Do you want to make money from the stock market? I do. How do I do this? I am a big fan of narrowing the universe of stocks to choose from before you start to make your own investment decisions. My rationale is there is too much information and choice. By the time you can analysis the bulwark of the equities at a given point in time, the situation has changed. There are too many potential investments to consider. Even if your brain is a super computer, if you analysis stocks at any meaningful depth, you are behind the times.

Still not convinced? Consider this metaphor. I guess my first question to you,  is can you beat a computer Chess program of reasonable strength ?  If you can, at a  2700 level, then you do not need quantitative investing. I play chess at an expert level and I can not. I am certainly not going to learn the same lessons with investing. Think about this metaphor and what this means. It means with computers, you can leverage other people’s knowledge. You do not have to reinvent the wheel. This is my first recommendation. Use other people’s knowledge. However, not just any research, as every guy out there has a new letter. Use quantitative objective, testable scientific research.

Stock Screener vs. a Quantitative shop

The question is how do you quantitatively narrow your  selection of stocks and what objective determinate criteria do you use to to find a universe of stocks, so you can subsequently make subjective choices on your own?  Lets see how I approach this.

People often login to their favorite financial website, such as Yahoo finance  and run a stock screener. A filter based on selection criteria like PE or PS. Perhaps they read about the most important ratios in a book or article and want to apply this to a screen. They narrow the universe this way or at least a reality check on stock buys they are considering. This is not the way to pick stocks. Why? Because these ratios are like single musicians in orchestra. Only together with all the other ratios do they explain the whole and you can get the sense of the music.

Therefore, stock screeners are not the way to go.

The alternative to stock screeners are quantitative shops. These are academic researchers who consider all the value and fundamental date in unison. Then package their results in a useable form.  They consider the whole picture and have created a selection criteria that works as seen by the past results and long-term back testing. It is a scientific approach to investing.  Of course everything could change but over the long-term, however, if they have done their job correctly then the stocks they pick will outperform, and by a significant margin.

Many but not all institutional investors use this, these guys know how to make money. Almost no individual investors use this approach because they are not aware of it. It is rarely written about. Everyone in the mass media writes about investing news and mutual funds or techniques of trading. However, how often do you have specific advice about quantitative investing in a useable form?

Why are quantitative shops better than using a mutual fund?

Because Mutual funds are managed often buy young guys trying to prove themselves based on conventional methods. Maybe they have a CFA degree and ten years of experience as a junior fun manager, but this does not mean I would trust my hard earned dollars with them. It is just a resume.

Some do well for a while but in the long run many (most) underperform the market. When I was a stock broker I would always see the hot fund of the month being pushed. They would show some five-year return that allowed this fund (often a sector fund) to out perform the market. But everyone knows like Heraclius wrote ‘all is flux and fire’. Past performance means nothing unless it is ten years plus. Further the discipline for selecting the equities need to be consistent. What if the manager tries something new. Then the past will have little baring on the future as there are different set of variable. Or what if like the fund manager leaves or has  personal problems.

Even the mutual funds themselves have a human element, what if the Fund gets too big like Fidelity’s Magellan fund in the 1990s and it was like trying to navigate a battleship in a small canal. Its popularity changed the fund. Therefore, funds like stocks are not in my opinion dependable.

Many people diversity their funds, but basically they will approach the index over the long term as they are holding so many investments. Some fund are good and I like them. But I still prefer individual stocks based on my own criteia with the help of quantitative investment information, not some hot shot Wall Street fund manager. If I lose or make money I want it to be my fault or not.

Use a quantitative investment shop to pick stocks

You can narrow the universe to stock that have a significant chance of outperforming the market. It is clear and tested with back testing. Of course it is all probability and nothing, repeat nothing is guaranteed. But if you can use a quantitive shop you should be better than the blok who does not.

I do not recommend giving your money to a quantitative equity management firm, but rather do it yourself. I believe this for various reason.

What about technical trading and software? Use this, but first narrow your universe to under valued stocks so if your technical elves are wrong, you will not be in bad shape for a longer term.

Why is a few percentage points important in investing?

