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Real Estate vs. Stock Trading
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_DC_ Offline
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Real Estate vs. Stock Trading
I know there are better resources to learn about both, and I have done significant research. This forum always seems to have solid opinions however and I'd love to hear experiences with either or even better comparisons.

For real estate I've been reading about section 8 slumlording. For the market, swing trading, which is essentially trading between daytrading and buy-and-hold seems ideal for my situation.

Slumlording has the appeal of a bigger chance of appreciation on investment over time, particularly if the actual property appreciates. The obvious downfall is shady tenants, though I've read several tricks for screening for quality tenants, e.g. working families. Swing trading is both more and less involved. I may be spending more time, making it less passive, however going on a computer and making a few clicks is much less taxing then evictions, worrying about rent, and making significant financial repairs.

I have a big stomach for risk and a well paying flexible hour job, which are probably factors. I've heard both can return 20% under a deft hand. I also don't have much startup.

Where would you actively invest 20k? Hunt for a solid 100k foreclosure, put 20k down for a 10 or 15 yr mortgage, attempt to find quality tenants, and rent it section 8? Or put it in several select stocks, perhaps focusing on a particular sector and long or short trends?

My gut feeling is Section 8 is smarter, but only if I can manage from afar. Is the 10% charge of rent for a property manager an accurate figure? There seem to be particular regions with a great sub-10 rent ratio, which seem like no brainers for section 8.

I understand diversification later on would be best, but I need a place to start.
10-24-2012 01:02 AM
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Tigre Offline
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RE: Real Estate vs. Stock Trading
I'd lean towards property. Mainly because you can safely take advantage of leverage right from the beginning. With stocks and other markets, you should wait to get some experience before you begin to use leverage.

Before committing to buying the house, make sure you have plenty of cover to pay your bills (mortgage, property taxes etc). You should be able to keep paying even if the property is vacant or has a tenant that's not paying rent.

This could be as simple as knowing that family members are ready to step in and cover you for a while if you really need it, until you can get ahead of it. Or it could mean opening a credit card you can use as a last resort.

If you have enough left over, you could even do stocks at the same time. Start with somewhere between 2k and 5k and build it up from there.
(This post was last modified: 10-24-2012 09:34 AM by Tigre.)
10-24-2012 09:33 AM
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WestIndianArchie Offline
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RE: Real Estate vs. Stock Trading
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10-24-2012 10:05 AM
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BIGINJAPAN Offline
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RE: Real Estate vs. Stock Trading
There are a few ways to buy houses without putting any money down. Also you can pull out extra $$$$ on top of having your mortgage fully funded by the bank. So what I mean is you buy a house for $200,000 you could get the bank to cut a cheque for 225k maybe 250k. So you would have an extra 25k-50k to invest. Now this only makes sense to take on a bigger mortgage if the Cap rate is high enough. But with the extra money you can make other investments such as the stock market or just sit on cash and wait for more real estate deals to come along. Or keep it in the bank and use as a backup for vacant months.

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10-24-2012 11:06 AM
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Tigre
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RE: Real Estate vs. Stock Trading
This is an interesting thread, I've always wanted to learn more about real estate investing, specifically rental properties. Does anyone have any links to share or books to recommend?

Why do the heathen rage and the people imagine a vain thing? Psalm 2:1 KJV
10-24-2012 01:22 PM
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WestIndianArchie Offline
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RE: Real Estate vs. Stock Trading
(10-24-2012 01:22 PM)wiscanada Wrote:  This is an interesting thread, I've always wanted to learn more about real estate investing, specifically rental properties. Does anyone have any links to share or books to recommend?

Most of the books are outdated. The kind of book you need is one that explains how to evaluate a deal. If you can't do the #'s, and don't know how to do the research to get the #'s, don't waste any time in RE.

The best way to do it is google "real estate investment club" + whatever city you're interested in. (REIC)

You'll find national boards, but you'll also find local boards, that have local monthly meetings, where you hear flippers and investors talk about their deals. *bring business cards*

REIC's split into 2 big camps
- buy and flip or buy/rehab ad flip ( imo you're better off knowing construction yourself, rather than relying on a crew)

- buy hold and rent out

The rest of people
- bird dog - find properties for investors, get a flat fee. (this is sales job)

- wholesalers - convince the seller to take a lower price, and resell to a buy and flip guy. (this is a sales job)

- hard money lenders - take your IRA and lend it out to people who do flips, and make better interest

&

- gurus - people who sell information on how to do this. It's just like internet marketing and pick up/game. People getting rich on selling you the dream.

