financial zen

Off and on again I follow the Motley Fool. It tends to have some interesting articles (when they aren’t pitching their own services) - and this one I had to laugh at:

Warren Buffet Issues Death Threat:
“We show below our common stock investments. With two exceptions, those that had a market value of more than $700 million at the end of 2006 are itemized. We don’t itemize the two securities referred to, which have a market value of $1.9 billion, because we continue to buy them. I could, of course, tell you their names. But then I would have to kill you.“

Basically, this is smart investing - something Roger Blackwell is not accustomed to doing (which is a shame, I hear he was an excellent and awesome teacher). By identifying that you made some wise choices - and keeping them private - it keeps the stock price from being manipulated, and it keeps you where you want to be - on top. Like The Fools point out, letting slip those winning picks would lead to termination.

What I find most amusing is when they talk about Jim Cramer’s Mad Money - and how the returns tend to drop on his recommendations. The irony is of course, stocks shouldn’t be picked with short-term gains in mind. Actually, I followed a pick from the beginning of the year and once it took a dive (as I figured his recommendation would) I bought some up and saw a great return on it (and I am currently holding the stocks as they continue to climb!)

Picking stocks is a difficult thing - when you rely on someone on a show, or website, you are relying on the information that’s also being given to hundreds of thousand other people - so if everyone buys in, it’s going to screw with the prices, shooting them up or down depending on the situation. It’s like penny-stocks - they have the potential to make you a huge profit or screw you over horribly. Those emails you get, those “stock tips” from your friend about that new start-up/cable channel catering to a special group - they can make him rich and make you lose your investment.

Basically, stocks are a volatile area. You need to know people, recognize trends and be able to recognize the stats and probabilities of stocks before you buy (of course, in the area of Personal Finance - you really should have your monetary affairs in order before you start thinking about buying stocks).