It is not the few percentage point advantage that you get, but rather the constancy. quantitive shops tend to produce selections that year to year, in bull and bear markets outperform with positive results. This means the market is down but the top selections are still up. Do not take my word for it, look at a few of these like valuengine.com . They also have information on potential shorts in a bear market.

Again why is this constancy factor important? Because if you are investor it is nice. But if you are a stock trader and want to make high profits and get rich the only way to do with, besides being lucky or very patient, is leverage. If you have a system that yields 10% a year, but every year, and leverage this 10 to 1 then you will be doubling your money ever year.

I am not recommending you buy stock options or use margin. I am just saying consider the theory of this. I personally use leverage, but I have worked with these ideas for many years.

When quantitative research firms fail investors

Results shown on quantitive investing page are aggregate results and if you buy and sell like a computer, exactly when the equity has been added or subtracted to the list. If you buy stocks from the list, you will get different results. However, the theory is still valid and you in all probability will outperform the market and do it with consistency. But I have lost money using quantitative picks by trying to be too much of a maverick investor and not systematic.

Also if you are using research that is not in a usable digestible form, rather it is just thrown at you than, it is no good either.

I recommend two quantitative research tools

• valuengine.com – Developed at Yale and marketing privately. Relatively cheap.
• MSN top ten picks – Free but no frills. If you are a small investor try paper trades with this at first. Also try leverage scenarios with paper trades.

Where is the human element in investing

There is a lot. Quantitive shops and moving averages just narrow the exogenous and endogenous variable to a manage level. Once you have your universe narrowed, then go to work. Pick stocks based on things like do you like the company and what they do etc.

Remember investing is work not play. I have always said trading stocks is the most fun you can have with your clothes on, but this is about your money. Earn money first and have fun latter. Have fun playing tennis or whatever you like (me I like chess, languages, traveling though Eastern Europe). However, when it comes to your hard-earned money, be wise and objective. This is why I back up my investment choices with quantitative investing research.

1. moving averages
2. stock market news
3. quantitative valuations

For me, if you want to know where the stock market is going you can cross out stock market news. This includes all the gloom and doom written by experts.

One of the worst things you can do as an investor is worry about predictions of stock market doom. Why? Because the result will be your doubts will start to have doubts. I can remember right before the market took off in the 1980s people were predicting the next 1929 crash. Check back over the last year even all the predictions of another black Monday or Tuesday or the next Great Depression. It makes great news to write negative things, but often times the market already has accounted for all the things people have speculated on.

Learn from Odysseus about how to invest in the stock market

The reason is, if you are a market forecaster and are right with your financial market crash predictions, you can get on CNN and write a book. Therefore, it is in your interest as a financial prognosticator to try to predict the market. However, my advice is this, there is no way to be captain of the ship when it comes to sailing your investment portfolio if you listen to these sirens of doom. Like Odysseus tie yourself to the mast of your ship and avoid the sirens (the predictions of the stock market crash today). You need to screen out the noise.

For example, here are some current reasons the stock market might crash.

Stock market crash predictions

The following is a list of reasons the stock market, a leading economic indicator will crash. The stock market is a pretty good crystal ball for the economy. Therefore, if the economy is going down, then the equity market will preceded this.

• People micromanaging the economy are out of answers – Ben Bernanke and Obama have tried everything and nothing is working. That is because they have not asked me. What is needed is not  stimulus shots,but economic healing. You need to understanding how markets work. If you want to improve the economy radically reduce governments involvement in monetary and fiscal policy. Let the markets work and they will adjust. Trust me on this,  I have worked in the economy from a ground up perspective and as well as studying economics. If you reduce government people, simple humble folks will find a way to innovate, create, produce. Republicans and Democrats are guilty in different ways.  Government should not be playing monetary or fiscal chess. Why? They are not smart enough. They are now basically checkmated.

