Mad Money Machine

MMM-058: Perfect Performance

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The Mad Money Machine is proud to be sponsored by Index Funds Advisors at ifa.com. I’m going to help you go through each of the 12 Steps for Active Investors with snippets of the author Mark Hebner’s own podcast.

Please Digg Me! Please? This moves the MMM up in the Digg list of business podcasts.

Also, sign up for the Mad Money Machine email newsletter.

Get out your cell phone and type in 206-734-4763, add it to your contacts, make a call.

Email me: feedback at Mad Money Machine dot com, or comment, or Call me on the Mad Money Machine voicemail line at 206-734-4763

I play Guitar Hero II to Perfection! Well… on easy setting.

What word did I not say in the previous show that I had said in every other show? Mr. Mackerel and Todd got it right: Cramer!

iTunes still isn’t updating my feed. Hmmmmmm…..

Tech tip: I use HotRecorder and PowerGramo. HotRecorder has pops in it every second. Boooo.

Have you seen the new Jonathan Clements web site?

We play a round of “Russian Guru Roulette” this time.

Barbara calls wondering how they pick those stocks that scroll by on the TV. And also wants to know about a stock with the same name as her son.

In MARK HEBNER PRESENTS THE ANSWER segment this week, he answers the question, “Should we choose actively managed funds in ‘inefficient markets?'” Check out the Small Cap Alpha Myth, The Big Lie by William Bernstein, and a look at International.

Our Tool this show makes it easy to allocate your assets.

Take the Quick Risk Capacity Survey.

I review the Portfolio Smackdown game. Anyone know of a better system than MarketWatch’s VSE? What a pain! Also, don’t forget: Short term-gains are taxes higher than long-term gains. This will bring down the average net gain of the participants assuming it was in a taxable account. IRA? Nevermind. I’ve left fu_fish in so far…

Download the show directly MMM-058.mp3

You Really Got Me – Guitar Hero II for XBOX 360

Music from music.podshow.com

Runaway Train – Under Feather
Romanydance – ???
The Answer – Eric Vardeman
Money – Theory in Motion
I Like That – starlord

MMM-057: Serendipity

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but, if you just can’t possibly deal with that then go ahead and
Play the new show right now 

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The Mad Money Machine is proud to be sponsored by Index Funds Advisors at ifa.com. I’m going to help you go through each of the 12 Steps for Active Investors with snippets of the author Mark Hebner’s own podcast.

Please Digg Me! Please? This moves the MMM up in the Digg list of business podcasts.

Also, sign up for the Mad Money Machine email newsletter.

Get out your cell phone and type in 206-734-4763, add it to your contacts, make a call.

Email me: feedback at Mad Money Machine dot com, or comment, or Call me on the Mad Money Machine voicemail line at 206-734-4763

Brian from Chicago wants to know more about how the show is made, how it has affected my life, and specifically now that it is weekly, if I still have my “day job” or is this a full-time gig? I begin a year-long answer on this show.

It’s just me in my home office with my computer and microphone, heavily editing the show until it is just right, then uploading it for your listening pleasure.

Can you find the link to read the book for free?

How and why did I get into investing? One of my early idols was Alex P. Keaton of Family Ties who read the Journal. Then when I got my first paycheck, I wanted to know how best to save it. Wall $treet Week to the rescue!

The “Ah Ha!” moment: After reading Phil Town’s Rule #1 and trying to manually figure out what stocks to buy, I realized that it is a game I cannot win because I don’t have the same access to powerful software that the pros use. There must be a better way. And there is.

Briar Rose from Colorado fell for the #4 ploy and called 206-734-4763 and misses the Guru segment. I complied and spun the wheel this week.

Next time “Are You Smarter Than a 5th Grader” comes on, instead of spending an hour with that, you gotta watch this instead. It explains everything. It is like taking the Red pill.

Also, I think I’ll buy a Tackamap!

