The Yajnik Letter

I have written about this before but thought it would be worthwhile to rehash the importance of healthy living. What’s the point of making a ton of money if you sacrificed your health in the process and are unable to enjoy the fruits of your labor with your family and friends?

So, here are some ways to improve your healthy living for 2010:

1. Sleep hygiene is the most important thing…specifically the consistency with getting enough sleep. Most research suggests that if you fix either the time you wake up or fix the time you go to sleep, and then let the other time naturally take care of itself, your body will end up adjusting to right around eight hours.
2. As you get older, getting sun becomes ever so important. That means year-round, especially in the wintertime, trying to get sun. The body makes vitamin D from sun exposure, and vitamin D is critical in a whole bunch of things – fighting cancer, regulating your mood, allowing you to sleep easily at night, and a whole host of other important processes.
3. Movement is the next thing. You can call it exercise if you want, but it’s really important to move. The ability to move really defines humanity in many respects… the fact that you can express movement and can get up and walk and jog or swim or bicycle. It’s critical for your health, too. Just doing something, whatever it is, whatever you can do. Whether it’s stretching in the morning or evening, or walking 20 minutes every day. Whatever you can do that’s simple, easy, and doesn’t cost much will absolutely benefit you. There are chemicals released throughout the body that regulate mood as well as cancer-fighting chemicals. Blood pressure-helping chemicals that release from the large joints in your body, like the hips, knees, and shoulders. So by moving those things, you’ll feel better and live longer, and that’s been studied and looked at over and over again.
4. I love massages. Although it’s expensive to go out and have someone massage you and pay for a professional massage, there are inexpensive alternatives with great benefits. This has incredibly powerful benefits in relaxing, getting rid of aches and pains, and flushing toxins from parts of your body as well.
5. Next up is eating fruit because there are a lot of micronutrients in fruits, especially fruits that have colors in their skin. As more and more research comes out on fruits, we’re finding that they are better and better for you – fighting cancers, lowering blood pressure, getting rid of joint pain, all these things that seem to become more worrisome as you get older.
6. I have started to meditate this year and have found it to be very beneficial. Just spending time sitting quietly, breathing, concentrating on your spirituality has incredible health benefits. Benefits for heart disease, blood pressure, even your ability to use oxygen, which is one of the measures of fitness. They all improve with meditation.
7. Aromatherapy is something I am going to experiment with in 2010. By that, I mean getting some pleasant and fun and nice aromas in your life and around you, especially in the winter, when we spend so much time indoors. Scents can just be so powerful and have such an effect on your mood and well being. Smells like fresh-cut flowers, cocoa, cinnamon, fresh-baked breads, even onions cooking, are fantastic, and it can be quite soothing to surround yourself with them when the mood strikes you, even if it means doing something as simple as throwing some onions in a pan.
8. Next up on the list is aspirin. I have read in several publications the benefits of taking one tablet, which is about 325 milligrams, once a week. Aspirin’s known to reduce the risk of colon cancer and heart disease for people taking it more regularly than once a week. But the benefits of it last about seven to 10 days. So I figure you are probably getting most of the benefit by taking just one a week. And the cost to take one year of aspirin is a couple bucks, so I’ve done that for a long time. I would check with a doctor first before doing this.
9. Drinking one or two glasses of wine each day if you’re an average-size male, or one glass – which is four to six ounces – if you’re an average-size female, can provide tremendous health benefits. The health benefits of drinking wine and even alcohol are undoubted in the medical literature. And yet, there’s this whole push against alcohol and drinking alcohol and the risks that can come from alcoholism and drunk driving. Now that’s not what I’m advocating. Moderation is the key here. Often, I will have a glass of wine before dinner. No one as yet has really teased out exactly what produces the benefits, but they are certainly there – everything from arthritic diseases to heart disease to cancer to Alzheimer’s, you name it. There’s very, very powerful research on that. The red wines tend to have a lot more of the antioxidants, the polyphenols as they’re called, that give it the red color. But the research shows white wines, or even moderate alcohol consumption in general, can provide health benefits.
10. The last item on this list is don’t share drinking glasses, mugs, cups, forks, spoons, or knives with people. Obviously it’s not quite as important with your spouse or children or someone who’s living in the same household as you, simply because you’re already so close that it probably doesn’t matter as much. But it’s a great general rule to follow. I’ve always contended that one of the major reasons people get so sick this time of the year – besides the lack of sleep and sun exposure – is that people are shaking hands more frequently, touching their mouths, eating the foods at holiday parties, sharing food and drinks. “Here try this wine.” “Try this food.” And it just spreads bugs like crazy.