• Housing market is a mess – If the forecasters are correct we will have 1 million foreclosures this year.
• Monetary policy is ineffective – Interest rates are about zero and this is not stimulating the economy, the stock market is a leading indicator. Monetary stimulus is like pushing against the wind.
• Fiscal policy has dried up – The bulwark of fiscal stimulus is done. Throwing money at a problem does not work and creates long-term inefficiencies.
• Taxes are increasing in 2011 – People will have less disposable income.
• Baby booms are retiring – in the 1990s I saw a prediction that the stock market would go up until about 2012 and then boomers would start to take money of out of the market as they retire to live, it seems this prediction was a little early. This demographic wave can not be ignored. Market cycles are correlated to demographic ebbs and flows.
• Massive debt – Federal, State and private debt is not fixed, this was the cause of the crises and nothing has changed much.
• The days are getting darker -  Stock market crashes come in the fall as people’s psychology gets more pessimistic with the shortening day light.
• Gridlock in Washington – Nothing is moving and with the 2010 US elections Republican gains will make Democratic initiatives even more lame (duck).
• Unemployment is structural – The USA is getting a taste of European long- term 10% natural rate of unemployment. When benefits get extended like the 99ers, it is a sign that nothing is going to improve structurally and people get reabsorbed in an underemployment lower wage market. IT and financial managers are waiters and working retail. The US  office of labor statistics announced that people are making in aggregate .7% less than last year.
• 2015 the market might improve – There have been periods of long-term flat markets, for example between 1969 and 1981 the market was basically flat.
• Ask yourself do you create anything – I do not know if I know too many Americans involved in the creation process, but rather moving paper and working on the computer. If Americans are pressing each other pants in a service economy, this is not a good sign.
• People are risk averse – With so much damage done by the market to people’s personal saving why risk it.
• Valuations are high – It depends what numbers you are looking at but according to Robert Shiller, price compared to cyclically adjusted earnings are about 20 and should be about 16, this means this the market is over valued.

If this has not scare you into thinking the stock market is going to crash  what will?

Fear of an economic collapse and a stock market crash will overwhelm you if you are an investor listening to the news on a day to day basis. Better is to spend your time studying investment strategies that have worked.

Here is the reality about the direction of the market. No one knows. As long as I have been investing people have soberly said ‘these are gravely uncertain times’. Do not take council of your fears. Invest in a disciplined rational way.

Think about it, what if there is an earth quake, anything could happen, the Sun could give us a solar storm and fry us. Play to win and do not act on fear.  Think about this, what if you are out of the market because of irrational fear you miss the biggest bull run in history? What if. This is why you need to be objective and not emotional about your investment strategy. I am not in the business of predicting stock market crashes. I often remind myself why I lose money investing. However, my message is this, in any time and any place you can get rich investing if you know what you are doing.

The solution to stock market crash predictions

• Some people are market neutral – If you want to research market neutral investing it is not a bad idea. This way you take market risk out of the equation, however, it will require you are long and short on the market, with the actual equity or with stock options.
• Use a very good quantitative screen on your equities picks – I have mentioned valuengine.com and moneycentral.msn.com top ten picks many times. The reason is if your individual picks are good they will fall less if a crash comes and bounce back faster on the uptick.
• Use a simple moving averages to give you signals to exit the market – Moving averages are not a 100% stock market predictor. However, they work. They have gotten me out of major downturns like in 2007 and given me the green light to get back in. Right now we are in a strange market situation, that is the S&P 500 index is dancing around the moving average. It is not giving a clear signal.  I am watching is closely but will give it a month or so lag even if it crosses below the moving average. This is because if you use something like a 12 month moving average on the S&P like I do, it is a very broad technical indicator.
• The wider the base the higher the pyramid - The longer the market dances around the moving average then when the market does break out into a stage 1 then stage 2 trend it will go higher.
• What if the stock market crashes fast like a full adjustment in a week -  Yes someday there will be another market panic, someday. Do not worry, most everyone will get burned just like you. Fast market drops are very hard to predict and react to. You have to either have your finger on the sell button or put stops in. My strategy is to do neither. I think there are too many false signals out there and you will be neurotic to try to time the market on a day to day basis. I am not a day trader. I have a general investment strategy and if I miss a 1929 type market crash that happens in a a day, so be it. I am not going to sit around and wait for the end of the world when there is money to be made today.  And remember it is only money.
• There is always more risk being out of the market than in – Call market returns luck or skill, if you are in the market and have a plan for investing, a disciplined system, in the long run you should will make more money than the guy on the sidelines, putting his money in a bank CD and getting a free toaster.
• Global markets – When one market is up another is down. If you enjoy reading about economics and stock markets, this is the right time to be alive because the world is full of opportunity. You can invest in almost any type of asset or equity anywhere in the world. There is always somewhere the market is going to do well.

