The New Book, Cash Flow Your Way to Wealth, is Closer than It’s Ever Been


I remember when I was involved in testing in one of our facilities (my day job is “rocket science,” or more specifically, aerospace engineering), one of the most irritating things that one of our test engineers would say was, “We’re closer than we’ve ever been.”  He would say this when you asked questions like “How much longer do you think it will be before we’re ready to test?”  The answer was absolutely correct, but totally useless.

I remember specifically one day when I was supposed to meet my wife for lunch.  I didn’t have any way to contact her (didn’t have cell phones in that day).  We were testing in a facility that would blow really hot air over things like materials you would put at the front of a space capsule to allow it to survive coming back into the atmosphere.  This facility used compressed air at such high pressures it would look like a liquid if you could see it because the molecules were squeezed so close together.  Once the test started it would only run for a few minutes, so I knew that we could be done in just a minute or two if the test started, but as is usually the case when doing these kinds of tests, there was one delay after another as we were checking things and finding issues.

As I watched the time tick away, I got to the point where I would need to leave to meet my wife on time, then the time passed where I would be a little late, and then it started to get to the point where I was going to be more than a little late.  I didn’t absolutely need to stay for the test – I could find out afterward what had happened and look at the data then, but it was really neat to see this facility run and I didn’t want to miss it if I didn’t need to.  If I knew it was going to be a half-hour before we tested, I might have just gone for lunch, but thinking that it could happen at any minute, thanks in part to the test engineer saying we were “closer than we’ve ever been,” I stuck around and waited.

Finally, the test went off and I went to meet my wife.  By this point I was a half-hour late and had some explaining to do.  Luckily, she understood, but I still hated to keep her waiting.

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I feel like the same thing is going on with the new book, “Cash Flow Your Way to Wealth.  I keep thinking that the book is almost done, but then I get a proof copy and sit down to read through it for errors and issues, and find that there are still things I want to improve and move around a bit.  As a result, we’re always “closer than we’ve ever been.”

The other day I got a new proof copy (this is the third one) and started reading through it.  I think that it is finally to the point where there are just typos and grammatical errors to correct, which means that it should be out in about a month.  I’ve only made it through the first couple of chapters, however, so it may take a bit longer than I think.

I really like this book because it gives you something you really don’t find in other finance books – a specific strategy for managing your money to live a financially secure life.  If a high school senior picked up this book before he got into debt and made all of the other bad decisions many of us make, he could save himself a lot of pain and not need to use the Dave Ramsey debt snowball to climb out.  That is the beauty of it – we all start out clean and debt free when we first become adults.  It is at that point that we try to live beyond our means and we get into trouble.

Hopefully, there are a few folks out there who have been following my posts on writing this book who are eager to get their hands on a copy.  If you shoot me an email (VTSIoriginal@yahoo.com) I’d be happy to let you know when the book is ready so that you can buy a copy and not miss out.  I also have a special offer for those who buy a copy of the book and send me proof (like a picture of the book in your hands or a screen capture of the e-book):  I will give you a copy of a spreadsheet program I created to manage my own cash flow.  This means that you can use all of the work I went through in putting the spreadsheet together to make developing your cash flow plan that much easier.

So, we’re closer than we’ve ever been.  Please keep checking back to The Small Investor or subscribe to make sure you don’t miss the big release.  May financial security find you all.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Is this a Correction? Yes.


Now that the markets have retreated a bit, as they always do eventually, we’ve started to see the commentators blather on with their endless speculations on where the markets will go from here.  One particular subject of discussion is about whether this is a correction or not.  Just the other day I heard one reporter say that it is important if the Dow Jones reaches a certain level because if it did, we would “be in a correction!”

