What would you do if NO ONE gave you ANYTHING? or how I started with $1000

General Real Estate Investing
41

The problem with that theory is in THE EXECUTION.

Every investment book I have ever read (and it’s in the hundreds) tells you to put in trailing stops, take small loses, let your winners run, have discipline. If it was as easy as that Mike, no one would have a job. There is a LOT more to it than you lay out here. It’s like telling people the key to real estate investing is buying low. As WE all know there can be MANY good reasons a property is selling LOW, none of them GOOD. That’s a whole lot of NOTHING as far as a workable plan goes.

Take a look at a 5 year chart of homebuilders stocks. There is NO WAY I’m trying to pick entrance and exit points on these charts. In my opinion the momentum is neither up nor down. If looked at over a 4 or 5 year period these stocks ahve fallen SUBSTANTIALLY over the last 1 to 2 years. I wouldn’t want to bet on them falling further. Could it happen? Yep ANYTHING could happen. But…when a stcok has come from $80/share to $18/share THAT’S NOT A STOCK I WOULD WANT TO SHORT.

You SHORT those stocks when their in the $60’s.

YOU BUY THEM when their at $18

Here’s my bottom line…

The…The… ONLY advantage a small investor in stocks has is the abililty to NOT PLAY THE GAME. What that means is you can increase your winning percentage by NOT participating when the odds are not in your favor. How do you put the odds IN YOUR FAVOR? The ONLY way I know to consistantly do this and make a LOT of money (a lot of money to me is minimum, 6 figures) is to buy stocks in an industry that have been beated down so badly that ANY decent news can send them upward, or the bigger economic trend changes and that sector comes roaring back.

I can’t tell you what the price of oil will be next year, neither YOU nor I know what the price of Toll Bros. stock will be next week, I don’t know what the hot toy will be this holiday season, no one knows how much exposure banks REALLY have to sub-prime, I can’t tell you what gold will cost next year.

Here’s what I do KNOW, and I invest based on this information…

5 to 7 years from now housing will be back on it’s feet. Toll Bros. Centex, and the other major players will be building homes and selling them for a PROFIT. Right now, they are losing money because of this housing correction. That is the EXACT time I want to be ACCUMULATING shares in these companies. It works because people OVER-REACT. We have proof of that in the roots of this housing BOOM. People OVER-REACTED to the theory that housing would just keep going up forever. It doesn’t work that way. Just like Home builders stock will NOT continue to fall forever. I doubt very much Mike, that you’re making a 6 figure return on your short term trading in these stocks. I’ll sit on the sidelines, buy these things up over the next year or so and cash in in 5 years. I’ve done this CONSISTANTLY for 20 years. I average a 300% return over a 5 to 7 year holding period. I have the tax returns to prove it! The problem with a short term strategy is that you aren’t putting $75,000 into that investment. Your playing with MUCH smaller sums. I will put up to $100,000 into these long term investments. You would literally have to make 1,000 trades to make what I will make on ONE. That is NOT an ADVANTAGE for you. In reality it is a HUGE DISADVANTAGE because, like Las Vegas the longer the Casino can keep you playing, the better the odds they take your money!

If your winning doing that with your short term strategies my hat is off to you! You have found a way to invest that CONSISTANTLY works for you. THAT’S GREAT!! Keep it up and stay with your plan.

42
I doubt very much Mike, that you're making a 6 figure return on your short term trading in these stocks. I'll sit on the sidelines, buy these things up over the next year or so and cash in in 5 years. I've done this CONSISTANTLY for 20 years. I average a 300% return over a 5 to 7 year holding period.

FDJake, you are absolutely right, I am not making 6 figures in the stock market - NOT EVEN CLOSE. As I said in an earlier post, I only trade as a hobby (although I’ve been trading for about 10 years). My rental property business is my full time business and where I make my money. In my opinion, there is far less risk in the rental property business and a much higher return on investment with rentals than there is in trading full time.

As I said, I agree that your buy at a discount theory of investing in stocks is a good one. However, you have been predicting a severe recession (maybe a depression) and that will certainly cause many homebuilders to go out of business. All I’m saying is that buying $76,000 worth of Toll Brothers stock is a risk and it COULD go to ZERO.

I had a friend that owned about $100,000 worth of WorldCom. He thought that WorldCom was a GREAT deal and he kept buying on the way down. I kept telling him to sell and cut his losses, but he didn’t listen. He lost EVERY PENNY of that $100,000. I’m not saying that Toll Brothers is a bad buy at $18.

