The little man taking it down....No doubt..

My phrase to my wife has been, "they are shaking the trees really hard, seeing who will be strong and hang on".. That was during the mid year craziness. Those 400 to 500 point runs in 2011 will happen in 2012. stay the course..

The Trees will get shaken hard...now I know that there is a little man that we hate, doing the shaking...

I was telling my wife, I try to be like the Character Mel Gibson played in "We were soldiers "..

During the chaos, he just stands there calm as can be , as bullets wiss by, and he see's the problems, or what needs to be done, or not done, and Just calmly does it...

I love it...I try to be that calm guy in a crisis of any kind.. Even the market roller coaster.. At the end of a cycle, things are good... I fugetaboutit moment to moment..

So my personal trainer comes on Monday AM's --- and he tried to sweat out the Double Double and the Chocolate shake I had for Friday nights dinner..... 10 seconds after he left I was in the hot tub contemplating life... and came up with this analogy:



4 guys are playing a round of golf.... I'm on the tee -- and the usual banter (noise) starts.... We bet $1 per hole -- and $100 for the game...

A buddy says - "he can hit the hell out of the ball when he's on -- or it's 15 yards into the woods"

Another buddy... "that trap is out 250 yards - ya gotta drive that or lay up"

They're now in my head.... Do I try to pound the driver and punch it 275 on the carry -- or do I hit the 3 wood and lay up short of the traps....

Here's MY THOUGHT PROCESS..... I know to win the hole I "should" punch it past the trap... but I also know if my game isn't spot on - I tend to slice when I swing too hard... (gambling or risk taking!). I also know if I swing nicely and just lay up a 3 wood I'll be right down the middle and have an easy 8 iron to the green.... A nice 8 iron on the green - a two put and I par and win the hole. My Steady Eddy game!

This goes on for 18 holes (18 stocks).... I can try to kill it -- OR I can swing easy - play the game - ignore the ribbing (noise).... and MAYBE I can win 10 of the 18 holes AND the GAME ---- netting me $110

I could have tried to pound the ball and win all 18 holes and the game.... but then I might have sliced into the water and the woods -- and had a couple snowmen and a couple "double holes in one" (1 plus 1 ='s an 11 ---- LOL) and only won 7 holes and lost the game.

You know......I do not Golf at all, and your golfing lingo had me confused at first, as I read your post for the FIRST time....:willy:

When I got to the "using a 3 wood, and laying up before the traps", my gut said, "that is the answer"... Without even a breath, or second thought...:thumbsup:

I know I am somewhat on the right track..:cheers:

G-Dub - For a guy that doesn't play much you have a pretty good grasp on the concept. You sand-bagging me? :unibrow:

:lol: :unibrow:

Sadly -- it was all metaphors! What I "know" - does not necessarily translate to the actual play. :willy:

A thought occurred to me this morning as I was shopping for some corporate bonds - that maybe people really don't understand the difference between Muni bonds - corporate bonds - and stocks and how it affects your taxes.

So here we go:

Stocks: You're investing in the company - so think of it as you're becoming an owner. Some stocks share their profits with the owners in the form of a dividend. QUALIFIED DIVIDENDS (please note that term - it's important) are currently taxed at a maximum rate of 15%

Corporate Bonds: These are basically a corporation BORROWING money at a rate they state - and a maturity date they state. Example - Goldman Sachs (GS) issued bonds recently paying 5.75% with a maturity date of 1/2022 -- so it's a 10 year bond @ 5.75%. When you buy these -- you are a LENDER - and as such you collect INTEREST - Interest is taxed at your ordinary tax rate. These should be bought inside your IRA/ROTH/401 unless you're living off the income and are willing to pay ordinary income tax on the earnings (as I do).


MUNI BONDS: Short for MUNICIPAL BONDS. These are issued by County - State - City - School Districts etc. They are - IN MOST CASES - tax free. As such the interest rate is lower. You are a lender to that entity - you collect interest payments (generally every 6 months). The bonds have a face value and a maturity date. You'll get the interest until the maturity date at which time you'll get your capital back. They're backed by the "full faith and credit of the issuing entity"... in other words - some form of government - this is why they're considered "safe".

Simply stated, and clear to understand. :thumbsup:

Okay -- so STEP TWO of this is to explain how these "work".


Stocks go up and down depending on how many people want to BUY vs how many people want to SELL...

Corporate BONDS and MUNI BONDS pay a fixed rate - so to the BORROWER - they're paying the issued rate - let's just use 10%.

If you bought a 1,000 bond paying 10% and you bought at PAR... then you paid 1,000 and you're going to get 10% interest. But lets say interest rates are RISING..... and the "market" is at 12% -- your bond is going to have to be DISCOUNTED until the yield is equal to 12%. Remember - the borrower is only paying 10%.... so if you want to sell your 10% bond -- the new buyer needs to pay you less in order to "yield" the currently higher market rate of 12%.

If you held your bond to maturity - you're going to just get your 10% and then get all your money back. But if you chose to sell it in a rising interest rate market - you'd lose money. The REVERSE is true in a falling interest rate environment. If market rates fell to 5% - you're bond might be worth TWICE as much as you paid!

Remember that bonds have MATURITY DATES -- it's the combination of what that date is - sooner or later - and the rate it pays - that determines it's "price" (value) on any given day.

Hi Greg
Thanks again for all the info. I have a rookie question for you that may have covered already. When you talk about the interest on a corporate bond of 10% it is paid annually correct? And then you get your initial investment back on the maturity date? And is this the same for Muni bonds? On a side note I have a mutual bond story when I was 21 I had 18k invested in a tax free account. I am now 38 that mutual bond is now worth 21k and some change. That is why I have stayed away from the stock market; I figured if the “pro” heading up the mutual fund can’t get it right what hope do I have.
Ray

I wish we had a "crying" icon --- I'd start with that for you....

Corporates and Munis generally pay interest every 6 months... and YES -- on the maturity date (or before) you get your capital back. When I say "BEFORE" - most bonds are "callable"... so at some date the issuer can "call" your bond and cash you out. Sort of like if you re-fi your house - you pay off the high interest note and re-fi it with a lower interest. I've had bonds called away before. A couple times -- they've paid more than the face value... but then you give up your high interest rate and now have to buy something else that's paying the current lower rate... but that's the way these things work.

Mutual Funds equal a jackass throwing darts at a dart board.... it takes hardly any work to beat their performance - because you can AIM -- and they just buy "stuff" that fits their predetermined scope... There are good ones -- but most are just so friggn' ho hum that they do more harm than good.

By the way - you state your MF was in a "tax free account".... by that I think you mean that it is in a TAX DEFERRED account such as an IRA/401? These accounts have no taxes due UNTIL you start to withdraw...