So what is the take away from this post? The stock market might crash as some have predicted, but so what. I am investing with my system (when the signals are right) as I have done for years. Some years will be good and some will be bad, but I am playing to win and will. There is generally more risk of being out of the Stock Market than in. Develop your own investing systems and make your capital work for you.

It is beyond me why some people are afraid to live their dreams. I know life is hard and you have pressures from all side, money, parents, fears but why do you not live your dream? You have to be strong because this is the only life you have. ‘It is because we will never be here again that life is so sweet’. Yes, I believe in God and see this life fragment of our existence in eternity. However, this life is important in itself and you are here for a reason. This life means something and if you are not dreaming and then living your dreams you are not discovering the meaning of your life, It will be a wasted life.

It is very hard to do when and most people are afraid to make a wrong choice. Here is a trick to help you overcome this fear: remember there is no such thing as a wrong decision in life as everything in life is a learning experience. Just make a choice. Exercise your freewill.

I know one friend of mine who has been in a bad relationship for many years. It is not that bad, just not the real deal. It is just not the moon and the stars. Why he does not go for what he wants in terms of love is beyond me. I think it is fear.

I know one girl who has a great job, interesting everything going for her in the right direction, but no guy. She tried Internet dating but really is settled in her job and habits. She will not get married.

I think again it is all about fear that people do not live their dreams. Fear of failure or something bad will happen. You know what, maybe something bad will happen. Maybe everything will be wrong and then it will be the end, you will get sick and then then end, but so what. At least you lived your life.

Do you remember the movie Papillion (he was stuck in captivity on an island)? He has a dream:

Judge in Dream: I accuse you of a wasted life.
Papillon: Guilty I’m guilty.

Do not waste your life. Be free from your fears and live the life that you are suppose to live. Whatever that life is. Feel the fear and do it anyway.

The first step is to dream

If you are not dreaming of something, that is anything, I highly recommend you start. You need to have a vision. If you do not have one start thinking about what you really loved when you were a child. Maybe it as travel or going to France. For me it was learning languages. But whatever it is you should really start dreaming this is the first step to living your dream.

Do not be afraid to live their dreams step two

What is the second step? Start dreaming about what is needed to achieve your dream, that is concrete logistical steps. Thinking is the hardest work there is that is why so few people do it. Think, dream and plan, if you do not have the strength ask God to help you. Read books like the ‘Power of Positive thinking’, whatever it takes. What the movie ‘Yes man’ – the man who said yes to everything everyone asked. It is based on a real story you know.

People are destroying their lives working at whatever jobs and relationships.

I have scores of stories like this, people ‘s whose minds are free and they are living their dreams and they have a wonderful life. Look at hippies, many of them became very successful people because their minds were open and free. They were not afraid to live their lives. For example, I had this friend who worked in a coffee shop and looked like he crawled out from under a rock. I was an investment guy. My parents where always said ‘look at that boy he will never amount to anything’. I said he is doing what he loves in life. They shock their heads. You know what, his mind was open and free and he started his own company and he is a millionaire today. I think that is the rule, as you know from the ten richest people in the USA, only two graduated from college.

I have another friend at 55 years old was unemployed so he started a company and now is living his life. His friends who got laid off are still complaining about their life.

I have scores of stories of people who are afraid to live their dreams and are mildly depressed.

If you  need any motivation write me. Whatever is blocking you I might be able to point you in the right direction.  I would not talk so big if I had not done this all myself. My message is do not be afraid to dream and then to live your dreams.



Examples of how government helps the wealthy:

• Bailouts of companies - These are senseless distortions of the market than make the US less competitive.
• Deductions for those with money – Liberal tax deductions on businesses expenses and loopholes for wealthy people.
• Corporate Welfare – This you can not deny if you know anything about the Political process in Washington, D.C. lobbies and special interests rule.
• Military – this is the largest special interest.
• Social Security for the upper class – I know many wealthy people in Florida receiving nice Social security checks.
• Real Estate surprisingly helps the rich – many laws and tax laws benefit homeowners and not the poor, who rent.