I trade strictly on technicals, which is much too complicated to discuss here. However, there is good money to be made trading if you have the discipline. I made 11.8% in my trading account last month (after commissions but before taxes), but of course this is an EXCELLENT market for trading (with the volatility). However, that is dwarfed by the equity and cash flow that I will pick up in that ugly pink apartment building! Personally, I’m putting my future iin the real estate business.

Mike

43

You’re 100% right Mike.

It’s a very good point and one that needs to be understood. Could Toll Bros. go to ZERO??? Absolutely. That’s the risk you take. For the record I like Toll Bros. BECAUSE of the coming recession. Toll Bros. builds luxury homes. They have been around for a very long time and are EXCELLENT at what they do. As I said before. I could care less if Toll Bros goes to $9/share. I buy in when I see signs that a stock has hit some sort of floor. Right now it looks like the $18 level is a support. I never BUY all in. If we have a vicious recession (which I believe we will) Toll Bros. may go down, but here’s the GREAT thing about this kind of investment…

THE BAD NEWS IS ALREADY PRICED INTO THE STOCK. These guy’s posted their FIRST quarterly loss in 20 YEARS!!! Guess what?? It won’t be their last. Wall Street has these stocks dead and buried. If I’m a buyer at $18 and again at $12 and some more at $9 thats GREAT!!! I’m a holder until this economy rebounds. I AM PLANNING ON A RECESSION. I hit the MOTHER LOAD if we don’t have one. If we do, I wait it out as planned, and conitue to buy the stock.

Comparing Toll bros. to Worldcom is like comparing Merck 3 years ago to ENRON. Two TOTALLY different businesses. One has made money for the majority of a very long lifespan, the other was built on the theory that it MIGHT make money some day. I DON’T DO SOME DAYS!
I thankfully missed the ENTIRE tech boom because I couldn’t understand how a company that NEVER made a penny was now worth more than GM. I saw MANY of my friends become overnight millionaires. Funny thing, NOT ONE of them has ANY of that money now. They’re all still working 9 to 5 jobs and paying mortgages.

I LOVE Real Estate…LOVE IT…But like Real Estate, there is NOTHING like a 50 cent on the dollar sale in ANYTHING! Vintage Cars, Stocks, Old Guitars, if I can buy it for 50 cents on the dollar…I’m all the way in!!

44

I really like fdjake’s saying when it comes to finding your first real estate deal:

“It should be sooo great that it’s like walking by a pile of money on the sidewalk”.

Kind of like Mike’s recent ugly pink building…btw…nice job Mike. Glad you were able to snatch it up before someone else.

I also like fdjake’s long term buy and hold strategy for stock investing and think the same saying of finding a pile of money on the sidewalk can be applied.

If I were considering a stock purchase next week and had to choose between a home builder stock and Ford Motor Company…it’s a no brainer. We’re talking Model T here. I’ve got a Ford truck, I know Propertymanager has a Ford truck, and I know fdjake has a Ford truck. At $6.89 a share it ain’t going out of business. It can’t.

But that strategy, (buying a substantial stake in it), only works if you can afford to wait it out.

I still like home builder stocks right now, (for longer term), but that’d require knowing a lot more about their ability to weather things.

-Mike

45

The TOL brothers currently have been buying back company stock…They sold every single share they owned in the co in 2004…Thats cause they went belly up in the early 90’s and learned their lesson…If they are buying they must be confident that a bottom is near for their stock…Heavy insider buying and selling is a above average indicator to use imho…

46
I've got a Ford truck, I know Propertymanager has a Ford truck, and I know fdjake has a Ford truck. At $6.89 a share it ain't going out of business. It can't.

I agree that it won’t go out of business. In our current world, the government won’t allow running a crappy business to drive a big company out of business. They would certainly get a bailout. However, they could go bankrupt, which is enough for your $6.89 stock to go to ZERO (although I don’t think that is going to happen). There is long term support for Ford at $6.00. I am anticipating buying some at $6.00 for a trade. It’s on my watchlist.

Mike

47

Out of curiosity, I was wondering how you figured out the $6 long-term support for Ford. Thanks.

48

Go to yahoo and look at a 10 year chart for Ford. It has bounced of the $6 mark numerous times. Forget the $6 mark. Look at it like this, in 3 or 4 years when Ford is back on solid ground (which they will be) who gives a cr*p if you bought the stock at $6.00 or $6.80 or $7.75. It really doesn’t matter when the stock is $35/share. This is the kind of thinking that SCREWS people up when it comes to stocks. They watch a stock go to $6 then it goes to $7, they say to themselves “as soon as it drops back to $6 I’m buying” The problem is it NEVER goes back to $6 and they sit paralyzed because they can’t get that $6 out of their head. They think they missed it.

