Street Speculator

- Tax Free investment gains

- Reduces the amount of taxable income

- Allows small investors to participate in the stock market

- Opportunity to own company stock (Remember ENRON)

These are a few of the various reasons employers promote this program to its employees. The 401K program I admit, is not a bad program to participate in. Then I did the math. What I SPECULATED, or concluded, was that this program will create a false sense of financial security to many as it relates to retirement.

First, if you were born in 1965 and beyond, forget about receiving social security benefits to help with retirement (I believe the social security program will go belly-up in the next 25 years, too many current government obligations: Medicare, Medicaid, War on Terror, Fiscal Deficits).

Second, look at this scenario. I believe many people fall into this context.

Employee ($60,000/yr. salary)  +  401K contribution ($750/mo., or 15% of salary, which is the maximum allowed under the program)

Your annual contributions will be $9000 per year. Add in potential investment gains and employer contributions (Some employers contribute $for$, others are $.50 or $.75/ dollar invested, etc….), which could deliver another $4,000. You are then looking at $13,000/year in contributions and investment gains (IMP: Also calculate losses for downward trends in the stock market).

Now do the math as it relates to you! Over a 20 year period (If fortunate to be with an employer this long), your 401K earnings and contributions would equal $260,000, possibly a bit more.

20 years at the same employer, with an annual salary of $60,000 equals to $1.2 million dollars (But, take home pay is much less when you subtract taxes and insurance benefits).

Think, if you had trouble making ends meet with a $60,000 annual salary, what will your situation be when at 65 and still paying on the same debts and expenses. The 401K money will vanish within 2 years just on living expenses alone.

To become financially independent (Independent of the perception of U.S. Government anyhow) you need at least 2-3 different revenue streams, to complement your 401K contributions. Now I am not advising you to cease your 401K contributions. But, you definitely need additional options as an insurance policy. 401K contributions will not be enough to survive on once retired. The fundamentals don’t add up.

To move you in the right direction, you need to 1st STOP CHASING………….

Next time with The Speculators, Chasing What?

Bravo! What a run, arguably the most successful and influential entrepreneur of the century.

If you were unaware, today was to be Bill Gates final day at Microsoft. His next step is to work full time at his foundation (The Bill and Melinda Gated Foundation).

However, I do not believe we have seen the last of Mr. Gates at Microsoft. Don’t quote me, but somehow even as he does the marvelous works with the foundation (Ex. Providing immunization shots and treatments to children living in 3rd world nations) the desire to outmaneuver and out-innovate Google, Sony, and Apple will never leave him.

Bill will return within the next two years! If not, well the SPECULATORS, would like to thank you for your contributions.

The first order of business in creating wealth is to STICK TO THE FUNDAMENTALS. Your income statement should resemble that of a well run corporation.

Take Microsoft.   

Microsoft is the global leader in consumer and business software products and services. These are some highlights from their financial statement:

DEBT: $0  CASH: $24 billion  REVENUE: $57 billion (As of March 31, 2008. Source: Yahoo Finance)

These are amazing numbers and most of us will never see numbers of this magnitude in our personal accounts. But, you can put together some techniques that will allow you to at least have a secure lifestyle for both you and your family.

NO, we are not interested in getting you into a house you cant’ afford nor move you toward purchasing expensive feel good luxuries. The goal of the SPECULATORS is to make you LIQUID and to end this paycheck to paycheck pattern of poverty.

Start with these simple techniques to begin:

1. Get rid of the unnecessary Cable/Satellite television services (Watching television does two things to the body: Creates obesity and increases ignorance of the brain).

2.  Read the newspaper daily. The Business Section should be read first.

3.  Establish a Savings Account (Deposit at least $50/paycheck). Don’t touch the money. Be Discipline

4. Use some talent (passion) you have to create a small business (While still employed until this venture generates enough revenue to allow you to leave your current job).