To understand what a bear market and a correction are, you need to understand Dow Theory a little.  Previously I wrote about a pet peeve of mine – reporters and market commentators trying to distinguish between corrections and bear markets based on percentage changes – in a blog post from a few years ago.  You can find that post here if you want to be smarter than your friends.  The bottom line is that a correction and a bear market are both market events when stock prices decline, with a correction being one move down, followed by a resumption of the upward trajectory, and a bear market consisting of at least two legs down.  A trader didn’t feel like teaching Dow Theory to a bunch of journalists, so he just said that a correction is when the market indices go down by at least 10%, where a bear market is when it goes down at least 20%.  Journalists are lazy and didn’t bother to learn more, so the definition has stuck and become gospel.

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Where they used to worry about going into a bear market, the commentators are now all concerned if we even hit a correction level, as if that would matter.  Now it seems all important if we go down 10% because then we would be in correction territory.  It is as if everything is just fine and rosy if we go down 9.9%, but if we hit 10%, the end of the world as we know it will occur.  Who knows what would happen if we went down 20% and went into bear market territory?  Maybe we’d all be homeless and sleeping in our cars.

Well, I’ve got scary news for you:  We are in a correction.  It doesn’t matter if the markets go down 5%, 10%, or 90% before they recover.  In any of these cases we’ve seen a correction.  And now that the markets have recovered a bit from their lows, if they proceed down a second time before they start reaching new highs again, we will be in a bear market.  And should any of this matter to you?  Not in the least.

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The markets are falling for two good reasons.  The first is that they went up huge last year, with many indices 20 or 30% plus higher than they were before the Presidential election.  Anytime that the stock market goes up like that, people get a little silly about what they are wiling to pay for stocks.  Eventually they look at their portfolio and decide maybe they paid a bit much, then try to quietly sell and get out of their positions.  If enough people do this, it causes prices to decline, which gets people worried, so they sell as well.  Before you know it, you’re seeing a correction.  This is normal after a big move upwards.

The second reason is that the economy is starting to do really well for the first time since 2008.  The Federal Reserve has been keeping interest rates at near zero for about ten years now.  This means that they can’t lower rates much at all should they want to spur the economy.  They therefore want to raise rates a bit to give themselves a little breathing room, but have not been able to do so for a long time because the economy has been so sluggish.  Now that they are seeing the economy start to grow rapidly, with GDP going over 3% for the first time that anyone born since the millennium can remember, they are taking the opportunity to let off on the gas a little.

They also worry that all of this great news about jobs being created, companies giving out bonuses and raises, and people going to full-time work and spending again, will  cause inflation.  They therefore want to raise rates to tamp that threat down as well.  Because higher interest rates affect the ability of businesses to borrow, raising rates causes the stock market to decline.  It is also bad news for current holders of bonds since they see their bonds decline, but it is good news for new buyers of bonds since they’ll be able to get a better rate.  It also helps those with savings accounts and money market funds.

What should you do?  Nothing that you are not doing already.  If you are building up a position and investing regularly, you should  continue.  If you are getting ready to retire soon, you should have already taken some money out of the markets (enough to meet immediate needs for the next few years) just in case a decline such as this occurs.

If anything, you should try to find more money to invest if you are not planning to retire for at least ten years since at this point, stocks are on sale.  You may not get the best price possible (they could decline more if we’re in a bear market), but you’ll get a better price than you did a week ago.  And prices will be higher than they are now in ten or twenty years regardless of whether this is a correction or a bear market.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

My Investing Journey, or, When I Stopped Fooling Around and Got Serious


Probably fifteen years ago, I found a book that really changed the way I invest and really made a difference.  It was Do You Want To Make Money Or Would You Rather Fool Around ? by JD Spooner.  About that time was when I shifted from what I had done through my youth to what I now call the Serious Investing strategy.  It has made a huge difference in my investment returns.I started investing when I was twelve-years old.  My father was a big investor and I used to watch him keep track of his stocks using the stock tables from The Wall Street Journal.  He would diligently write the closing prices down each day, then make a chart of his stocks on graph paper.  This was around 1982, when there really were no spreadsheets, let alone the internet.  After talking about investing with him a bit, I decided that I wanted to take the $250 from my bank account and invest in stocks.