After you get your feet wet doing this, you can go pro and make even bigger money (aka real money, aka buying a benz outright type money)
- REITs
- redevelopment/major rehabs
- commercial flips/redevelopment
- raw land development
- tax sales (fed,state, local)
- buying liens
- real estate debt buying

WIA
10-24-2012 01:38 PM
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Kdog Offline
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RE: Real Estate vs. Stock Trading
I'm also really interested in rentals. In my city the market is booming and vacancy rates are insanely low. The only brutal thing is in Canada the rules are against you for investing IMO. You need 20% down (5% if you're a first time buyer) otherwise you pay a big fee for insurance. Also no more 30 year mortgages, max is 25. Terrible for cash flow.
10-24-2012 02:00 PM
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Cr33pin Offline
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RE: Real Estate vs. Stock Trading
I rent houses out for a living. I hired a friend to look after them for the rent on one of the houses, now I can travel world an get paid.

Plus its long term money, long as you own an rent them its money in your pocket for the rest of your life

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10-24-2012 02:06 PM
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RE: Real Estate vs. Stock Trading
(10-24-2012 02:06 PM)Cr33pin Wrote:  I rent houses out for a living. I hired a friend to look after them for the rent on one of the houses, now I can travel world an get paid.

Plus its long term money, long as you own an rent them its money in your pocket for the rest of your life

How many properties did it take you to buy for the income to be considered comfortable enough to travel as much as you do?
10-24-2012 02:08 PM
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BIGINJAPAN Offline
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RE: Real Estate vs. Stock Trading
If guys are interested PM me and I will dig up my spreadsheet I use on all my properties. It has all the date inputs you will ever need to evaluate the cash flow on a property. I am pretty sure it will work just as well for guys in the US or anywhere else seeing how most of the inputs are universal.

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10-24-2012 02:12 PM
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kosko Offline
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RE: Real Estate vs. Stock Trading
REITs.

Take advantage of higher appreciating properties (Apartments, Industrial, Retail-Comm) without the bullshit and smelly tenants. Why hold onto the physical property? Unless your crafty with your hands your just shot changing yourself. Residential Properties may have just peaked or are far from the floor depending if your in Canada or the States. Maintenance costs to upkeep your property will swell long term just as much as its supposed value. You can guarantee that it will cost way more to upkeep and maintain your property then to guarantee what your returns will be. This is why I love REITs as they hawk over and aggressively take on high appreciating sectors whiten RE, they do all that hard work for me.

One trend I am looking into now is Strip-Malls. Not as investments because a lot of REITs gambled on Strip-Malls and a ton of them are hurting and sit mostly empty. But depending on the location a Strip-Mall + Some investments + plus some time and proposals can see you re-zone that shit and sell it off for for a handsome profit to some schmuck that wants to build a property on it.

Depending on your location Slumlording and scooping bum properties can have its appeal. But it all depends on where your at. I deal with development policy and I see a lot of future money rushing into the Midwest Cities where you have tracts of run down row-houses that young yuppies will be moving into once they are officially priced out of top-tier markets. You have some of the best housing stock in America just chilling unused or with squatters in it in cities like Cincinnati, and Detroit. These Cities are far from bouncing back but they have solid bones and both Metro areas have large industry and capital swirling around it. The problem for these areas, mostly the City-Cores is that there is not enough people to maintain the tax-base so its just a matter of getting bodies into those Countys and things will level off. I'm big on those areas for that reason and may even spend time down there once I am down school.

Stocks? I'm not well versed in the numbers of it all but they seem like a fools-game for the most part. Unless your dealing with Top grade stocks like Mining, Pharma, Banking (in Canada) what is left? The deals are random Foreign Companies. Stocks can and should be a part of the pie but IMO its a bottomless-Pit to try and teach yourself enough info to be that half step ahead to nickle and dime on a large level.
10-24-2012 02:21 PM
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Cr33pin Offline
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RE: Real Estate vs. Stock Trading
(10-24-2012 02:08 PM)Kdog Wrote:  
(10-24-2012 02:06 PM)Cr33pin Wrote:  I rent houses out for a living. I hired a friend to look after them for the rent on one of the houses, now I can travel world an get paid.

Plus its long term money, long as you own an rent them its money in your pocket for the rest of your life

How many properties did it take you to buy for the income to be considered comfortable enough to travel as much as you do?