Ah, the serendipity of finding great music on your own. On our way to Great Wolf Lodge, at a McDonalds I heard a song playing that I wanted to remember somehow. Thinking quickly, I took out my Treo and used a sound recording software program and held it up to the ceiling speaker. I replayed it recently, googled the lyrics, and behold… it’s KEANE! Nothing in my way.

IndexTown.com wonders why anyone who needs to pay taxes would e-file.

Jack Mackerel from Brooklyn wonders about the difference between Roth 401K and Roth IRA. And promises to get me some REAL Brooklyn style pizza when I come there.

Mark Lindsay wonders if the tide is changing in the stock market in the next few years as baby boomers retire and start taking money out. I think as Jeremy Siegel said in his book The Future For Investors, we will need a Global Solution where populations from other countries will buy our assets. But the best answer is, what is your risk capacity? If you fear a big market decline will impact your investments, then you should not be heavily invested in stocks. Also, it means that you must seek as much return as you can get for the level of risk you can accept. Tilting your portfolio more toward small cap and value stocks around the globe will help not only diversify but squeeze out some risk-appropriate returns.

I play the New Step 11. Thanks Anne Davis! Thanks Zach and Sara!

I read the abstract from the most popular academic paper from SSRN.com. It is Market Efficiency, Long-Term Returns, and Behavioral Finance by Eugene F. Fama.

I think the bottom line of the paper is this: If you find someone who says they have a technique for picking the next winning stock, unless it is one of the three factors of market, size, or value, Fama would say that they are wrong.

Something is happening here at the Mad Money Machine. There is a word that I did not say on show 57. If you know what it is, call me at 206-734-4763 and tell me how it makes you feel.

Why Paul DOUGLAS Boyer and not Paul Boyer? 1) PaulBoyer mushes together poorly 2) Its Google-rific!

Download the show directly MMM-057.mp3

Music from music.podshow.com

Alta Plaza – XRAY Dogs
Runaway Train – Under Feather
The Answer – Eric Vardeman

Name That Investing Style

Henry Blodget says in his blog post “In Search Of: A New Name for ‘Passive’” that the name “Passive investing” is misleading and deflating. Who wants to be passive when we all know that being active is the way to make things happen?

He suggests alternatives that he says don’t work: Indexing, Rules-based investing, Factor-based investing, Dimensional investing, Quantitative investing, and Weston Wellington’s suggestion of “Equilibrium-based investing.” Dylan Ross suggests in the comments to the post to use “Efficient investing.”

I’ve always been curious about how some things get named. Why, deep down, is Illinois named Illinois? Where do people’s last names come from and are there any new ones being put into use? Who thought up “guitar” and why?

Some folks say that names don’t matter. I fall more into the camp that says they do matter and that having a perfect name is like a metaphor; a concise way to convey the essential truths about something. A name should neatly summarize what you are talking about. Passive investing suggests that your money is automatically direct-deposited into your 401K, not quite the point. So what is the point?

We are talking about doing things the right way, the way that the academic studies say we should do them. Intelligent investing, Smart investing, Simple investing, Sound investing, Common-Sense investing, Lazy investing. All of these names, while correct, are generic and unfocused. Other names come from guys who either write books or blogs and develop lazy portfolios with names like Coffeehouse, Couch Potato, Margaritaville, No-Brainer, and Yale. Useful as labels but not great names for the complete discussion.

More specifically, what we are talking about is opposites. The opposite of trying to pick stocks. The opposite of selecting a winning mutual fund manager. The opposite of trying to time the market. The opposite of selecting the hot sector. But “Anti-Active investing” doesn’t sound all that friendly.

But wait, there’s more. Other concepts to get across include Broad diversification across the globe, low Expenses, low Taxes, low Turnover, Exposure to risk, and Rebalancing. Try to fit all of that into one word! Perhaps we need an acronym. BETTER investing? Taken. Ironically, by the National Association of Investors Corporation, an active-trading community. Or we could drop an E and do the Web 2.0 thing and have BETTR investing. Nah. Perhaps we add a U like Uniformity or Ultimate-buy-and-hold and hijack the word burette (an extremely precise piece of laboratory glassware) and dub thee BURETTE investing or the calmer Burette investing. The problem with hijacked names, though, is they are not great for Googling. You try to search for more info on Burette investing and you get a screen full of laboratory beaker manufacturers.