I bought 15 shares of Tucson Utilities for $15 per share.  We got the stock certificate in the mail a couple of weeks later, which featured a picture of some goddess shooting lightning bolts from her fingers.  I held the shares through high school and college.  I actually went to undergraduate school in Tucson, so I became a customer of my company, which felt pretty neat.  Along the way the stock went to about $80 per share and then collapsed when a scandal broke out at the company.  The share price dropped to $4 per share, and then $2.  I continued holding for several years.  Eventually the company started paying dividends again.  The share price recovered with time until the company was bought out.  Overall I made a good profit on the position.

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Rather than having me call home every few weeks asking for money for college expenses, my parents used the gift exemption each year when I was in high school to put money in a brokerage account for me.  Actually, my father transferred shares of stock that he had into the account, which allowed the profits from the eventual stock sales to be taxed at my lower rate, rather than at his high rate.  This was probably good and bad, in that it gave me a good start and financial security, but it also gave the opportunity for me to really mess things up since I was a young man with a fair amount of money available to throw at a whim.

For the most part I managed it well, not blowing the money on stuff as some late-teens, early twenty-somethings often would.  I was actually able to make the account grow while I was in undergraduate college while using the account for rent, food, books, and other expenses.  I had a state lottery scholarship that allowed me to go to college tuition-free, plus worked a job in a lab at school that paid about $400 per month.  Grad school was more expensive, living in the San Francisco Bay area with higher rents and costs, so even though I was also able to go to grad school tuition-free and had a research assistant job that paid $1500 per month, the account started wasting away a bit and was fairly small by the time I graduated and got a regular job.

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While I was fairly good with money management, I wasn’t that great at investing because I had lessons to learn.  A big lesson was that people have no business buying options for speculating.  During my sophomore year I was buying options on both some individual stocks and the S&P 500 and S&P 100 futures.  I had planned to try option speculating with a certain amount of money, and actually ended up losing about twice that amount before all was said and done.  Funny how easy it is to start throwing good money after bad, as the expression goes.

Besides doing really foolish things like trading options, a lesson I’d learned before I finished undergraduate school, I also wasn’t investing effectively because I was trading too much and not letting profits grow like I should have.  My mind was filled with the idea that you need to “cut your losses short” and “protect your profits.”  As a result I was selling stocks when I made a profit of $1000 and also selling them when I had a small loss (or sometimes a big loss, since stocks sometimes fall a lot before you can do anything).  Taxes each year were a pain as well since I typically had 15-20 trades I needed to detail on my tax returns.  Another issue I had was that I wasn’t buying in sufficient quantities to make much of a profit when I did get a winner since I had 100 shares each of maybe 20-30 stocks.

About then was when I found JD Spooner and his book, Do You Want To Make Money Or Would You Rather Fool Around ?   From Spooner I learned that, if you are going to try to trade individual stocks, it is better to concentrate your investments in a few holdings than it is to buy a few shares of this and a few shares of that.  If you are spreading your money out, you might as well buy mutual funds, which are cheaper and do a good job of diversifying your investments.   Actually, you should use mutual funds for your core investments and then have a few individual stocks to try to increase your returns.

I then went from making a small amount off of my winners, maybe $2,500 off of a huge winner that went up 200% and that I didn’t sell just because I made $1,000, to making real, life-changing profits.  I now buy large positions for my individual stock investing (my 401K and a good portion of my IRA is in index mutual funds, in case I don’t do that well with stock picking) and let those investments grow for several years.  The only reason I sell is if the company has changed or the position has become so large that a loss would be devastating.  (I typically cut a position in half if it grows to about 5% of my net-worth or more.)

This has made all the difference and I have actually been able to beat the markets over time since I started using this technique.  There are some years when I lag the market, since I’m invested in a few companies and they don’t do well every year, but over a period of time I have done very well.  This is not to say that I have not had some significant losses, since concentrating also makes your losses big when you choose poorly, but by letting my positions get big, but not big enough to be devastating, I can tolerate the risk.

Have a burning investing question you’d like answered?  Please send to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.