thing you can be certain of--the chronic overreaction of other investors. Buy out-of-favor stocks, as measured by low price-to-earnings ratios, low price-to-book values, low price-to-cash-flow ratios, or high dividend yields. Surprisingly, Dreman doesn't mention price-to-sales ratios at all, despite the fact that much evidence supports their use as a great measure of value.

Dreman points out that volatility is not the best measure of investment risk for the investor and he destroys the efficient market hypothesis and that higher reward is correlated with higher risk.

Dreman suggests that one category of stocks, GARP stocks (Growth at a reasonable price), can offer both value (i.e., low risk) and significant appreciation potential. The pharmaceutical stocks of 1993 are an example. These pharmaceutical companies offered significant capital appreciation potential, solid financial positions, and high dividend yields.

Buying out-of-favor GARP stocks "allows you the possibility of a home run, while staying safely in the value camp."

Contrarian Investment Strategies offers an eclectic investment strategy based upon Dreman's approach to investing. Dreman recommends using some basic fundamental analysis to assure the out-of-favor companies you buy are financially strong.

http://www.bainvestor.com/contrarian-investment-strategy.html

FUND WATCH

Pinnacle Value manager John Deysher uses a successful strategy of buying out-of-favor shares of small companies.

By Stacy Rapacon

January 24, 2008

Some fund managers have been riding out the recent market turmoil by sitting on a pile of cash. One of them is John Deysher, manager of Pinnacle Value. The $64 million fund, which invests in tiny, undervalued companies, currently has about 50% of its assets in cash. The problem, Deysher says, is that he can't find enough cheap stocks.

Deysher's conservative approach paid off last year and has helped so far this year. In 2007, Pinnacle gained 15.4%, whipping the average small-company value fund by nearly 22 percentage points. In 2008 through January 23, the fund lost 3.2%, beating its peers by an average of 5.2 percentage points.

The secret of Deysher's success lies in buying out-of-favor stocks from among the smallest companies. Deysher, who spent 12 years with Royce & Associates, a leading small-company value shop, gets many of his new ideas by scouring the list of stocks hitting their 52-week lows.

Wall Street analysts and other pros tend to ignore microcaps and what Deysher calls nano-cap companies, the smallest of the small. The average market value of his holdings is just $150 million, and his fund holds a couple of companies valued at less than $20 million.

Most of Deysher's picks are not only under-followed but also out-of-favor. He looks for stocks that sport low price-earnings ratios and other indicators of value. To ensure that a company that interests him doesn't remain permanently undervalued, Deysher looks for a history of consistent earnings, capable executives and significant insider ownership.

He also looks for a catalyst that could energize a stock. This might come in the form of new management or a more activist shareholder base looking to boost the stock. A catalyst could also come in the form of a new product or a new distribution channel. Or it could simply be a cyclical rebound in earnings.

One Deysher pick that worked out well was Conrad Industries. He invested in the shipyard operator, which specializes in the construction and repair of ships and barges, about three years ago for nearly $2 a share.

Conrad had many of the qualities Deysher looks for, including a strong balance sheet and capable leaders who held significant stakes in the company. "When you put that combination of factors together," he says, "it just lead us to think that eventually we could make money if we were patient enough." Conrad (symbol CNRD.PK) gained 138% last year and closed January 24 at $13.70.

With the stock market in turmoil, Deysher is finding plenty of beaten-down stocks in a number of industries. He's been checking out banking and insurance stocks, as well as some retailers and real estate stocks. "Any of those industries have catalysts that could make the stock prices go back up," says Deysher.

But he insists that he doesn't make calls on sectors. "We're agnostic in terms of industries or representation in the portfolio," he says. "We'll just go where the values are and let the results speak for themselves."

For most of this year so far, locating good values has been much like looking for Waldo -- just when you think you've got him, it turns out to be a dog in a candy-cane shirt. If stocks once again descend, Deysher will actually become more optimistic: "As the market comes down, we tend to get more and more bullish."

Deysher has plenty at stake. He has a significant (but undisclosed) amount of his own money in the fund: "There's an extra level of thoughtfulness and concern that goes into the management of the portfolio because I am where the buck stops and I am the largest shareholder."

Pinnacle invests in some of the riskiest stocks in the market. Deysher's focus on mitigating risk is a good thing and makes this fund worth considering for the part of a portfolio dedicated to small, undervalued companies. The fund (symbol PVFIX) requires a $2,500 minimum initial investment and levies 1.49% in annual fees.

http://www.kiplinger.com/columns/fundwatch/archive/2008/fundwatch0124.htm

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