I have been doing this for the last 15 years so most of them are paid for now. Having them paid for makes it comfortable enough to travel.

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10-24-2012 02:47 PM
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RE: Real Estate vs. Stock Trading
(10-24-2012 02:47 PM)Cr33pin Wrote:  
(10-24-2012 02:08 PM)Kdog Wrote:  
(10-24-2012 02:06 PM)Cr33pin Wrote:  I rent houses out for a living. I hired a friend to look after them for the rent on one of the houses, now I can travel world an get paid.

Plus its long term money, long as you own an rent them its money in your pocket for the rest of your life

How many properties did it take you to buy for the income to be considered comfortable enough to travel as much as you do?

I have been doing this for the last 15 years so most of them are paid for now. Having them paid for makes it comfortable enough to travel.

If you've been at it for a while what do you think of the common rental quote that people say; essentially if you're not 'handy' you will lose your shirt?

Why do the heathen rage and the people imagine a vain thing? Psalm 2:1 KJV
10-24-2012 03:04 PM
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Tigre Offline
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RE: Real Estate vs. Stock Trading
(10-24-2012 10:05 AM)WestIndianArchie Wrote:  I wouldn't buy an investment property @ 20% down.
I would not be an absentee landlord on my 1st property.

I'd use a part of that 20k, as my 3% downpayment for a quad plex in a decent part of town. Keep my day job, live in 1 unit, and rent out the other 3.

I'd caution against leveraging too much.

I'm the first to admit that low interest rates are an opportunity to build wealth right now. But don't go overboard and lose everything.

It's possible we could be in for some financial turmoil over the next couple of years.

If that happens, here is the script:
- bought asset, leveraged to the hilt
- financial environment worsens
- income drops, liquidity becomes difficult
- unable to pay bills on time
- distressed selling - forced to sell asset into a buyer's market at a poor price
- assets pass from weak hands to strong hands

Whatever you commit to now - make sure you can complete it under a wide variety of future economic climates.
10-24-2012 06:29 PM
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WestIndianArchie Offline
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RE: Real Estate vs. Stock Trading
(10-24-2012 06:29 PM)Tigre Wrote:  
(10-24-2012 10:05 AM)WestIndianArchie Wrote:  I wouldn't buy an investment property @ 20% down.
I would not be an absentee landlord on my 1st property.

I'd use a part of that 20k, as my 3% downpayment for a quad plex in a decent part of town. Keep my day job, live in 1 unit, and rent out the other 3.

I'd caution against leveraging too much.

If we're talking about a hypothetical purchase

300k house, 9,000 (3%) down versus 60,000 (20%) @ 5% interest

1906 payment @ 3% down v. 1600 payment @ 20% down.

So 51,000 dollars more upfront for a reduction of 300 dollars per month payment? It'd take you ~14 years to recoup that extra 51K you put down. If you had 60k sitting around that you could put down on a spot, it'd be better to have the bulk of that in reserve.

Worst case scenario, you can't find 3 people to rent because your major industry moved out of town (the situation in the midwest).

Do you know any foreclosure attorneys? Anyone doing loan mods?

You can live in that house for 2 years and not pay a cent because those attorneys are so overwhelmed (and underpaid). Go to any of the hearings and raise any kind of reasonable objection, (which most under water home owners don't do, but *shrugs* i'm a lawyer), and the judge will give you more time to get a deal done.

It all goes back to cash flow, and whether you've got enough units to cover the expenses (and the wherewithal to do the management, which can be awful)

WIA
10-24-2012 08:49 PM
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RE: Real Estate vs. Stock Trading
(10-24-2012 03:04 PM)wiscanada Wrote:  
(10-24-2012 02:47 PM)Cr33pin Wrote:  
(10-24-2012 02:08 PM)Kdog Wrote:  
(10-24-2012 02:06 PM)Cr33pin Wrote:  I rent houses out for a living. I hired a friend to look after them for the rent on one of the houses, now I can travel world an get paid.

Plus its long term money, long as you own an rent them its money in your pocket for the rest of your life

How many properties did it take you to buy for the income to be considered comfortable enough to travel as much as you do?

I have been doing this for the last 15 years so most of them are paid for now. Having them paid for makes it comfortable enough to travel.

If you've been at it for a while what do you think of the common rental quote that people say; essentially if you're not 'handy' you will lose your shirt?