My wife’s reply was, well, if that is true then there is one solution. I said oh, yeah what? This was her reply:

If you feel that the government only helps the rich, then we better get rich

With the above statement she is right. In a free capitalist economy the primary reason for people being poor is wrong thinking. I know this sounds radical or New Agey but it is not. With an average intelligence and the right attitude you can get rich in a free society. The only thing preventing you is sloth. Being mentally lazy and not exploring ways you can make money by creating value for others is the reason people are not rich. Yes there is luck involved but if you really spend about a year brainstorming I think you will come up with an idea besides going to work. Start with reading books on why the rich have money.

The issue is thinking is the hardest work there is, that is why so few people do it. Dare to think. Do not be afraid to be creative by making money with what you really love.

Why people complain about the rich

People complain that the government only helps the rich because there is a lot of truth to their complaints. However, you can not wait for the world to change. You have to change.

Why do people wait about for the government to help them? Why do they complain the system is geared towards the wealth? Or proclaim you need to be rich to make money. The truth is in a capitalist economy all you have to do to be rich is create something of value and own the process. In my economic blog I explain a lot about how to make money in a capitalist economy. How to be rich.  Stop complaining about not having money and saying the system favors the rich. The reality is if you feel only the people in power only help the rich, there is an easy solution. You better get rich.

The reason why people lose money in the stock market is twofold. Either they are unlucky, as the stock market is still a combination of skill and luck, or they do not have a disciplined approach to investing. It is that simple.

You can make all the right decision and still lose money. You can make all the wrong decisions and make money in the stock market or in life. This is the way it is. Life is an interaction between the knowledge and probability. Many people who have made money in the stock market are lucky, not skilled. Skill comes into play when you have a system and perfect it.

Wall Street sign - Find out why people lose and make money on Wall Street.

Prevent losses with systematic trading

If you want  decrease your chance or losing money in the long-run, in the stock market, here is the way.  I would recommend researching the best trading systems. Search high and low until you find one or two that is convincing and backed up by real sceintically tested methods, not some cheesy sales pitch. Once you find a sytem, your mission is to build on it. It could be a simple investment approach like buying the S&P 500 index and holding it. With this you will get about 10%, in good times.  This is a trading system.

Compare the simple index model above with the approach most people take, that is buying and selling equities based on hunches or tips or a few hours of research. These people may do well, but it is like the player in Vegas that does well in the short-term. In the long-run the odds are against the investor for earning greater than normal returns.

Your objective in buying and selling equities is to change the stock market financial game from backgammon to chess. That is reduce probability to investment stragegy.

How to earn greater than average returns in the stock market

• Choose the best trading system – Compare various systematic approaches to investing over the long-term. Find one that achieves a significantly greater return. I like valuengine.com and MSN money top ten picks. These are tested and back tested to give you a better return than most of the high paid wizards of Wall Street with fancy degrees. Why reinvent the wheel?
• Do live trades or use paper trades to get use to the system - Once you feel comfortable with trading with the system you chose, try to add a little finesse or your own creativity. It could even be with paper trades at first. I once saw on an IQ test a proverb question. ‘If it is not broken do not fix it’. The question was what could happen if you try to fix something that is not broken. My people would say you would take something that is working and break it. I disagree. If you try to fix something that is not broken you could improve it. And on the IQ test that was the correct answer. Therefore, try to build off a tried and tested system to break new ground an improve it.
• Use your own intelligence to invest creatively – To improve a tested trading system, maybe add leverage or one more layer of technical analysis.  Narrow the universe of stocks to a reasonable level. Then analysis what could improve on this. This is the point where you should trust yourself. That is, once you have a winning team of stocks then you can try to create a new strategies book working with winners.

How losing in the stock market is like having a bad work team

Here is a metaphor I think everyone can relate to. Every manager in business knows, that if they have a winning team of workers under them, almost no matter what they do, it is hard to not reach your target goals. The department is really on autopilot. On the other hand, if you have a team of people who are lazy or do not know what they are doing, no matter what you do, the team does not reach its planned matrices. And so it is with stock market investing, start off with the right team of winning stocks. Base this universe of equites on other people’s work and research. This is not thing more than division of labor. Let the technical people crunch the numbers and you be the high level decision maker.