Hopefully, you have found my postings to be of use. I plan to continue writing and finding ways to profit in the current market. If you have followed my advice, you should have done pretty good year with our precious metals and large global dominating blue chip stock picks. I think these will continue to do well in 2010.

So, have a happy new year, be safe tonight, and see ya in 2010!!!

-Samir

Here is some commentary I received from Jeff Clark, who is a very successful stock and options trader and a writer of various investment letters. Be sure to read all the way to the end and click on the link so you can sign a very important petition. It only takes a minute to do.

-Samir

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Is there no common sense left anywhere in Washington D.C.? Just when you think our elected officials have reached the peak of stupidity, they somehow manage to go a little farther.

Back in February, U.S. Congressman Peter DeFazio introduced bill HR 1068, “Let Wall Street Pay for Wall Street’s Bailout Act of 2009.” The proposed legislation imposes a 0.25% tax on all stock, bond, and option transactions. So anyone with the audacity to buy and sell 100 shares of Apple would pay about $50 in taxes for the round trip.

There are so many problems with this proposed legislation, I don’t know where to start. How about with the name? This is not “Wall Street paying for Wall Street’s bailout.” You and I, as taxpayers, have already paid for that. Now, you and I, as traders, are being asked to open our wallets again.

Individual traders didn’t cause the financial crisis that sent global markets into a tailspin last year. Corporate executives making overleveraged bad bets with other people’s money and idiotic regulators who loosened the rules during the height of the housing mania caused it.

Let’s call the bill what it really is… “Let the Government Confiscate an Extra $150 Billion a Year of Your Money.”

The tax was originally proposed to help fund the various bailout programs. That idea, however, ran into some resistance, as the “bailout” idea isn’t polling too well with the electorate these days. So now, the tax is being marketed as a way to help pay down the deficit.

I have a better idea to pay down the deficit. How about… STOP SPENDING MONEY YOU DON’T HAVE!

We all know none of this tax money is going to pay down the deficit. It’s going to be used to increase spending on more government programs and increased bureaucracy. That’s how Washington works.

Let’s also consider the unintended consequences of this act. It will put a lot of small traders out of business. Individuals who day trade to capture small profits will have much of their gains eaten away by the tax. Consider a trader who uses the same $10,000 to buy and sell stock each day. One round trip each day for a week creates a $250 tax bill. That’s 2.5% of his principal amount. How do you stay in business when you have to make 2.5% per week just to break even?

As smaller traders drop by the wayside, discount brokerage firms will do far less business. And the exchanges on which these trades take place will see their order flow diminish. Job losses will no doubt follow. Market liquidity will also decline, resulting in larger spreads between bid and ask prices.

The backers of this bill claim it really only affects day traders and speculators… meaning the average person is largely unaffected. That’s simply not true.

In today’s world, the average person owns mutual funds. Mutual funds will need to increase their fees in order to pay for the tax. Since the average turnover in mutual fund holdings is something like 100% each year, fund holders can look forward to seeing their returns decline by at least 0.5% each year. Anyone holding mutual funds for the past decade is barely above water as it is. Knock 0.5% off the annual return, and the results go negative.

Finally, this tax is just patently unfair. Traders already pay income tax on their capital gains. Now, they’re being asked to pay an additional tax on the principal value of their trades.

The bill was introduced in February… Now, it has somehow made its way into committee. It needs to be stopped here.