BUY IT. AND BUY A LOT OF IT…NOW!!!

If your buying it at $7 and it goes to $28 that’s a 400% RETURN!!!
Someone show me a mutual fund that can do that in 4 years??

There AREN’T ANY!!!

49

I agree with you on everything in terms of contrarian investing, but from a more technical standpoint I was just curious if he ran the numbers and can help us nubes show how the company is undervalued given the outlook on FCF in the next four years. I could say like look at any stock htat has fallen considerably, lets say USG corporation, and then say buy now because in four years its will be 3x what it is worth. I am not trying to bash anyone I am just trying to understand how you evaluate your investments. How do you personally figure out a company is undervalued with the numbers. Thanks a lot, and once again I am not trying to bash anyone or cause arguments. If you compare this to real estate you wouldn’t just tell someone to buy an apartment complex because it would simply increase in value, you would show them the annual property operating data to show that a given property was “a buy”.

50

I know your not trying to bash anyone here. Your question is EXCELLENT!! I’ll lay out my case for Ford. The company itself doesn’t really matter. The way I research is the same…

First off, by identifying stocks that have been decimated it narrows the field by a HUGE amount. Then I like to look for companies that are in industries that are cyclical. That means they rise and fall in cycles based on the overall economy. Car companies are CLASSIC cyclicals.
Next, I break down why this particular company has had problems, are they fixable? Have they committed to fixing them by going OUTSIDE the company to find PROVEN management with TURNAROUND experience? Is the company still in a viable industry? If your company is in the tube radio business you can forget all of the above.

Now let’s research Ford… Problems began at FMC when they relied on their huge truck sales to make them money. They let their car business go because trucks and SUV’s were making them BILLIONS. Then oil prices started to rise. We all know what happened next. Ford has RECORD breaking losses. Bill Ford takes over, and is in WAY, WAY, over his head. The stock price continues to plummet. Bill isn’t a dope, he knows he needs someone with BIG time industrial turnaround experience and they must come from a manufacturor which builds complex machines. In steps BOEING President ALAN MULLALY…

Mullaly is a SUPER STAR at Boeing. I have personally had conversations (that’s REAL research) with members of his (Boeing) management team and union employess who all confirm he is THE REAL DEAL.
One of the most interesting aspects of Mullaly’s management style is his willingness to ASK for advice from the people who actually BUILD the products. He did this at Boeing, intially it was looked on as a gimmick, but when the line workers recomedations started to be implemented, reality set in. This guy was for REAL. After 911 Boeing was on the verge of bankruptcy. Mullaly’s plan was to build a plane quicker, lighter and better than anything out there. With the advice of assembly workers they shaved 30% off the time it took to build an airplane.

THAT IS AMAZING!!!

He has already stated that his plan for Ford is to GLOBALIZE the company. Before you all yawn take some time to read about the cars Ford sells in Europe and Australia. They are WORLD CLASS award winners. The European Mondeo and Focus are the best selling cars in Europe. They are NOTHING like what Ford sells here. THAT will be changing VERY SOON. LOOK AT THOSE CARS!! Next up QUALITY…
Anyone here care to guess who knocked Toyota’s Camry out of the top
spot in this years Consumer Reports??? FORD DID!!! The Fusion has a better reliability rating than the Camry.

Mullaly is an Engineer. He recently had a meeting and had 10 different metal hood props (the things that hold up a cars hood) on a table. When the engineers entered the room he asked a simple question…Why are EVERYONE of these DIFFERENT! They all do the same thing, yet none of them was the same shape, or size, or price. It sounds trivial, but this is the foiundation of cost cutting.

The Democrats will probably take the White House in 2009. There is no way on earth they will let Ford go under. This country has stepped in TWICE to rescue Chrysler. If needed, the same will be done for Ford.
They have already sold Aston Martin. Jaguar and Land Rover are next. These 2 sales will raise over $2 BILLION for Ford. They reported a $700 million profit in the 3rd quarter THIS year. They will still post an overall loss but the light at the end of the tunnel is there.

The new Lincoln MKS will be a smash hit. Take a look at the other new products they have in their pipeline. They are on the way back.
My guess is the next 2 years will be slow. After that I believe they have a great chance at regaining market share. Remember…ANY improvement is this companies output will send this stock FLYING!!