If people followed these rules I think they would not be asking themselves why I lose money in the stock market. Although I initially said it was luck or not being systematic, in the long-run luck can be controlled with a disciple approach to investing.

Empty apartments are all over Poland from over investment

I am an American living in Kraków, Poland. I am also a Polish citizen and an investor. My view of the Polish real estate market is this, if you want to buy a house to live in for the next ten years, that means owner occupied, I think this is fine. But if you are speculating on investing in Polish real estate you will almost certainly lose money. All these photos are with in a five-minute walk of my flat and this is not even all the empty buildings, there are, just a small sample. There are 1000s and 1000s  of apartments waiting for an investor or someone to take them off the builders and agents hands, in a short radius of my residence.

This building they told me would be filled three years ago, it is still empty

Everyday, I see a new investment being complete and my wife jokes good, I think they should build more, and sure enough they do. This is nothing more than a speculative bubble that is in disequilibrium for the long-run. I know many people in Poland in Real Estate from builders to agents to lawyer to investors and they all think the market is over built and unrealistic.

Warning against investing in the Polish real estate market

• Over supply – There is a huge over-supply in the housing market. Foreign investors build on speculation and local people can not afford their asking price. I see scores of empty investments, new and old apartments empty, and they are empty for many years.
• Weak Demand – Every person I know is building their own house in the suburbs. No one person I know is moving into a new construction. The price per meter in a city is about 3-4,000 dollars a meter. In the suburb you can build you own house for about 500 dollars a meter.  My sister-in-law finished a beautiful large house in the country for 300 dollars a meter.  So what person will pay 1000% more for a house that is not built to their design. Usually some ugly block of flats that is some investors dream of making a profit with no care about design or the people who will live there.
• Mortgages are hard to get – For normal people it is not possible to get credit since the crisis.
• The population is decreasing or flat – Even a popular city like Kraków where I live, has a decrease in population every year, partially because of the birth rate but also emigration to warmer or high paid countries now that Poland is in the EU.

Construction everywhere because real estate operates on a lagging cycle economically.

If you just consider supply and demand and not even the tight credit market or long term demographics, the market is too high.

More investments then the market can handle in Poland

My friends in the Real Estate business have said they are selling nothing.

One of countless Polish houses waiting for an investor in Kraków

I have heard people putting money down on a new construction and the builder goes bankrupt. I think the housing market in Poland is a mess.

Empty lots for sale everywhere or new buildings going up only to remain vacant for the next five years

The good news about Polish real estate

Poles are hardworking sensible people. The country is getting rich.  With time income levels will rise. However, if the average income is 1000 dollars a month, this should be the average price of a house per meter.

The whole city is for sale as people move to the suburbs and still more investing

Right now it is 300% this. Prices only really increased from 2005-2007.  To me that is a speculative bubble. Before that is was about 500 dollars a meter instead of 3-4,000 dollars a meter. Some someday in the far future incomes will rise and prices will come down and there will be equilibrium in the market.

Poland is in the tail end of an over investment construction cycle

Until that time, I would not walk but I would run from investing the Polish real estate market if you are considering buying. Me personally I will build my own house. It is cheaper and to my design. It will be my primary residence, not some speculative real estate investment in Poland.

Many buildings are empty waiting for an owner.

Let me know when you think this market will recover, but some people say ten years.

Many buildings that can not sell are offered for rent, but are still empty

I am someone that lives in Poland and know about the real estate market first hand. It is not a good investment.

In personal opinion I think Wikileaks is reliable. Of course there might be some mistakes on the website and nothing is proven until lawyers and courts decide, as this is our society’s standard for the what is real. However, basically they put information on the Internet that pretty powerful. Read on as to why I think so and maybe you should trust them more than your government.

I believe in transparency in government. I live in a post communist country where government was all secret and always justified their actions as protecting their army or police or their citizens. This was not true. It was always a Jason Bourne type convert action that the government did not want people to know about. Then when they were discovered some smooth talking general would come on and talk about it was to protect people or army that we kept this secret.