Please contact your Congressman and tell him or her you oppose HR 1068 – The Trader Tax. Or sign the petition to stop the Trader Tax…

I have touched on this before. However, with the recent rise in precious metals and energy, I thought it may be useful for all of you if I explained why am I a fan of uranium. On a high level, the reasons are:

1. The world must go nuclear – Nuclear has been an unpopular option for the world ever since the Three Mile Island incident in 1979 and Chernobyl in 1986. However, as the world looks to cut back carbon emissions, even former opponents of nuclear are beginning to embrace it as a lesser evil. Consider the words from the co-founder of Greenpeace, Patrick Moore: “Nuclear energy is a key technology for the future and [there] should be a resurgence of this technology happening now.”
2. The ending of the HEU Agreement between the U.S. and Russia in 2013 – The HEU Agreement between the U.S. and Russia, also dubbed the Megatons-to-Megawatts program, converted Russian nuclear warheads to useable fuel for American nuclear reactors. This has supplied a large percentage of the American uranium needs for the past decade. The program is ending in 2013, and the uranium to replace this source will need to come from somewhere else.
3. The China factor – China currently generates about 3% of its energy from nuclear. If it reaches the regional average of 25%, it will need 8 times more reactors than it has now, putting further pressure on global uranium stocks.

Uranium had experienced an unsustainable rise in price  (similar to oil surpassing $140) in recent years and when the financial markets and the residential real estate sectors collapsed, hedge funds and other investment groups were forced to sell their profitable uranium holdings to improve their own liquidity positions to help cover the sudden losses in the two previously mentioned sectors. Now with the long-term futures price holding steady at $52/lb and with oil, gold, and silver steadily rising, it’s a matter of time for uranium to join the parade.

You might be asking how to invest in uranium? There is a futures market for this metal but the volume isn’t that great. I invest in uranium through mining companies and diversified energy and metal funds. Some of the ones I like include FRG (Fronteer Development Group), PNPFF (Pinetree Capital), LMRXF (Laramide Resources), and MGAFF (Mega Uranium). Some of the larger miners are Cameco (CCJ), Shaw Group (SHAW), and Areva (CEI.PA). Cameco has had some problems with getting some of its mines online due to ongoing flooding issues. Keep in mind that my mentality in investing in this sector is to hold my investments with a long-term mindset. It’s very tough to day trade or have a short term mindset with this sector since trading volume is relatively low and the thesis is that emerging nations such as India and China will be building more nuclear reactors over the next 10 years to solve their own energy problems. Also, I would hope that the US will get on board and seriously consider nuclear energy as a sustainable and green energy source. Also, with regards to safety, the regulations and standards are far superior to those of the past. More people die annually from working in the coal mines than from uranium mines or nuclear reactors.

Overall, nuclear energy, and thus uranium, is something that I am very bullish on and will continue focusing on and investing in over the next few years. You may want to begin thinking about the “other yellow metal” yourself. There will be a lot of money to be made.

-Samir

If you have been investing in gold (bullion, mining company stocks, ETFs, etc.) based on my prior postings, well, you are sitting on some nice gains. For the record, a year ago you could have bought an ounce of this yellow metal for $778. It has traded as high as circa $1200 but retreated about $50+ yesterday. Doing the simple math, year-over-year gold has now risen about 50%. There is nothing wrong if you choose to take some of the profits off the table. Personally, I am not selling because, even though we are in for a needed correction (come on, everyone from CNBC to your mother is saying, “buy gold!”), I still feel the fundamentals are still very much intact for gold to reach $2000/oz.

Emotionally, all of us must feel to some extent that gold is running too far, too fast. That inclination is supported by considering that, over the same period, the dollar index (DXY:IND) has fallen by 14%. When it comes to first-world currencies, that’s a major move!

Even so, that data point is suspect, because all it really tells us is that the dollar has fallen less against other fiat monies than it has against gold. If you view gold as the only honest currency (a currency backed by gold would also be viewed as honest…really it’s the only way gold can be a currency since we can’t buy bread with a gold coin), then the dollar has fallen about 35%. (Think of it this way… each dollar could purchase 1/778 or 0.001285 ounces of gold last year and now can only purchase 1/1192 or 0.000839 ounces, which reflects a decline in the value of the dollar relative to gold of 34.7%.) This is a significant move that screams big for the need to double check one’s premises about what’s next for gold.

When I step back from the emotional reaction to gold’s stunning rise and look strictly at what’s actually going on in the world, I have to think that gold will go to at least $2,000 in this cycle, as I mentioned earlier. And there are very credible scenarios in which it could go to a multiple of that number.