So how about creating a brand new word? Creating a new name out of the blue either takes some significant authority or a viral campaign. The President could come on TV tonight and announce that “Passive” investing will henceforth be called “Bretter” investing. He could go on to describe that what he means by Bretter investing are the concepts listed above and from that moment onward Bretter would be the name for that style of investing. On the other hand, a viral campaign could start by some forum poster describing an investing style that is a “Broadly-diversified, Rebalanced, Expense-efficient, Tax-efficient, and Turnover-efficient Exposure to Risk.” And all replies to the topic simplify it to BRETTER for less typing. Seemingly overnight, bretter (not capitalized, just a word) becomes the shorthand for describing what was formerly called passive investing. Two approaches to naming. Top-down and bottom-up. Imposed or organic. Come at it from both directions.

Bretter Investing! Just humorous enough for the tongue-in-cheek crowd, playing off of “Better Investing.” Thoughtful enough for those demanding meaning. Unique enough for the Googlers. Bretter investing. Say it often. As in, “Since I adopted a bretter investing style back in 2007, I’ve never had to worry about my financial freedom.” Or, “The bretter investing crowd doesn’t believe in picking stocks; instead preferring to buy index funds.”

The bretter investing style. You could get used to it. You got used to Illinois didn’t you?

B roadly-diversified,
R ebalanced,
E xpense-efficient,
T ax-efficient,
T urnover-efficient,
E xposure to
R isk

“It’s definitely a bretter way to invest(tm).”

Full disclosure: In order to avoid being sniped or swiped or otherwise misused, I went ahead and registered the domain name BretterInvesting.com, not that anything will ever come of it.

Why doesn’t iTunes update with newest episodes?

If you browse iTunes and look at the details for the Mad Money Machine, it shows the most recent episode is only show 54. I have written to them twice today but no joy so far.

So if you get the episodes through the “Get Episode” link, here’s what you should do instead: Click SUBSCRIBE and then go into your subscribed podcasts lists and find the Mad Money Machine in there. Then, in the Windows version of iTunes, right-click the mouse and choose “Update Podcast” and you’ll see shows 55, Cramer in Crisis, and 56.

I’m with Leo Laporte: I don’t like Apple being the monopoly on controlling podcasts.

MMM-056: Who You Callin’ Fool, Fool?

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The Mad Money Machine is proud to be sponsored by Index Funds Advisors at ifa.com. I’m going to help you go through each of the 12 Steps for Active Investors with snippets of the author Mark Hebner’s own podcast.

Please Digg Me! Please? This moves the MMM up in the Digg list of business podcasts.

Also, sign up for the Mad Money Machine email newsletter.

Hot stocks this week: NEWC, TSCM. Hot funds this week: Amidex Cancer & Innovative Healthcare CNCRX. The expense ratio is only 4.7% with a front-end load of 5.5%.
PASMX Pacific Advisors Small Cap. Rated 4 stars at Morningstar. Expense ratio is 3.37% Front end loat is 5.75% to get into it. with a 2% redemption fee.
SAOAX: Security Alpha Opportunity. Has a waiver on some fees until the end of 2008. Get in now while the getting is good!
AACFX: AIM China. China is hot. Get some now. Expense ratio 2.05%, 12b-1 fee 0.25%, Management fee 0.94%, Initial load 5.5%. 30 day redemption fee 2% Morninstar cost projections for investing $10,000 in this fund? After 10 years, you will pay them the low low price of $4517.

Bogle, Bogle, Bogle: He was on Consuelo Mack WealthTrack, a couple of other podcasts, CNBC, and lots of other places I’m sure, promoting his new book. David Darst? says active managers can do well in small stocks, international, or emerging markets.

Casino Royale!

My shoulder is sore from playing Wii baseball. Any games you recommend for the Wii?