It makes a difference.... luckily I had lots of "handy" friends.
Doing all your own upkeep an maintenance is key in the early stages. Once you get money rolling in you can pay to have it done, but obviously you make more money doing it yourself.. an can write it off on your taxes

(I assume handy means working on your own shit)

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10-24-2012 09:47 PM
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RE: Real Estate vs. Stock Trading
(10-24-2012 10:05 AM)WestIndianArchie Wrote:  Real Estate all day.

I wouldn't buy an investment property @ 20% down.
I would not be an absentee landlord on my 1st property.

I'd use a part of that 20k, as my 3% downpayment for a quad plex in a decent part of town. Keep my day job, live in 1 unit, and rent out the other 3.

I'd of course do the math, and know what 1-1's rent for in the area that I want to be in, but 2 rents would pay the mortgage/taxes. 1 Rent would be incoming profit. And I no longer have to pay rent myself, so that's Mo Money, Mo Money, Mo Money © In Living Color.

From there, I'd focus on getting 3 more quad plexes, that only need to be 50% occupied to break even.

The key with real estate is buying your profit. Rental Vacancies, Rental Rates, Housing Stock, Overall economic conditions in the area - do your rents have jobs, good screening of tenants, and systematic management, and a host of other things.

I wouldn't be focused on appreciation, I would be focused on CASH FLOW. Appreciation of the property is just gravy. Cash is king.

Having worked on wall street and dealt with lots of financial litigation, My personal impression has been that professionals, who have degrees, experience, and a shit ton more market knowledge than retail investors only have a 1 in 5 chance of beating the market each year. Even the Benjamin Graham/Value Approach doesn't give you a better shot @ above average returns.

WIA

I am doing the above(minus sec 8 tenants) and is for the most part solid advise. Absenteed landlording Sec 8'ers is strictly for made men not for freshmen. Also before you even start find out how renter friendly your municipality is because fucking with the wrong tenant can eat up all your profits and you'll be back to square 1 and into foreclosure.

About FHA 3.5% down program, keep in mind that its really 6% you are going to need out of pocket to close because of higher cost. And I believe you are only allowed 1 FHA Mortage at the time. I am not aware of any Zero down mortgages unless its for some s closing ort of first time home buyers or veterans.
10-27-2012 11:38 AM
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saturn Offline
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RE: Real Estate vs. Stock Trading
I have real estate and stocks and can tell you trading is a much more challenging, in fact its not in the same league as investing in property.

Stock investing needs a very unemotional calm mentality, you need to be able to stomach huge volatility, to see your assets lose 25% or gain 25% but wait to close positions.

Remember for every winner there is a loser. You will be playing against wall street, you have many advantages as a private investor, you don't have to diversify so much, you can hold positions longer, you don't have to worry about performance against an index, but you need to be able to make these advantages pay. Most of all that takes mental discipline.

I suggest start playing with small amounts in a trading account, see how you feel when you lose some money, when you gain some, and you will get an idea if its for you. Good luck
10-27-2012 12:47 PM
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RE: Real Estate vs. Stock Trading
(10-27-2012 12:47 PM)jacks48 Wrote:  I have real estate and stocks and can tell you trading is a much more challenging, in fact its not in the same league as investing in property.

Stock investing needs a very unemotional calm mentality, you need to be able to stomach huge volatility, to see your assets lose 25% or gain 25% but wait to close positions.

Remember for every winner there is a loser. You will be playing against wall street, you have many advantages as a private investor, you don't have to diversify so much, you can hold positions longer, you don't have to worry about performance against an index, but you need to be able to make these advantages pay. Most of all that takes mental discipline.

I suggest start playing with small amounts in a trading account, see how you feel when you lose some money, when you gain some, and you will get an idea if its for you. Good luck

The whole system is rigged. What you describe is true, but that's not really investing. It's gambling.

Real estate in many markets still remains something akin to what was once known as investing. That is no longer the case with stocks and most financial instruments.
10-27-2012 04:31 PM
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RE: Real Estate vs. Stock Trading
(10-27-2012 04:31 PM)Don_Johnson Wrote:  
(10-27-2012 12:47 PM)jacks48 Wrote:  I have real estate and stocks and can tell you trading is a much more challenging, in fact its not in the same league as investing in property.

Stock investing needs a very unemotional calm mentality, you need to be able to stomach huge volatility, to see your assets lose 25% or gain 25% but wait to close positions.