Why so bullish for the yellow metal? There are a number of reasons, but one in particular I’ll focus on today: Interest rates. At the peak of the last great U.S. inflation and corresponding gold bull run in the late 1970s, the government had a simple yet very effective tool to deal with the then prevailing problem of runaway inflation: aggressively raise interest rates, thereby contracting the money supply. Once inflation was tamed, the Fed was then able to steadily reverse course by lowering interest rates, effectively rebooting the economy and setting the stage for a protracted bull market.

In the current scenario, with everyone and every government up to their eyeballs in debt and interest rates already near 50-year lows, the problems the economy faces are distinctly different. And far more intractable.

Simply, there is no conceivable way the government can raise rates without destroying what’s left of the economy. Besides, in the absence of price inflation, why would it want to? Quite the contrary, using the lack of price inflation as its cue, it is going to great lengths to keep rates low in order to encourage yet more spending and more debt.

I suppose the hope is that, over time, the Fed will be able to manage the inevitable rate increases so they occur very slowly. That mindset cements in the cheap-money policies for as far as the eye can see, or at least until – again, it hopes – debt levels fall to the point where an increase in interest rates won’t be so devastating.

But there’s the rub because at the same time the U.S. government is pursuing some of the most aggressive easy-money policies in its history, it is simultaneously engaged in historic levels of deficit spending as in year-over-year deficits more than 3X higher than any seen since WWII.

Thus, when interest rates ultimately start rising, they’ll be rising on an even larger pile of debt. Which, of course, the government will be even more anxious to avoid because at that point they’ll only have one option: default on the debt. Either suddenly or over time, with an even more aggressive dollar debasement.

All of which is to say that we are now in a classic negative feedback loop in which one outcome is most likely – a lot more currency depreciation. But depreciation against what? Well, pretty much anything tangible. But as far as money is concerned, it’s gold that comes out the winner.

Here are some articles for your reading pleasure:

• Click here to see how the mighty are falling and that fall is happening quickly!
• Here are 10 brands that may disappear in as early as 2010.
• I can say, due to recent events, my view of Tiger Woods has diminished. Here is an interesting take on Mr. Woods.
• China’s appetite for gold is increasing and you can read out it here. Keep in mind that US currently holds over 70% of its reserves in gold, Italy has over 60%, India has between 4-7%, and China has less than 2%. With growing uncertainty around the US, more and more easy money flooding the global marketplace, growing economies (China and India, in particular) will seek ways to diversify their reserves by incorporating real assets (i.e. gold).

-Samir

There is uneasiness in the air, and that’s to be expected. Everyday something weird happens, it can be little things or it can be mysterious things like Dubai. Investors have been made to sweat, and yet through it all, another strong month goes into the books for the stock market. For all the periodic air pockets and pauses, stocks enjoyed their best month since June. However, toward the end of the month the market was clearly range-bound. After making a series of higher lows, the market hasn’t been able to generate the kind of momentum needed to breakout. The drag on the market has been financials, which led the parade until October when all of a sudden a deep freeze hit the sector. Yesterday, banks were up significantly after Abu Dhabi said that it would help Dubai World reorganize $26 billion in debt. The banks don’t have to be in front of the parade for the broad market to rally but it certainly can’t be an anchor.

An article in the Wall Street Journal today says to look for a spike in unemployment in the construction space as stimulus money for that niche of the economy is running out. According to the Association of General Contractors of America, the industry only received $27 billion of the $787 billion stimulus plan. Unemployment among construction workers is 19.1%, up from 10.7% a year ago, as 1.5 million have lost their job since the recession began. Remember, this article says that the economics in this sector should get worse. I agree with it.

It’s amazing how all of the major network stations can’t seem to get off the Tiger Woods story. As I would expect, many advertisers are standing by Tiger Woods, with Nike among those issuing public statements. The best statement is from Accenture, which is running an ad on the WSJ website that reads: “the road to perfection isn’t always paved” and pictures Tiger walking uphill. No word on if his wife was chasing him in the background…with an 8-iron that is.

November auto sales are beginning to roll in and so far, the numbers have left a little to be desired. Ford’s numbers were flat year over year, but it did improve its market share for the thirteenth time out of the past fourteen months. However, the momentum from the past few months (post cash for clunkers) has seemed to have run out. The Street was looking for sales to increase 8.5%, and the result came up short. This just shows that central governments can’t spend their way to prosperity.