I have a very large postion in this stock and consistantly follow company news at various auto related web sites. I LOVE investing in car companies. They ALWAYS release pictures of future models up to and over a year before they hit the dealerships. If it looks GREAT, has a PROVEN powertrain (which Ford has now) IT WILL SELL!!!

As far as looking at numbers??? Here’s the thing… EVERYONE of these companies is LOSING money. Toll Bros., Ford, it doesn’t matter. If I looked at “The NUMBERS” I would RUN away from these companies. THAT WOULD BE A VERY COSTLY MISTAKE! I have made money doing this with car companies for over 15 years. Porsche in the late 1980’'s, Chrysler in the 90’s. They all returned over 400%. It took a few years for it to happen, but it was EASY money.

Hope that helps.

51

http://media.ford.com/article_display.cfm?article_id=26886

-Mike

52

thanks a lot for your insight.

53

Very true, the CEO always knows something we don’t. When the start selling off…BAIL OUT. When they buy you buy.

54

Not to get into the mix on F but why not buy the LEAPS or longterm option calls instead of the stock…This way you only limit your downside to the option cost…It’s a win win situation…If the stock rally’s you can simply exercise the option and get the stock at the said price,if it goes to zero your only $$$ exposure is the cost of the LEAPS…I wouldn’t be long heavy amounts of F going into a recession…This pig stock couldn’t bounce in a raging bullmarket over the last 5 years so why bet on it now going into questionable times…Longterm call options is the smartest most cost effective way to play this pig…Hands down…

55

Your forgot to explain how your long term LEAPS LOSE VALUE as time decay eats away at them. Your leaps turn to garbage if that recession hits (which it will) My stock on the other hand, simply waits out the storm. I’ve done this a few times BEFORE. Remember how the U.S. Goverment bailed out Chrysler TWICE? Sort of hard for a stock to go to ZERO when Uncle Sam is co-signing Billions of dollars of loan guarentees for them. Believe it or not, I’ve actually done years of RESEARCH on this. I’m not talking out of my rear end here.

Ford’s a turn around play. Plain and simple. Will the recession delay that turnaround. YES IT WILL. Has Ford already made GIGANTIC cost savings over the last year in an absolutely terrible market for car sales??? YES THEY HAVE!!! Don’t forget the BILLION$ in UNION health care obligations they just WIPED OFF THEIR BOOKS with the new contract. I think I’ve got a pretty good handle on whats going on here. If you want more detail I’ll be happy to supply it.

I was a car dealer for 15 years. I’m gonna go out on a limb here and say I know a LOT about INVESTING in car businesses.

I have also invested my OWN money successfully for almost 20 years.
I do it this way because it WORKS!! Buy LEAPS that expire in 1 year and Ford hasn’t moved, YOU LOSE. Buy the stock and Ford hasn’t moved WHO CARES? You should understand that going in. I’m a long term guy. I buy stock that has been HAMMERED for reasons that can be fixed. (Like a car company that put all of it’s eggs in an SUV basket) It’s a boring way to invest, but it sure is profitable.

A LEAP, for those of you who don’t know, is a long term option. They are priced based on formulas that use volitility and price movements to determine a VALUE for the OPTION. When you buy one of these, you control a pre-determined number of shares of the underlying stock. It’s basically a premium. If you eventually DO decide to buy the stock you still have to pay for it but at the option strike price. Remember, you have paid a PREMIUM IN ADDITION to the cost of buying the stock. So you will actually pay MORE than if you just purchased the stock it’s self. The upside is if the stocks falls and you can’t wait it out (NEVER buy a stock that you can’t wait out) your loss is the premium, which could be 100% of your investment.

The VAST MAJORITY (90%) of options end up as a LOSS for the BUYER!!! Check it out for yourself. That stat comes right from CBOE (Chicago Board of Options Exchange)

I’ll pass… Thanks though.

I MAKE MONEY doing it my way.