Does this sound like cloak and dagger a communist government? Think again. In the USA, there are abuses of power. I think Wikileaks was right in publishing the documents it did regarding the Afghan war.

What is good? I think the truth is a good place to start. Regarding Wikileaks reliability, what is reliable? I think people who take risks to expose the truth can be trusted more than those who try to hide the truth. What do you think?

Examples of what Wikileaks exposed

• War crimes – For example, there is evidence of war crimes such as a US assassination team making a mistake and killing seven innocent children. How is keeping this secret jeopardizing people? If anything if it is public it will help prevent things like this in the future. The whistle-blower Assanger wants you to read the documents and see for yourself if  this recent leak has 1000s criminal events by the military. Is this what the the military is defending as a security risk?
• Helping the enemy – What about the connection between Pakistan and the Taliban. The US gives a lot of money to Pakistan and they help the other side. To me this sounds similar to when the US helped Iraq and Saddam? The USA plays these Machiavellian imperial politics and yet we are a democracy. A democracy which George Washington the founder of our country, warned us against overseas involvement and abuses of past governments. If anything this information brought to light, in the open is important to protect American lives.

Wikileaks’ Julian Assange has courage

The US government is calling Wikileaks’ founder Julian Assange irresponsible. Why? Because they are being exposed. I think Julian Assange has courage and I hope it inspires other people to do the same, that is expose the truth. How can the truth be harmful? This is old information and not tactical information. It is simply politically dangerous to the people who are abusing power by keeping the truth from their citizens.

Assange is under surveillance by police, CIA ,foreign government pretty much anyone with a secret to hide. I know the Chinese do not like him. Iceland has offered him asylum. He runs his server in Sweden on PRQ. Sweden has pretty liberal laws regarding the Internet.

I recommend people look at these documents themselves by visiting the Wikileaks website: Wikileaks.org.

Wikileaks is good and reliable:

• The truth is always good.
• Governments in the past from kings, dictators and communists kept things secret because they had something to hide from the good citizens of their country.
• When people are aware of the truth they are empowered to change, this is a mission of Wiki leaks, to bring transparency to government.
• Contrary to what the inner circle of politicians and old generals says, that is these secrets are harmful if people know about them, the opposite is true. That is in the long-run the truth will be good for governments and in the long-run are helpful. Wikileaks is good.

Is Wikileaks bad? I think not. Wikileaks is good and I think reliable. It brings transparency to the next level, hopefully our children will have a better future which is more open.  Consider Thomas Jefferson: ‘The government that governs least governs best’.

I think organizations like Wikileaks, which is committed to the truth can be trusted more than governments who try to hide the truth. I would have one caveat, that being removing or not publishing names of people whose lives could be endangered for helping the USA in the war.

Do you need to make 10,000 dollars fast? Do you want to try to add income to your main job for fun? These are ranked in order of effectiveness based on my own personal experience. Again these are fun ways to earn cash.

• Have a blog -  If you want to make money this is very popular. You can earn money with advertising or selling your own products or services. Research how people make money with a blog. The downside is it takes about 100,000 words before you start to get respect. This is far and beyond the best way to make money, however, it is not a fast way like a week but a couple of years. Do not read too much about tricks on how to make money online, this just takes your time. Simply choice a topic you really love. It could be anything and write passionately about it.  Start a WordPress blog with an SEO theme and a few plugins. Next write about 1,000 words everyday.  After you write you When you have your first 100,000 you can star thinking of ways to get an income stream from it. If you need help with all of this I can give you an hour or two of consulting if you contact me.
• Tutor the English language – Many foreigners are looking for English lessons. Put up announcements on online classified or signs around town if you live in a city.  Use Murphy’s grammar and English conversation, specializes in medical English and earn more. It is easy to get students and when you are good it pays well.
• Sell consulting services on the Internet (IT) – Very good money here but need technical knowledge. You can even sell this remotely via Skype.
• I have Sold things on e-bay  – Works well if you can find a niche. I sold old currency. I love in Eastern Europe and bought it very cheap and sold it to the Americans. It is win in as the value I offered was very good.
• Life coaching services – Only if you have your own act together, you can charge a sliding scale based on need.
• Resume writing services – This is similar to making money with consulting. If you were a decision maker in the past with hiring people then you can do this.
• Created an ebook – I believe this is infinitely better than selling someone else’s e-book. The problem if you have to write something good, compelling and not recycled information. Information based on your personal experience.
• Free lance writing – Your a native speaker in English.  This is very valuable, if you write for others you can have a nice cash flow. But why? Why not write for yourself. No one will pay you what you are worth?
• Reflexology – or any other type of holistic treatment for fun.  Buy body shoppe oil and offer spa or treatments for people. You have to be  well organized with a table and a few things to be legitimate.
• Sell vegetables in the farmers market – Buy it from a wholesaler and sell it in the market. Many immigrants do this as it is easy and fun.