-Samir

Here is an interesting article I received this morning. Very appropriate given the amount of debt infesting the global economy.

- Samir

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Nothing ruins a good meal like the vision of a cockroach scurrying across the table.

In the financial markets, debt is a cockroach. Debt is an ugly, six-legged insect that feasts on rubbish and carries disease.

One cockroach is an inconvenience – a minor nuisance that can be handled with one well-timed thump of a shoe. But as anyone who has ever had the misfortune of watching a cockroach scamper across the kitchen floor will tell you, there’s never just one.

On Wall Street last year, we discovered the same debt-ridden cockroaches that devoured Lehman Brothers had also infested Bear Stearns, Countrywide, Merrill Lynch, AIG, and nearly every other financial firm in existence. The infestation threatened to topple the global financial markets. So the leaders of Wall Street’s most influential firms called in the exterminators – the U.S. Treasury and the Federal Reserve Board.

But rather than implementing measures to pare down debt, shore up balance sheets, and get rid of the pests for good, the exterminators simply threw a couple of pastrami sandwiches into the cupboard beneath the sink and then duct-taped the cabinet doors shut.

“That’ll keep ‘em busy for a while,” Chairman Bernanke figured. “We won’t see those disgusting little pests again.”

And it worked. For the past several months, nobody has worried about the cockroaches. Wall Street feasted on higher stock prices. Banks were free to ignore the true value of their nonperforming mortgage loans. And every time a cockroach stuck its antennae through a crack in the floorboard, the Federal Reserve Board shot a little Cheese-Whiz into the crevice and held back the swarm.

Until last Thursday, that is.

As Americans celebrated Thanksgiving by stuffing themselves with turkey, cranberries, and sweet potatoes, and watching the Detroit Lions lose another football game, Sheikh Mohammed of Dubai noticed a cockroach scurrying across the gold inlaid floor of his palace dining room. “This isn’t good,” he must have thought to himself. “I must call the best exterminator in Abu Dhabi to take care of this.”

The best exterminator in Abu Dhabi saw the success Chairman Bernanke had here in the United States, so he threw a couple of pastrami sandwiches into the cupboard and duct-taped the cabinet doors shut.

Stock markets around the world rallied on the news.

But what happens weeks or months from now when there’s not enough Cheese-Whiz to fill the crevices?

Too much debt led to the destruction of Drexel Burnham in 1990. It led to the collapse of Argentina’s economy in 2001. The debt cockroach devoured Iceland in 2008, and it almost wiped out most of Wall Street earlier this year.

You can’t solve a cockroach infestation by throwing food at the little buggers. It only makes them stronger. And you can’t solve a debt crisis by lending more money. It only delays the inevitable default.

Sadly, the cockroaches are back on Wall Street. And this time, they’re hungrier than ever.

From the team here have a great day with your family and friends and enjoy that Turkey or Tofurkey if you are vegetarian!

For football fans we are shouting for Dallas to beat up on Oakland!

Enjoy the holiday, and I am back at my desk making new postings for all of you.

-Samir

Everyone, my apologies for the long delay since my last post. I have been out of town for meetings in New York. In the future, I will notify you if I foresee a significant delay again.

Yesterday’s news saw the headline confidence number come in at its lowest level since 1983. The headline was 47.7 from 53.4 in the previous month, while consensus was 54.0. The expectations reading took a dive to 65.7 from 73.3 month over month. Historically, consumer confidence leads market turns and direction. In fact, going back years, the direction of consumer confidence has been an accurate harbinger for the stock market and GDP direction. This is a sensitive time for the market where things are increasingly becoming tougher. I don’t like the way the market is acting from a volatility standpoint when a company just slightly misses earnings or warns that the next few quarters will be challenging as we all know that.

Consumer confidence is limping along weighed down by economic uncertainty and a tidal wave of government spending, wealth redistribution, rules, regulations, and so many other factors that have nothing to do with jobs and prosperity. Americans believe by nature, but they are unsure what to believe these days. Basically, government intervention is making the investor public nervous.