56

NEVER buy a stock that you can’t wait out)

Never?..Like even after it goes to zero?..If you lose the premium you paid on the options who cares,it’s 1/10 of the loss you will get for owning stock…When I see big money managers accumulating F then I will take notice,only money is on a fast trade through hedge funds…No one is taking a longterm bet just yet…Short term who knows,god knows its overdue for a small bounce…Best of luck

Your stock waiting out the storm is the biggest mistake you could pen in that post…Your stock will LOSE value if my leaps/calls lose value,and vice versa…Id rather have an insurance policy on my money rather than taking the balls on the chopping block approach as you claim to have…Options are a very technical way to leverage yourself and your portfolio…I wouldn’t expect a warm reception to my comments when most don’t understand it…

Never mind the fact that I could take the money im not tying up in that pig stock to buy cashflow properties that actually make me money…I’m not saying DONT BUY F ,its just there are better ways to do it…My way I have insurance and I limit my loss,while I pay a small premium for having my money if it goes up?..I dont see the downside but what do I know,I’ve only been doing this for 20 years…

Also adding in that I can buy F at any point while owning the options…This method works even better if the stock goes down…Because now you can purchase the stock cheaper…Its basically an insurance policy and on a company like F you better believe its worth it…All of Ford’s debt has been reduced to junk bond status and alot of these closed end funds are holding fords debt…F is highly riddled with debt…I don’t know what kind of share size you are talking about but if it’s just a few bucks then do whatever…My thinking is -5k-10k shares or more…

57

90% of ALL options purschased expire WORTHLESS. FACT!

We don’t have to agree here.

I ALREADY HAVE cash flowing COMMERCIAL properties.

Ford is FUTURE Money to me.

Merck was dead money (or a DOG as you call them) 3 years ago when it was… $18/share…and All the “PRO’S” on Wall St. were running away from it. Now at $59/share guess what THE PRO’S are ALL recommending??? You guessed it!! MERCK!!! Tell me how I just got “LUCKY” when I bought that “dog”. Merck was being sold by every fund manager on Wall St. because of Vioxx. I had the CRAZY idea that a baby boom generation entering their drug maintainance years would probably be good for the long term health of that company. That and George Bush’s one year only foreign profit repatrioting tax rate of 5%. (Merck brought $6 Billion into this country, and paid 5% tax on it) I’ll give you ONE guess what their using to settle those Vioxx suits. Guess I was just lucky.

Merck last Friday… $59.67/share STILL OWN THAT DOG!!!

…and it pays almost a 4% annual dividend. Now I don’t know what kind of fantastic cash flowing properties YOUR buying in this WONDERFUL real estate BOOM we’re having. But in my world an over 300% return in 3 years is about as good as it gets. Another bonus??? Merck has never called me at midnight because a pipe burst, or a roof leaked, never paid their rent late, never paid PROPERTY TAXES or insurance on my Merck stock. Never had to advertise my Merck stock in order to rent it. Oh, and the BEST part…The day I decide to sell, I click the ENTER botton!!! SOLD!!

Here’s an idea Mr. 20 years experience on Wall St. Let’s see your pick for a stock that you expect to double or triple in the next 5 years?? I went inot great detail about why I believe Ford is on the way back. I put my neck out there. You’ve done nothing. Let’s here it. We can all check back in in a few years and see who was right

I’ve been buying Ford and Toll Bros. You guy’s can remind me of this post in a few years and we’ll see who had it right.

58
When I see big money managers accumulating F then I will take notice

How can one track when big money managers are beginning to accumulate a position in F?

This is just some website I found…but I’m sure there’s a more reliable source of publishing this data on who’s accumulating:

http://www.gurufocus.com/StockBuy.php?symbol=F

Thanks,
-Mike

59

Ok Mr.Used car salesman now you annoyed me…

90% of ALL options purschased expire WORTHLESS. FACT!

First off einstein the only reason why any options expire worthless is because many DO NOT exercise the option and simply buy the stock or sell the option (options are used as HEDGES if you have any clue what that word means…And that %90 is ridiculous…And how can you quote what a stock is gonna do over the next 3-5 years (%300 returns )…F may go to 100 or to zero and I could care less nor will I ever make such bold predictions about any stock…Why should I?..I manage risk for a living,I don’t shoot from the hip with bold/outlandish predictions…For all I know the market and F go nowhere for the next 10 years…How the hell should I know what any stock will do in the future…

And the best part about you is your now making claims on what you bought years ago and taking credit for it to boot…Are you kidding or what?..I suppose you bought MSFT and GOOG after it IPO’d also…Keep your hindsight wet dreams to yourself…Your posts do nothing but annoy me and I could care less if you have 10 cents or 10 million,I personally think you don’t know much to make bold stock predictions…Pro’s never make such claims and all you are doing is showing how green you are…

And if you look back on the history of my posts you will see I posted a year ago about shorting REITS and homebuilders, so I have a history of my calls…What do you have ?..Pipe dreams…Tell your stories to someone who will believe it…

60

Rookie,
Chill, seriously.