The Economy

There are so many economists these days that make nonstop predictions about what is going to happen. Although, they’re economist most of them aren’t even qualified to make such analyst. Did you know that economics isn’t required in high school and college? That is why the majority of people don’t have a basic understanding of the economy. However, when making investment decisions you SHOULDN’T put any economic factors into it. No one can guess or predict the economy accurately the only thing you can do is make sound investments. If it is a good investment, it will get through the rough and difficult times.

Imagine if you didn’t’ invest because of WWII, Vietnam War, Gulf War, Iraq War, you would lose out on so much money. Don’t let the so called economist fear monger you into buying into gold, or other useless commodities to protect yourself. I have a lot of faith in America, and their economy therefore I put no judgment on economic predictions. However, I do listen to Janet Yellen to get an understanding of what she’s saying and then I make my own analysis of it. In addition, based on what she says I look at how the market reacts, and the economic data published.

Go for Rich,

Ronald

Community Health Systems Options Trade

I use a combination of support, resistance, Fibonacci retracements, volatility, and credit received to generate myself income. I drew a Fib line from an extreme low to the extreme high. Then based on volatility, and credit received I sold a vertical call spread.

Trade: 58/60 Vertical Call, above previous high, and since it’s reaching previous highs on weak volume, it won’t be able to break resistance.

Required Capital: $1500

Return on Cash: $600

Contracts: 10

Duration: 8 Days

Total return:  600/1500 = 40%

Go for rich,

Ronald

The Federal Reserve Is The Most Powerful Entity

The Federal Reserve is a very powerful entity, more powerful than the American President. The Fed can control a country’s interest rate, and money supply. Imagine what kind of power that entails. You have the ability to control the economy, and the rest of the world because America is globalized nearly into every country.

When the Fed lowers or increases interest rates a chain reaction is set in motion. You can usually see this with the stock market, you will an increase or decrease in the market. It’s an domino effect. If the fed increases interest rates, then banks increase their prime rate, which affects mortgage rates, car loans, business loans, and other consumer loans. However, banks can change their prime rate without the Fed but it rarely happens because they will usually wait for the Fed to make their move. 

Lower Interest rates are usually caused to make consumer, business, and investing borrowing easier which will incentives economic growth.

Higher interest rates is usually the result of a growing economy and it is intended to make borrowing harder in order to slow down economic growth.

Remember these four terms and you’ll know more about the Fed than 90% of Americans.

Federal Funds Rate: Interest rate controlled by the Fed which banks charge each other overnight

Discount Rate: Interest rate the Fed charges banks on their own funds.

Prime Rate: Interest rate the Fed gives their best customers, usually banks. When the Fed changes their interest rate, banks usually change their prime rate which effects mortgages, auto loans, and so forth. 

Inflation: The circulation of money is greater than the amount of the goods. The fed changes inflation to control the amount of inflation or money chasing goods.

The Power of Stock Options

The Power of Stock Options

In order to generate consistent income in the most efficient way possible, I use stock options. Options lose value over time therefore,  it is best to sell them because the mantra is sell high and buy low. If you were to buy options you would lose value everyday unless the stock makes a large move.

In chart below you is an example of time decay of an option. As you can see the option price is losing value every day. However, that isn’t to say that you can’t make money buying options, it just takes a bit more skill.

Stock Options

•       Give the investor the ability to buy/sell a stock at a predetermined price.

•       High leverage products.

•       Enhance returns.

•       Limited loss/limited gain and/or limited loss/unlimited gain.

•       Based off of statistical measures.

Components of a stock option

•       Price of underlying

•       Volatility

•       Time Decay

•       Intrinsic Value

Go for rich,

Ronald

Gold is at $1200, And Why It’s Worthless

Commodities are great in certain aspects but when it comes to precious metals such as “gold,” I don’t buy into it. Gold has reached a close of $1200, and many investors are in an optimistic view.

As investor you have to look at how it creates value. Gold has no value as far as creating income. It is just a metal that produces nothing. The reason gold has as much hype as it does, is because it was used as currency in the past. Therefore, all the value that comes from it is purely ambiguous. It has no true value.

As an investor, look for things that create value. That value will translate into income producing vehicles. Therefore, I’m not a big advocate of gold because it doesn’t follow my investment philosophy. If I were given a million dollars versus a million dollar worth of gold, I would be able to do more with the cash than the commodity itself.

Go for rich,

Ronald

Business Plan

Business Plan

The majority of people want to get into business. Being your own boss is a right in the American dream. To be self-made and self-sufficient is rooted deep within the infrastructure of America. When I ask young business men and entrepreneurs what the fine details about their business are they always seem clueless. The crucial issue is they lack a business plan. They don’t have any definite goals. The business plan should be in great detail about what their company does and how it plans to execute those plans. The first step before anyone else see’s it is you must see it first. Having a business plan is a must because it is your constitution of guidelines. It is the path your business must take to achieve success.

There are crucial elements in a business plan that I will list below.

1.       Mission Statement

You need to have a vision on where your company will operate and how. In the vision you tell your clients about you, what you do, and how you plan to execute that plan. This is known as your mission statement.

Example:

ABC Company is a manufacturing company that provides the best raw materials to our clients for the lowest cost possible. In doing so, we also provide the best service possible for clients to ensure a positive relationship, and longevity.

2.       About Us

Tell your clients, customers, and investors about yourself. Make it simple and concise in order to draw people in. Let them know who they are. People love to know what it is about you that make you who you are.

3.       Plan

Write out in detail what you are going to do with your business. How you will enter markets, what returns you are expecting, how you analyze the product, service, market, and economy. Everything in your mind must be put down into paper.

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Business plans set the successful and unsuccessful apart. If you want to succeed treat it like a business, don’t trolley around hoping that you can just work based off the go. If you don’t plan, you’re planning to fail.

Go for rich,

Ronald

Compound Interest

Compounding interest is the most POWERFUL force in the world. If you consistently beat the average market you will make a fortune. Compound interest is the ability to make returns on returns. Investing doesn’t need to be home runs but instead the little gains made along the way.

 Example 1:

One hundred dollar makes a ten percent return for three years

Year 1: $100 * .10 = $110.00

Year 2: $110 * .10 = $121.00

Year 3: $121 * .10 = $133.10

 Example 2:

Go for rich,

Ronald