TV shows: Heroes, Prison Break, Lost, 24, American Idol.

Are the Fast Money guys beating their benchmark? What is their benchmark? Why don’t they put together a portfolio that they make trades in and show us their performance results?

Have you watched the ad for IFA on CNBC? Go to IFA.com and see it along the right hand side. What is that music genre called? I’d like to find some podsafe music like that. Call me 206-734-4763.

Index Funds Advisors are advisors that help get you into the Dimensional Fund Advisors funds which have a small and value not only in the US, but also internationally and in emerging markets.

I review the Portfolio Smackdown.

Phish43 calls in.

Fu_Fish is getting married. Congratulations! I hope you get a Better Life. Life intrudes when we’re trying to actively trade, doesn’t it?

I review Chapter 4 of Jim Cramer’s Mad Money: Watch TV, Get Rich entitled “How to Sell a Stock”.

Mad Money Ch 4: How to sell a stock
“You haven’t made a dime until you sell and take your profits to the bank.” Is Jim saying he wants you to put your money into the bank?
Why and How to sell:
Why: It’s either made or going to lose you money.(Taking profits or cutting losses) He doesn’t devote as much time on his show to selling… its is more subjective. (You do the homework) “Selling is a … decision.. you must make on your own”

How: People get caught up in the emotions of owning a stock. It should be fun. “We have fun because investing is interesting…” [HE should be using the word TRADING here] If a stock goes from $50 to $20 on deteriorating fundamentals, it is irrational not to sell. [value stocks have higher returns] If a stock goes form $50 to $80 sell most of it. [How about if a stock goes from $100 to $160? (same % as 50 to 80) Do you know of any stocks that have done that? Don’t you think you’d feel like an idiot for selling Google at $160? If you owned an index fund, you would have owned google from $100 all the way to $450 and you’d still own it.]

Taking Profits the Right Way: “Truth be told, this whole game requires flexibility and you shouldn’t adhere strictly to any tight rules about profit taking” [So basically he’s saying, nobody knows when to take a profit.] Then he gives six “guidelines” (Not rules!) that one should follow when trying to take profits. [what follows is as close to a horoscope for stock trading as one could get] 1) keep your stock position the same 2) set a target price 3) when target is reached, what do you do? 4) when you think it won’t go higher, sell it 5) if it goes up big, you’re being a pig… selling is an art 6) you should be eager to take profits. [no mention of evaluating the tax impact or the impact of commissions or what you’ll do with your money after you sell… you have to be right on that decision also] [Not only do you have to be right about when to sell the stock, you have to be right about what to do with the money. Compare performance to buy and hold.. If the market continues going up and you’re in cash… You Lose. If you buy a different stock that goes down while the market goes up, YOU LOSE BIG.

Cutting Your Losses: “Some of the stocks I pick are gonna be losers.” If I’m right just two-thirds of the time, then you can make a lot of money from listening to me” [Well as we’ve seen, he hasn’t been right two-thirds of the time but instead less than one half of the time.] More conditional statements, more talk about doing your homework, says to call him during the lightning round, talks about going to read his previous book.

[Who loves Cramer’s advice the most? The folks that get your money from making the trades… the stock market casinos.]

So how do we reconcile the fact that Jim Cramer said he manipulated the market, for example with RIMM, while at his hedge fund and that he is now telling us how to sell a stock? Do you remember the book that Jim’s said in his Real Money book was his favorite book on investing? Not Peter Lynch, not Warren Buffet…Picking Winners by Andy Beyer. And no, that’s not a book on picking stocks, it is a book about picking winners at the horse track. Does that give you any kind of background on where Jim is coming from on his so called investment advice to you?

I am not saying this as a rant, not saying this because it is fun to pick on celebrities. I am saying it because I truly believe that the suggestions are hazardous to your wealth. I know from personal experience… I tried following his advice and ended up lagging the market returns I could have gotten from investing instead of trading. And OH the tax headaches using TurboTax!