With regards to some economic data, mortgage applications fell again last week as average 30-year rates held relatively flat at 5.04%. Refinancing activity was much higher back when rates were below 5.0%, which is understandable. Now, refinancing activity is at somewhat “normal levels.” Purchases, however, are sinking as well and hit their lowest level since May. It seems natural though that purchase applications would sink seeing as the tax credit for first-time homebuyers is essentially over now with no time for potential buyers to get deals done before the deadline. The latest update from Capitol Hill is that the Democrats have agreed on a tax credit proposal that would extend it through next spring. The updated program would be a 10% tax credit (up to a maximum of $7,250) but would also include buyers who are not first-time homeowners and have higher incomes. Presumably, such a plan would bring purchase activity higher again. Again, this would be fictitious sales because as soon as the tax credit runs out, sales will dip again.

Right now, if you are sitting on gains for the year, you may want to think about taking some of it off the table. Insider selling is up, volatility is up, and the market has been well overstretched to the upside for the past few weeks. We may see a slight bounceback tomorrow but I believe the market will continue is descent downward as people take gains to offset last year’s losses. Plus, the economy is still shaky and jobs are still being lost at a high rate. True recovery won’t happen until job growth occurs. Don’t confuse a stock market rally for an economic rally as a handful of large money managers have the capacity to move the markets at their whim.

-Samir

Here is an article, which I thought you would find interesting, from frugaldad.com. These concepts are very important given the current economic times and the fact that it may take some time for the global economy to regain solid footing.
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One could probably build a small library for the books written on the subject of financial independence. It’s a subject many of us like to fantasize about, but few of us will see materialize in our lifetimes. Why? Mostly because we allow competing priorities, egos and financial peer pressure dictate how we spend, and save, our money.

The good news is you don’t really need a book to learn about financial independence (though, if you do decide to read more on the subject, I highly recommend Your Money or Your Life). All you need to do is remember the seven secrets below.

Secrets to Financial Independence

1. Pay off debt. Yes, even the mortgage. I can hear the mathematicians screaming now – “PAY OFF YOUR MORTGAGE?” What about the tax deduction? What about all-time low interest rates. I don’t care about either one. To reach financial independence I’m all about reducing monthly expenses. A mortgage represents the highest monthly expense in most family budgets, and ours is no exception. Knock out credit card debt, car debt, student loans and the mortgage and you’ll owe a monthly payment to no one, which puts you on the fast-track to financial independence.

2. Quit buying crap. And while you’re at it, quit signing up for crap. The other day I sat down to try to tally our monthly expenses. Seems simple enough, doesn’t it? Problem is I kept forgetting little expenses we’ve signed up for. Oops, there’s the Netflix charge; then the gym membership fee. The other day the TiVo bill hit. I enjoy all three of these examples immensely, but altogether they represent about $50 a month. Talk about being nickel and dimed! Of course, there are other things I’m forgetting to list here. You can see how challenging it is to come up with a total monthly outgo figure these days!

3. Forget about trying to impress people. Do you have any idea how much money is wasted in a lifetime trying to impress other people? Just think of the things we buy, and the options we choose, for show rather than for practicality. Flashy cars, big houses and expensive jewelry matter little to those working towards financial independence, because we recognize you’ll be paying for that stuff long after we hang up the employee badge.

4. Make savings a top priority. If I had a financial do-over, I’d start saving half of my income from the very first day I started working. I can think of no faster way to accumulate wealth, build financial discipline, and expand your creatively frugal way of thinking to make things work on a meager income. Trouble is, very few of us ever thought to do this, so right out of the gate we needed more like 90% of our income just to pay for all the goodies we accumulated. To make it happen, talk to your payroll office and elect to have 50% of your paycheck deposited in an online savings account (I’ve reviewed a few of the best online banks in the past), separate from your primary checking account. Now, live on what’s left. Every year you pull this off you are essentially buying (saving) a year of freedom from earning an income.

5. Be aggressive early on. I’m a conservative person by nature. I don’t like to take big risks – with money, or life in general. But if I could talk to my 20 year-old self now I’d tell him to live a little. Invest a little money (10% of your portfolio or less) in that stock you just know in your gut will be a winner, because you know the quality of the people in management, or you believe in their product. Don’t be afraid to invest in that “aggressive” portfolio in your twenties, and early thirties. You’ve got time for ups and downs. You’ll win some, and you’ll lose some, but at least you won’t have any regrets.

