Uh, I thought it was all the idiots who made the overly aggressive and uninformed decisions who caused all the problems. Actively buying stocks because other people said they should, buying houses they couldn’t afford b/c the banks said they could, wanting a big bang for the buck NOW rather than having the patience to wait for small profits to accrue over time. I think passive income generation, and the patience it requires, is actually the solution to many of our societal problems right now.

I’m one of those people who do this 80 hrs a week (I’m a trader) however, I must say that you did an excellent job of explaining it in simple terms.

Good Job!

http://stockcharts.com/c-sc/sc?s=GOOG&p=D&yr=1&mn=3&dy=0&i=t15138237280&r=837

With the benefits of hindsight you could always tell where to buy and where to sell.
Seems to me that if you sold short below $410 you’d have made a killing on GOOG. But then the question is when do you cover your short?

Below is how I would act situation on graph.

Let’s assume I bought stocks after passing ressistance D (or could be A or B as well). Then I would set simple stop loss (sell order when stocks reach certain price level). I would keep moving this stop loss few percent behind price, setting for example on last minimum. Then, as we can see on the graph, price can’t break C, trying almost three times to do so. This is a good sign to close your position.

Trent, you quite often write about passive investments but rarely if ever on active investments. Active investments can bring in 50 to 100 times more return on your money. I think that this obsession with passive income is one of the reasons this society has gotten itself into trouble. Everyone is looking for a free ride or at least an easy ride.

David T.

Please explain the current financial crisis to all the economic neophytes out there!

You’d be great for the task.

Long on GOOG

I believe there’s a difference between being able to do technical analysis profitably and having to spend eighty hours a week at it. Yeah, a lot of the really big-time fund managers do this, and they make some really incredible (in the literal sense of the word), consistent returns – and they are obsessive – but there are a growing number of “second-string” traders out there pulling consistent but more down-to-earth results doing the same thing on a part-time basis.

And I think most technicians would agree it is as much art as science. I was reading one interview with a fund manager recently who said his best analyst is only right about 65% of the time. So it can give you a leg up, but it’s definitely not as cut-and-dried as some would have you believe. So I feel it works, but it’s not a crystal ball. More like a meteorologist trying to predict the weather 20 days ahead.

If you are investing for the long term, I really like the combination of using fundamentals mixed with some basic technical indicators like those promoted by Phil Town in his book, “Rule #1.” The fundamentals tell you what stocks to buy (the ones that are both underpriced by a wide margin and growing solidly with good management and a strong competitive advantage), and when to buy them – and when to sell them.

With such a diverse readership, I apprecaite your thought process and ability to articulate the understanding of complex theories in “bite sized chunks”.