Happy Friday everyone! Lots of great questions this week so I’ll get right to it…
First off, Emma from San Francisco asks,
Your website looks very good. I especially appreciate the part that you shared what you did to learn investment. Your success with investment is impressive and inspiring. I’m interested in knowing the reasons of your actions. For example, why did you choose to take money out of the market earlier this year?
Hi Emma, thank you for your kind words! I chose to take money out of the stock market this May for many reasons. One big reason was because the Fed had announced the end of QE2, which I believed was artificially propping up the market. Additionally, valuations weren’t very attractive anymore, like they were in 2009, and I was also following what was happening “behind the scenes” with the liquidity crisis in Europe (and the solvency crisis in Greece).
Portugal was “bailed out” in early May, and I honestly believed that Greece would have to default on its bonds, at least in part, as they had already received a “bailout” and yet their bond yields were 20+% at the time. And several indicators from various newsletters that I follow (you can find them on the right hand side of my website under “Sites Worth Visiting”) were also quite bearish. I hope that answers your question…there were many, many reasons!
Next, Jarrod from St. Louis asks,
Regarding Rare Earths, so bottom line they are a very risky investment and a lot of the reason for that is that China controls almost all of the resources? So since you were an accredited investor were you able to attend this for free or was there a fee? Did they attempt to hard sell you on any products?
Yes, yes, and no.
Yes, Jarrod, you nailed it…yes, rare earths are a very risky investment because China controls almost all of the supply so they have a huge impact on the price of rare earths. They can restrict the supply at anytime and send prices soaring, or they can open the floodgates and flood the market with rare earths, thus hammering prices, and they can do all of this based on a whim…whenever and for whatever reason they choose. So, definitely very risky.
Yes, I was able to attend for free because I’m an accredited investor; otherwise the fee was $795.
No, it was definitely not a hard sell; the mining companies looking for investors were just pitching us on their company and the offering (and by “pitch” I mean a PowerPoint presentation on the company and opportunity that for example a start-up tech company would present to an angel investor or a venture capital firm). Each company presented their story in thirty minutes (their management team, financing, production plans, cost projections, drill results if they had any, etc.). But there was no pressure whatsoever—they don’t have the upper hand in this case (in most instances they are trying to convince people/us to give them $100,000 or more—not something you can put a hard sell on).
To sum up, if you have the opportunity to go to one of these events, I would definitely take it—you will learn a ton and meet lots of other savvy investors!
Next, Jeff from Canada asks,
I am interested to hear what comes out of your day 3 experience with rare earths. I have been following this niche sector for the past few months and believe that there are some great opportunities here. I would be interested to know if anyone at the conference that is talking about rare earths speaks of the strategic importance of them, specifically the heavy rare earths, and what their feelings are on the government considering setting up a stock pile of rare earths. I know that this niche sector can be hard to invest in and there is a great article on stock gumshoe that focuses on just how difficult it is to bring a successful rare earth mine to production.
Hi Jeff, and thank you for the excellent link to the Stock Gumshoe article—I just read it and it’s a great article for people interested in rare earths. I think I answered most of this yesterday but I’m happy to provide more specifics if you’d like. They do have strategic importance, particularly to the Department of Defense, and if the government decided to set up a stock pile of rare earths within the U.S. or fast-track mining in the U.S. then that would be extremely bullish for the sector.
If you are serious about investing in rare earths, the two companies I was most impressed with at the conference were Ucore and Matamec (although I am obviously not specifically recommending them nor do I own shares of either one!). But if you’d like more information on either of them shoot me an email and I can give you their summaries (warrants, shares outstanding, etc.).
Next, Jodie from Australia asks,
Thanks for putting such a great website/blog together and putting yourself out there to dominate this arena – well done!
I’m a typical over-achiever and keen to learn and succeed in stock trading…. for the long-term. After being in business for 8 years, I completely get there is no “short-term get rich quick scheme” for anything! Anyway, I was a bit of a nerd in School, but my economic knowledge is how should I put it….below average. I know you have a passionate goal of helping 1000 people and I’m keen to be a great student….so have a question for you –
Where does a beginner start….?
My initial thinking is to devour ALL of your blog posts in the next week and get onto your recommended reading.
I am a little overwhelmed with the plather of investing options (gold/options/day trading/and a million and other things I don’t know yet)…….and some of the initial reading I have done on your site has gone WAY over my head. I’m thinking that I need to find the niche that suits me, then master that area of knowledge….
Hi Jodie! Thank you so much for the very kind words and I can tell you that you definitely have the right attitude and enthusiasm to succeed! Because you are already extremely busy with running your own business (and parenting your little one– I remember how much time they require then!) I think the most important thing you can do to get started is to really sit down, take a deep breath, and focus on your vision and what you want to accomplish. I wrote about that here and shared my vision with everyone here, and I think that it is crucial to start with a clear vision to guide your decisions along the way.
For example, you mention wanting to learn stock trading for the long-term, but also getting overwhelmed at all of the different investing methods (gold/options/day trading/etc.). I completely understand your feeling of being overwhelmed (there are a million ways to invest your money, that’s for sure!). But if you have a clear vision to help guide you, it will be easier to focus on the methods that will best get you to your vision the quickest way possible and that will fit in with your lifestyle. For example, day trading is extremely time-intensive, so if you want to continue to run your business and write your blog, I would steer you away from that option immediately.
You are absolutely correct that you should find the niche that suits you and then master that area of knowledge, because it is nearly impossible to become a “master” of all of the myriad options, especially all at the same time. I would pick the one you are most interested in that best fits with your vision and goals, and start there. (And you have just given me the kick in the pants that I have needed to complete the special report that I started entitled, Unleash Your Inner Warrior: 9 Steps to Financial Independence! I will try to get that out to everyone ASAP, and also work it into the blog.)
So if you can hold out for that, I think it will help you a lot, and in the meantime I definitely recommend creating your vision statement and starting on Rich Dad, Poor Dad (it’s an easy read and will not feel “over your head” at all) and please continue to ask questions! There are no “dumb” questions and if something feels over your head, definitely ask!
Which brings me to my final question via twitter, from LoveInABento from California, who asks,
“this may be a dumb question, but what is QE?”
Not dumb at all! QE is Quantitative Easing, which means lots of money printing (or the creation of more money out of thin air).
(Twitter keeps me short and sweet but if you’d like more explanation, just let me know.)
That’s all for today…have a great weekend everyone, and thanks so much for reading and being a part of our Kung Fu Finance community!
To your financial success,
—Kung Fu Girl