6. Be conservative as you near financial independence. As passionate as I am about taking risks when you are still young, I am equally passionate about being conservative in the last few years leading up to reaching your “number.” That’s the time to start dumping the risky stuff, and start gearing down into low-risk investments. Some of your nest egg should be in cash, a little in bonds, or if you like simplicity, maybe something like a LifeStrategy Income Fund that takes the thinking (and emotions) out of investing your nest egg, or at least a portion of it. Be sure to check recent returns on such funds, as many billed as “conservative” lost their shirts in the recent downturn. At this point in your journey to financial independence you should be fairly immune to market swings, and more concerned with protecting the principal you’ve worked to accumulate.

7. Determine your own “number.” Speaking of your “number,” don’t let some financial egghead across a desk look down his nose and tell you that you need exactly $1.4 million to “maintain your style of living in retirement.” Garbage. Most of these guys immediately follow this with a sales pitch for an annuity, or a scare tactic about clients living to 90 years-old and running out of money. If you are dedicated to living frugal, paid off all your debts (see step 1), and built a comfortable nest egg based on your individual needs, you should be just fine.

Financial independence doesn’t have to be a mythical place we only visit in our day dreams. There are enough people out there living it, writing about it, and experiencing the joys of being free from the requirement to earn an income to survive. Learn from them. Model your behaviors after them. But be careful who you follow.

As author Thomas Stanley proved in his book, The Millionaire Next Door, most self-made millionaires look a lot different than the Paris Hiltons of the world. They probably drive a two year-old car (or older), shop where you shop, and live in a modest home. They don’t wear flashy jewelry, have a string of letters after their name earned from a decade of schooling in the Ivy League, and their idea of a fun family vacation probably looks like a week-long trip Disney World, not Paris or the Mediterranean.

The real secret to financial independence is to start living your life with that goal at the forefront of all your financial decisions. The longer you put it off, the worse your chances of ever succeeding will be. But for those who start early, and stay passionate about their dream, the payoff at the end is one of the more freeing experiences we can ever enjoy.
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-Samir

The market is up on light volume, in part to the Yom Kipper holiday, but also as there is a pool of money committed to buying much lower. If the employment report comes in better than expected on Friday, then that pool of money will change its mind real fast. There is strength across the board, although energy and retail stand out…again anecdotal signs of increased consumer demand right around the corner. This is just simply an impressive session. Part of it may be attributed to window dressing which means that fund managers sell off their negative positions and enhance their winners to make their portfolio look better (it’s all bs if you ask me) as the quarter is coming to a close.

One thing is for sure, I believe it’s going to take much more than silver linings this earnings season to drive the market higher. I honestly didn’t think that stocks could surge the way they did during the last round of earnings releases but there was sufficient enthusiasm for results that lacked quality. Plus, earnings expectations were so low, that many companies could do no wrong and only impress. This is why I think the concept of “earnings expectations” is hogwash. If you beat below par expectations but your earnings are 50% lower than same period last year and it’s been degrading each quarter, is that a good sign? So, the big question coming into the session is will this time be different? If the reactions to Research in Motion (RIMM) and KB Home (KBH) results were any indication I think the answer is yes. The bar will probably be much higher than it has been this thus far this year. Earnings season doesn’t officially begin until October 7, when Alcoa (AA) posts its results. There will be some earnings releases this week, however, and they should provide further clues. In the meantime, the market’s reaction to Alcoa’s results this year has been fantastic harbingers of things to come.

• April 7: Alcoa releases earnings results and the Dow Jones Industrial Average trades at 7,789.0; it hasn’t been that low since
• July 8: Alcoa releases earnings results and the Dow Jones Industrial Average trades at 8,178.0; it hasn’t been that low since

I have to say that the Xerox (XRX) bid for Affiliated Computer (ACS) surprised me a little. I thought that Affiliated Computer was attractive but was surprised that Xerox would step up to the plate. It’s a bold move for the company, but one that was overdue. Look for more deals in the tech space with the focus on:

• IT Outsourcing
• Business Intelligence
• Cloud Computing

Abbott Labs (ABT) buying the pharmaceutical division of Solvay is a big deal as it points to more trans-Atlantic deals and how large drug companies have to pull the trigger to make up for thin pipelines and lots of blockbusters coming off patent protection.

Have a good evening and hope your weekend went well.

-Samir