Remember for every winner there is a loser. You will be playing against wall street, you have many advantages as a private investor, you don't have to diversify so much, you can hold positions longer, you don't have to worry about performance against an index, but you need to be able to make these advantages pay. Most of all that takes mental discipline.

I suggest start playing with small amounts in a trading account, see how you feel when you lose some money, when you gain some, and you will get an idea if its for you. Good luck

The whole system is rigged. What you describe is true, but that's not really investing. It's gambling.

Real estate in many markets still remains something akin to what was once known as investing. That is no longer the case with stocks and most financial instruments.

I don't know if I would go far to saying its a rigged system, but there is allot of volatility that you need to be able to withstand.

However lets take an obvious example, if when the iphone came out you realised what a hit it would have been and put $10000 in apple you would have about $60000 right now.

At the start of this year, $10000 in expedia would have doubled to $20000.

If you buy shares in 10 reasonably prices companies that you believe have growth prospects for the future you should do ok over a longer term basis.

But you have to think of it like buying a house, if you have a house that pays you rent and the market drops 25% you will collect your rent and not worry to much and wait, absorbing these drops in stocks where you can see minute by minute your capital depleting is much more difficult. So if you can handle that, you have a decent chance of doing well.
10-28-2012 10:38 AM
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Andy_B Offline
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Post: #21
RE: Real Estate vs. Stock Trading
Don't trade stocks man, just invest for the long term in companies that pay solid dividends and have a 10 year plus track record of paying their dividends. You'll thank me when it comes time for you to retire.
10-28-2012 04:48 PM
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RE: Real Estate vs. Stock Trading
I put money into correlated stock pairs. For example, Home Depot is over 90 percent correlated with Lowe, so depending on where the spread is in its range I short one and go long the other. This strategy is almost market neutral. If the market drops 300 points, it won’t affect my portfolio. I don’t care if the market goes up or down because I make or lose money on the variations between the two stocks and not the general market move. It’s more complicated than that, but that is the general idea. Investing is just gambling unless you have deep pockets and can tolerate large drawdowns. I choose to trade and not invest.

Rico... Sauve....
(This post was last modified: 10-29-2012 03:07 PM by Sherman.)
10-29-2012 03:06 PM
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Post: #23
RE: Real Estate vs. Stock Trading
You are probably better off keeping the $$$ in a savings acct. If you go for a 100k foreclosure (depending on where you live) you could end up spending 5-10k to make the place hosiptable for your tenants to live. However, if you have the cash flow to keep the project running (mtg & taxes) this is the better choice. If you want to trade you are better off using 5k, learning chart patterns, & opening a futures acct to trade something like /ES or /ZN.
10-29-2012 10:53 PM
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Post: #24
RE: Real Estate vs. Stock Trading
Certain markets are zero sum - for every dollar you make, someone loses one.

But stocks definitely aren't zero sum. Over the long term, you're investing in a rising market. Stocks are units in underlying business, and a well run business makes money.

In the late '90s when idiots wanted to buy Microsoft at 100x earnings, you knew the market was a sell.

These days when novice investors are saying the market is rigged and it's all gambling, you know it's gotta be a buy.

Even if there's an element of risk but with odds in your favor, the optimal play is to bet and keep betting - provided you can handle the swings.

What are the odds in a typical casino? Just a slight margin in favor of the casino. And the whole city of Vegas was built on those odds.

The stock market offers much better than even odds to the investor, so it makes no sense to avoid it.
10-29-2012 11:15 PM
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RE: Real Estate vs. Stock Trading
Quote:These days when novice investors are saying the market is rigged and it's all gambling, you know it's gotta be a buy

I guess you don't read the news. The market is heavily manipulated by the FED, US treasury, ECB, PBOC, SNB and I could go on and on.

Ever heard of POMO ? The plunge protection team ? These are all programs ran by the New York Fed. They don't hide what they do. On down days they go in and buy Apple, NFLX, Ebay, AMZN, PCLN and on and on. They do this to ramp the market up. Look it up, Premanent open market operations.

What about quantative easing 1, lite, 2 and now infinity ? Operation twist ? Japan is on QE9 as of yesterday. The SNB and China have pegged currencies. Can't do that without manipulating the market.

There are serious distortations going on the last 5 years. Fundamentals don't mean shit. Look at AMZN. trades at 250x earnings. It has profit margins that are -. You can't have that unless things are being manipulated.

" I'M NOT A CHRONIC CUNT LICKER "

Canada, where the women wear pants and the men wear skinny jeans
10-30-2012 12:10 PM
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