TGIF! This is our first shoot the shit topic in a month or two. If you were thinking we would discontinue shoot the shits you’re wrong. This is a weekly event (most of the time unless we’re slammed). We like shoot the shits because it gives readers a chance to make any unsupported comments, use profanity, insult anyone they wish or change the subject altogether. A therapist would charge several hundred dollars per hour, more if they are using anonymous therapy and even more if they hit you with subliminal transference. It’s insane, but keep in mind that psychiatrist and psychologists are living proof that free market economies produce sufficient surpluses to support their ass.
Our shoot the shit topic for today centers around the Dow’s current valuation at over 20,000. I’m reminded of a former colleague’s favorite saying, which I think is appropriate to all of our personal success.
“ Dress British and think Yiddish”
“Buy low and sell high”
If you remember just those two things you will be astronomically successful! Now is the time to seriously consider the later. Here’s our reasoning…
The stock market is being driven by emotion and enthusiasm, for good reason. We have a great President, someone who understands business and what it takes to build a successful enterprise. He also likes to work and boy has he hit the ground running. More importantly, he firmly believes that government’s reason for existence is to benefit its citizens. He is committed to lowering taxes across the board, and even more importantly eliminating counterproductive regulations burdensome to business and business startups. But, who is it that’s winning in this market? It’s the guy selling into the rising market. So, keep that in mind and take your profits as appropriate.
An overpriced market, like what we have now, while good for investors also has a deleterious effect on job creation; here’s why.
Let say that all of your life you’ve wanted to set up shop and sew tactical nylon for sale. You clean out your savings account and you take a 2nd mortgage on your home, and with $200,000, you buy 2 or 3 sewing machines, tables, computers for patterns etc. and start sewing. In many instances you can expect to take a loss on year one, but let’s say that in year two you start to make a little money. Here is how that breaks down on your profit and loss statement.
Gross Sales – Cost of Good Sold = Gross Profit ( depending on the business you’re in, you can expect that to be from 40% – 50%)
Gross Profit – Selling and Administrative Expense = Income before Taxes (depending on the business this could be 2% – 20%)
Now, for a split second, let’s jump back to the market which is up 9.5% since the election in Nov 2016 , this translates to an annual return of 38%
Where should your $200,000 be allocate?
Readers, have a great and safe weekend. Get out to the range and spend some quality time with your friends and families.