5. Read biographies (Not sales books, “Getting Rich in the Stock Market”, “Real Estate Riches”, etc….) about successful and progressive business men and women (John Rockefeller, Warren Buffet, Michael Dell, Sam Walton, Martha Stewart, Steve Jobs) . Don’t focus on the money they generated, but their WAY OF THINKING, THEIR MENTALITY!!!!

6.  Exercise Daily and Diet properly.

These initial practices you can start tomorrow as well you should. Time is not on your side. Our premises stated in the SPECULATORS & Jedah Summit post about oil prices has now become a reality (Oil hit a new high today of $140/barrel).

Next, Why your 401K plan is not enough for retirement

Just Speculating…………

As you know, today Fed Chairman Ben Bernanke and the Federal Reserve Board decided to leave the interest rates steady.

Mr. Bernanke stated that his decision was based on a concern of higher inflation (Everything gets more valuable except money:WorldNet definition). Basically, the costs of goods will increase relative to the drop in the value of the U.S. dollar.

The state of the economy, according to who you ask, is very unpredictable and headed in a downward spiral.

The stock market goes up 100 points one day, down 150 points the next. Banks have virtually shut down lending, lending to consumers and small businesses. The housing market is in a tailspin. The U.S. consumer is neck-deep in debt, etc……………….

With so much bad news, one would think that the end is near. However, the SPECULATORS will discuss ways in which you can profit, even in this so-called negative market: Stocks, Commodities, Business Investments, Real Estate, etc…..

We will not become an infomercial nor sell or promote “Get Rich Quick”  & “You Can Do It” products.

STAY TUNED!

Ken Lewis is the current chairman and CEO of the Bank of America Corporation (Symbol: BAC), the largest consumer bank in the United States. As the CEO, he has made some incredible acquisitions which have added enormous shareholder value to the company:

MBNA (2005) $35 billion in cash and stock

Fleet Boston Financial (2004) $47 billion in stock

US Trust (2006) $3.3 billion, all cash

However, the latest acquisition, Countrywide Financial, may spell the end of Ken Lewis’s reign as the prolific leader of this Charlotte, NC banking juggernaut.

Bank of America, in 2007, made a $2 billion dollar stock investment in Countrywide. Subsequently, the current mortgage crisis started to gain steam, where Countrywide Financial became the face and center of attention of this volatile situation. By 2008, the stock of Countrywide (Symbol: CFC) had dropped tremendously where a large majority of its mortgage loans were in default and many more predicted to default well into the year 2010.

With the drop in Countrywide’s stock price, the $2 billion dollar investment made by BofA diminished in value. If Countrywide had filed for Chapter 11 bankruptcy, as many analysts predicted it would, BofA’s investment would have become worthless.

So, rather than wait for the ceiling to drop, and report a $2 billion lost on its books, Bank of America decided to buy the entire company in January ‘08 for $4 billion in stock.

However, Bank of America has had its share of losses from this current economic environment as are other financial companies. Adding Countrywide to its balance sheet would only increase its losses well into the near future.

Ken Lewis’s former Charlotte counterpart, former Wachovia CEO Ken Thompson, was ousted recently due to the financial losses at his bank. Like BofA, Wachovia purchased a mortgage lender, California based Golden West Financial. This purchase was made before the current housing market environment. However, California has one of the highest foreclosure rates in the country. Golden West suffered as a result and provided Wachovia with billions of dollars in loan losses.

I believe that if BofA does proceed with the Countrywide merger, Ken’s future at the bank may come to a swift end. BofA will continue to report quarterly losses, just as others in the financial sector. The stock price will suffer and they may have to cut jobs and the dividend rate to conserve capital.

If Ken Lewis can turn this around, he will definitely have earned my respect as a true visionary.

However, I will not buy any BofA stock until it falls into the mid-teens. My time period would be within the spring of 2009. That way, some of the Countrywide losses should be built into its financials. But as of now, I would not touch BofA.

JUST SPECULATING…………..