Manarin Investment Counsel, Ltd.

You see and hear the word liberty tossed around a lot these days, but what does it really mean? What exactly was Jefferson claiming to be an unalienable right? Does the concept of liberty allow for what passes through Congress in recent times? I highly recommend that you take eight minutes out of your day to watch this video. In it, you will learn the components of liberty and both ways to secure our liberty, and how it can be taken from us. Educate yourself and arm yourself with knowledge before making any decisions on who's going to represent you in our government.

http://www.youtube.com/watch?v=8z1buym2xUM

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Understanding Derivatives-"A Primer"  - Author Unknown
  

Heidi is the proprietor of a bar in Detroit ..

 She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

 To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

 Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers' loans).

 Word gets around about Heidi's "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit .
 
 By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.

 Consequently, Heidi's gross sales volume increases massively.
 
 A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit.

 He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral!!!

 At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS.

 These "securities" then are bundled and traded on international securities markets.

 Naive investors don't really understand that the securities being sold to them as "AAA Secured Bonds" really are debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb!!!, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.
 
 One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi.
 
 Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

 Since Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and Heidi's 11 employees lose their jobs.

 Overnight, DRINKBOND prices drop by 90%.

 The collapsed bond asset value destroys the bank's liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

 The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the BOND securities.

 They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

 Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

 Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.

 The funds required for this bailout are obtained by new taxes levied on employed, middle-class, nondrinkers who have never been in Heidi's bar.
 
 Now do you understand?

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"Real Estate is all about location, location, location.  It will take some time to work through the issues in places like Vegas, Florida, Phoenix, and California.  But, the fundamentals tell a much different story for us slow and steady Midwestern folk here in Nebraska and Iowa."    Aron Huddleston
MarketWatch Article By Steve Kerch

The 5 states where housing will recover first
And the five states that will lag all others

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Wall Street Journal Article -  Companies Cling to Cash by Justin Lahrt

1.93 trillion  in cash and other liquid assets demonstrates that companies remain uncertian about investing in the current economic environment.

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Being an owner with your long term investment capital is never about following a short path to riches. 

It is nearly always about the compounded power of many market sessions.  Times like these are what challenge investors' discipline and day by day we hold on past the doom-and-gloomers waiting for the breakout to emerge.

REALITY CHECK:  So here we are near the bottom and it seems that most of our peers have become overwhelmed and left the building.  Today being an owner often leads to second guessing ... "you aren't still investing in the stock market, are you?" ... "that isn't safe" ... "I moved my money to cash and bonds" ... but the market session that is right around the corner, THE bottom and the rally that follows, reaffirms once again that common stocks, over the long term, are the highest total return asset class of all.    

 

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The below article was written by my colleague Dave Blair and published in our client newsletter this past summer.  In light of public perception, it deserves a second look:

As the markets continue to stumble along driven by fear and emotion, some people have asked if they should be getting out of the market to "protect their investment."  Note that these are not clients asking the question, our clients already know the answer.

Short term volatility is the price we pay for long term success in building wealth.

You can see this chart in Roland's new book, Manarin On Money.

Over time equity ownership positions have moved up and down but have always trended up.  Like a yo-yo climbing a flight of stairs.

Market timing requires two perfect decisions, whereas, staying invested in quality, professionally managed stock mutual funds requires only one decision.  Nobody makes two perfect decisions all of the time. 

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Know what it is?  I learned it over 30 years ago the hard way. 

The secret is patience.

Back then I discovered that if I stuck with my ownership-based investment strategy over the long haul and outlasted the quitters and ignored the critics, I would someday be in a better position than the majority of my peers. 

This is why I continue recommending the investment model I've used since then:

                                        

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The "We are in the worst economic climate since the Great Depression" wackadoos sure put up a good fight.  But now more folks are finally seeing through their flawed logic. 

From a recent Newsweek article: 

The specter of depression stalks America.  You hear the word repeatedly.  Are we in a depression?  If not, are we headed for one?  The answer to the first question is no; the answer to the second is "almost certainly not."  The use of "depression" to describe the economy is a case of rhetorical overkill that speaks volumes about today's widespread pessimism and anxiety.  A short history lesson shows why.

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When talking about the stock market these days, it's easy to be wooed into becoming a long-term pessimist.  Last Friday, the S&P 500 closed at 1239.  Contrast that to where the index was trading at 10 years ago - 1164 - and you end up with a gain of about 6.4%. 

So why am I still so enthusiastic about my "stocks for the long run" philosophy? 

Take a look at history. 

The last time we went through a similar market environment was from about 1969 to 1982.  Not only were the returns middling but inflation wiped out the gains that investors had earned leaving many with a real return in negative territory. 

But people who maintained their discipline and continued acquiring equity positions were rewarded for it. 

From 1983 thru 2001, vast sums of wealth were created because certain people understood the gift the financial gods had given them and knew how to take advantage of it.  Or there were others who prospered simply from dumb luck for being in the right place at the right time. 

You see, tangible assets - real wealth - does not vanish in a market decline.  Instead, uninformed investors panic and sell their wealth while savvy investors go bargain hunting.   

And that's the way it has been throughout history. 

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