Here’s Chapter 4 of my book Paul Douglas Boyer’s Mad Money Machine: Play Video Games, Get Rich:

Don’t own individual stocks.
Sell when you need the money.
Go play video games.

The Suze Orman Moment: “Can I get my money back from my old employer’s 401K?” Yep. Read your ex-employer’s policy. Then roll that over into your own IRA.

Our Tool in the Toolcrib helps you with your asset allocation.

Get out your cell phone and type in 206-734-4763, add it to your contacts, make a call.

April 1 is Index Funds Day. Send your active investing friends an eCard for it from IndexFundsDay.com

Email me: feedback at Mad Money Machine dot com, or comment, or Call me on the Mad Money Machine voicemail line at 206-734-4763

Download the show directly MMM-056.mp3

Music from music.podshow.com

Alta Plaza – XRAY Dogs
Runaway Train – Under Feather
The Answer – Eric Vardeman
Voltage Clamp – Rubber Band Banjo
I Want a Better Life – The Shakes
Money – Theory in Motion

I just want to say thank you

Listeners and readers,

I just want to say THANK YOU for making Mad Money Machine the most popular investing search in iTunes. To see for yourself, open up iTunes and at the search box type “investing” and hit enter. Make sure to display the “Popularity” column. Then click the Popularity column to sort by the highest… Mad Money Machine!!

Thank You!

Special Report: Cramer in Crisis

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but, if you just can’t possibly deal with that then go ahead and
Play the show right now 

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Please Digg Me! Please? This moves the MMM up in the Digg list of business podcasts.

Special Report: Cramer In Crisis

Does Jim Cramer admit to taking steps at his hedge fund to manipulate the stock market? On this show you will hear what he said, what he said since he said it, what others are saying, and what you can do to protect yourself.

Watch the original video that started it all from Jim Cramer’s web site, TheStreet.com.

Listen to Jim Cramer on the Don Imus show 22 March, say he was talking about what other people do.

Check out the article by Henry Blodget at Slate.com regarding Cramer’s Crazy Confession. And don’t miss the transcript that Blodget links to in his article.

Read John Mugarian’s take at his Dynamic Growth website and also Phil Davis at SeekingAlpha.com

Cramer’s article The Least I Owe You.

I give you the simple answer on how you can protect yourself.

Email me: feedback at Mad Money Machine dot com, or comment, or Call me on the Mad Money Machine voicemail line at 206-734-4763

Download the show directly CramerInCrisis.mp3

Music from music.podshow.com

Pod Theme – Intelect

Cramer manipulating at his Hedge Fund

Several people have sent me links to the YouTube video where Jim Cramer described how, at his hedge fund, he could push stocks higher or lower. Article at Cnet describes it and tries to link to the YouTube video, but YouTube says “This video is no longer available due to copyright claim by TheSteet.com” Anyone else got another link that still works?

Does the video really say anything that hasn’t already been said in his book “Confessions of a Street Addict?” Or in Nicholas Maier’s book? (not that anyone has read that one)

Update: Jim Cramer on Imus today, says he was talking about what other people do. You can listen to the interview on Imus here.

Update 8:30 PM: Found a link to the video at TheStreet.com. Interesting that someone would want to advertise their investment advice before and after this video.

Update Friday 12:00PM: Whew, this is swirling now! Check out the article by Henry Blodget at Slate.com regarding Cramer’s Crazy Confession. And don’t miss the transcript that Blodget links to in his article.

BoomerCentury

I’m getting all kinds of good info from the new Diehards.org/forum to pass along to you. Like this one:

On March 28th on PBS (check your local listings) a show called BoomerCentury will air. From the web site:

BoomerCentury.com is a rich interactive experience that helps you explore the past, present, and future of this remarkable generation—and lets you tell your own story as well. It was created by Vanguard in connection with the upcoming documentary The Boomer Century: 1946–2046, airing on most PBS stations next week.

BoomerCentury.com gives you a sneak peek at highlights from the documentary, including interviews with well-known boomers ranging from entertainers to self-help experts to political figures.”

I’ve got my DVR set for record.

