I’m happy with the purchase. As always, wish I had bought more.

On the subject of investing, I agree, those companies are good choices for investing, they have a wide range of products, and they are spread over several sectors. They are pretty big contenders in the market place, so they will probably last any coming recession and maybe depression. In the future I might take a look at them, though right now I am just playing with stocks. I am currently invested in RBC (royal bank of Canada, I live in Canada :P) on strong advice of my dad’s investment broker. I am just trying to gain experience with the markets so I am not looking for any stellar results. Once I get out of high school, I will probably start some serious investing. Does anyone know if there is there a Canadian equivalent of an ETF?

I’m slowly starting to get back in the market myself, as the consumer confidence index suggests a bottom is coming this year.

Only time will show, of course, but here are some reasons:

-> As a nation and individually we are farther in debt than ever, and debt cannot drive a country to prosperity (it is savings that fuels long term economic growth, Keynsian theory to the contrary)

-> If you used the same methods to calculate inflation and GDP growth that the US gov’t used until a couple of decades ago, CPI inflation is over 10% and we have been in a recession since the bursting of the tech bubble (see shadowstats.com). Why not use the old methods to make comparisons to past economic periods? If you did, we’d be in 70’s style stagflation already.

-> The Federal Reserve has been allowing the money supply to go up at an ever increasing rate (approaching a 20% yearly rate these days, even though they stopped publishing M3 a couple of years ago), and you can’t inflate your way to long term prosperity, you can only inflate your way to ever higher inflation.

-> The last 15 years has seen the greatest credit expansion in US history, period (way greater in percentage terms than the 20s leading up to the Great Depression). If you have studied Austrian business cycle theory thoroughly enough it is pretty easy to see that the low interest rates that fueled the credit bubble have created massive malinvestments in the economy that are only recently coming to light and that must eventually be completely liquidated (ie: The damage has already been done to the real economy, the recession and likely depression to come will just reflect this as the real losses become paper losses) (Business cycle theory is long reading but if you are really interested in finding out if I am just talking out of ignorance or have carefully studied and thought out these issues you can do a search for “desoto.pdf” on google and download Jesus Huerta de Soto’s work Money, Bank Credit, and Economic Cycles for the best treatment of austrian business cycle theory out there.)

-> There are about a dozen other things I could point out here (including the fact that mortgage resets have only started and last until the end of 2011 with ALT A mortgages making up the majority of resets to occur, that housing prices are still way above their historic trend and have to come down to levels that people can afford and that this will cause massive paper losses and likely bank failures, that foreigners own trillions of our debt that they are beginning to cash in for real goods or other currencies, that the losses that banks have realized on all kinds of housing related investments are not according to market prices but marked according to their own estimates and hence extremely underestimated, etc, etc), but it would take a while.

The other thing is it is very easy for you to dismiss what I have to say by calling on mainstream economic views but to actually do away with the mainstream mistakes it would take hundreds of pages of careful reasoning and logic.

If you have an open mind look a bit deeper down the rabbit hole.

In addition to knowing how to price the stock, mentioned above, I think it’s essential to ask how much does the successful product that you like represent the company’s revenue.

Finding companies that we’re familiar with is certainly a good way to locate winners, but it’s just a starting point for more in-depth research.

I use the CAPS feature at Motley Fool as a good place to start. I also subscribe to the Jason Kelly newsletter. He’s written several good books on personal finance/investing.

The main thing, though, is do your own due diligence. I lost $5000 last fall when I followed the BUY strategy of Monish Pabrai on http://www.GuruFocus.com

I figured a Warren Buffet disciple like him, with all of his technology resources, would have done the best scrutiny possible. I bought a thousand shares at 50% what he paid for several million. He lost about $10 million, I lost the whole $5K.

Stupid. I cheated myself by trying to ride a guru’s coattails. I have no idea where his research failed him. The guy has a great track record as a value investor.

Good luck on your picks.

I saw that little comment about your chair being tax deductible. Good for you. I bet it went by most everybody else. My site could help them.

All my best,
Cade

Don’t overlook PM; philip morris. No one who smokes wants to stop until they WANT to stop (sigh) – great dividend. MO is altria, the old philip morris that is the US market plus other stuff. And KFT, kraft foods.Food will always go up; let’s get the dividend.

I also keep a running list of stocks I look at in addition to the ones I own. I have about 50 written down with price points I would consider buying at. Every 2 weeks or so I look through them and see where their price is. If one reaches a price point then I’ll look at it in more depth to see if I think its a good buy – sometimes a stock dropping in price is a good reason to buy, sometimes its a good reason to stay away – you have to figure out which. A good look at their financials and listening to a few quarterly reports will give you an idea if its a good buy or not. I think of it like having a running grocery store list – when something goes on special I buy.

Flea
http://beasurvivor.blogspot.com/

I am almost at the same stage you are in, waiting by the sidelines, before buying the first stock.

1. You haven’t mentioned what horizon you have in mind while mentioning “long term”. Can you please ? Also what does one do once the stipulated objective is achieved ? To shift to others or to keep after a review ?

2. I tend to agree with Comment 15 by Carlos, that it’s a nice cliche to buy only what you know. It can be the wisest-looking principle, but, unfortunately, imho, the wisdom difficult to prove. Or the contrary, is as provable as this wisdom.

3. I also have a similar disillusionment about “rebalance your portfolio from time to time to match your risk perception” . In other words, move from Stock A to B, though A is doing well, bcos you started out with a risk perception about A. I might as well, rebalance the risk perception (make it higher) and keep the good ones, right ? Is there any obvious goofup here ?

Thanks. Love your blog.
Whirlmind.

“Personally it seems like you picked mostly cyclical companies (the first four, to be precise) in what is likely to be the greatest recession of our lifetimes. So even if the price seems right, it may end up being a very, very wrong time to buy into companies that will be crushed by a recession”

What on earth makes you think that this is “the greatest recession of our lifetimes”? We’re *not* in a recession as I type this. Sounds like a lot of hyperbole to me.

“I just don’t see anyone waiting in the wings, which is worrisome because of the “cult of personality” leadership at Apple.”

I think this is more to do with our, and the media’s, obsession with personality. Sure Jobs is an incredible guy and a big part of the company but if you read this article from HBR (http://discussionleader.hbsp.com/hbreditors/2008/06/steve_jobss_health_worries_me.html) you’ll see that getting great talent is systemic at Apple. The guy that is being tipped as successor is a relatively unknown guy who has a similar reputation for getting things done (fast and properly).

Warren Buffett’s Berkshire Hathaway likes Burlington Northern Santa Fe (BNI) and owns a big stake.