John Bogle to appear on Consuelo Mack WealthTrack

According to the WealthTrack.com website, John Bogle will appear on the 23 March edition of the show with Consuelo Mack.
After the show airs on some PBS stations, you should be able to download it through iTunes at this link http://phobos.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?id=202795382
Or by signing up at the WealthTrack.com website

MMM-055: Dan Solin Interview + Slice and Dice

I ENCOURAGE you to Download this show thru iTunes!

but, if you just can’t possibly deal with that then go ahead and
Play the new show right now 

Standard Podcast [ 47:44 ] Play Now | Play in Popup | Download

The Mad Money Machine is proud to be sponsored by Index Funds Advisors at ifa.com. I’m going to help you go through each of the 12 Steps for Active Investors with snippets of the author Mark Hebner’s own podcast.

Please Digg Me! Please? This moves the MMM up in the Digg list of business podcasts.

Also, sign up for the Mad Money Machine email newsletter.

Listen to Warren Buffet on CNBC March 13th with Liz Clayman tell us the best way to invest.

I review Jim Cramer’s performance. I tried to pick day when the market bottomed to give him a chance to make some major gains. Here’s some of what he picked on 18-19 July 2006: GSK, KO, STJ, JNJ, PEP, UTX, and MO. If you had invested in these equally until 19 March 2007 your gain would have been 6.8%. Not too bad right? Well, compare that to the S&P 500 fund SPY which is up 11.9% since that time. And compare that to VTI which is up 13.%. And then compare it to my favorite benchmark the IFA Indexfolio(tm) 100 from 1 August 2006 thru 28 February 2007 which is up 17%. No one can pick stocks.

Visit the new diehards.org forum.

I attended the DC Area Vanguard Diehards meeting last Sunday. 14 of us met around a table aged from 30’s through 70’s. Wide-ranging discussions for 3 hours about portfolio checkups, re balancing, asset allocation, fund details, bottom line: very interesting for investment geeks like us.

Mark Hebner presents: THE ANSWER. “Is it better to slice and dice or to just buy the whole market?” That is, is it worth it to slice and dice your portfolio emphasizing value and small stocks or not? We go into some nitty-gritty details of John Bogle’s new book. Please view the charts for yourself to see the historical differences in returns for Value vs Growth. Here are some other interesting charts.

Jim calls 206-734-4763 and asks, “Are CWI or TMW as good as VTI?” I like the VTI best. I also like the new VEU better than the CWI. Both VTI and VEU have mutual fund equivalents at Vanguard.

What are two approaches to slicing the Pizza?
VTI (The total market approach)
(including any REITs it may own):
40% Large Cap Value, 40% Large Cap Growth, 18% Small Cap, 2% Micro Cap.

Slice and Dice:
Example from IFA Indexfolio(tm) 90 [oops, I had this at 100 formerly] invests its US portion (excluding REITs) this way:
50% Large Cap Value, 17% Large Cap Growth, 17% Small Cap Value, 17% Micro Cap

I review both the private and public Portfolio Smackdown results so far.

I play some sage advice from CNBC. And also the horoscope for some of my stocks.

Mark Hebner joins me as we interview Dan Solin the author of the great new book The Smartest Investment Book You’ll Ever Read: The Simple, Stress-Free Way to Reach Your Financial Goals. Make sure to watch him on the CBS Early Show also

April 1 is Index Funds Day. Send your active investing friends an eCard for it from IndexFundsDay.com

Get out your cell phone and type in 206-734-4763, add it to your contacts, make a call.

The next Mad Money Machine show to be released Tuesday, March 27th. Call me with your investing question and we will provide The Answer.

Email me: feedback at Mad Money Machine dot com, or comment, or Call me on the Mad Money Machine voicemail line at 206-734-4763

Download the show directly MMM-055.mp3

Music from music.podshow.com

Alta Plaza – XRAY Dogs
Runaway Train – Under Feather
The Answer – Eric Vardeman
Look to the Sky – The Plugs
Le pugiliste – David Cyr
California – Delfinium Blue