If anyone has tried anything else let me know. I am always open to idea, but these are the ways to make money I have tested.

More resources on money-making

• If you want to understand the theory of how to be a capitalist read here: how to make money.
• It you want to read about some untested methods try this: how to make money fast.

The three main ideas in Islamic finance are:

• Riba – This is interest or usury which is forbidden. This by far is the most important concept in modern economics and Islam as it relates to the banking system.
• Gharar – The idea of speculation on chance which is not allow, such as insurance.
• Zakat -  Taxing with a specific earmark for helping the poor.

These ideas all come from the Qu’ran. The first and second point is the most important and really only the first.

Islamic economics compared to Western Economics

I think the easiest way to understand the differences in philosophy is compare Western political economy with Islamic political economy. The following are similarities between two systems of political economy.

Similarities in the Western and Middle Eastern economic systems

• Belief in free market and low government interference in trade.
• Belief in private property.  Like in the West in the Middle East property is divided into private property, public goods , and state-owned property. Before there was John Locke who wrote about the definition of property rights or Adam Smith about free trade there was Ibn Khaldun the father of Muslim economics in the 14th century, similar ideas about supply and demand were addressed.
• Belief in the Muslim, Christian and Jewish world in charity and brotherhood of all people and helping the poor. Tilting is part of this.

Differences in the economic thinking

Really the main difference is the banking system. The the Muslim ideal is to have a banking system without interest. This was clearly written about in the Qu’ran. There is no question. Interest free banking in the Muslim world.  However, because of the time value of money, it is very hard to run a modern economy based on these principles. Therefore, although Islamic banking does not have interest they compensate by charging other fees which works out to be the same idea. That is they calculate the cost of lending with present value and risk factors. Then they charge not interest but fees. So in the end it comes out the same.

Therefore, although Islamic banking is central to economists and academic writing in the end there are work around for day-to-day businessmen. The same is true for the insurance industry. The two ideas of riba and gharar are respected in spirit but in practice a practical solution is found for the modern world.

An example of where these work arounds are implemented is the Middle Eastern market success stories is Dubai. Although facing a downturn now, this sleepy port city was transformed into money center metropolis based on free market and trade. Lets face it, besides being oil rich, Arabian countries are very good at trading, wheeling and dealing. I think no one can make a strong point that Islamic jurisprudence interference much with everyday business and market operations.

If anyone has anything to add to this please let me know as I tried to cover the main points of Islamic economics for the westerner. I have travelled to four Middle Eastern countries and in my personal experience, these economies show little difference in practice to western markets.

What did it mean that Adam Smith was laissez-faire? This asks another question, did Adam Smith really support an economy free from government interference? Generally yes, but there is more to the story and it is worth trying to understand more on the subject. The most important thing is to understand why Adam Smith believed, what he believed in. He believed a government that leaves people alone to live their lives according to their own judgement is the best for all.

Adam Smith’s laissez-faire economics ment:

When people are given the freedom to be the best they can be, the result is the rich and the poor have  a better economic situation. Yes the poor are the ones who win in the free trade capitalism of Adam Smith.  The purpose of government is not to make everyone equal. It can not happen, but rather give everyone the freedom to make choices on their own enlightened self-interest.

The philosophers of the enlightenment believed that the role of government was to protect the rights of the individual so people and society as a whole would be happier. After all happiness is the goal of life. In my heart of hearts I truly believe in the ideals of the enlightenment. It was a great time for humanity and philosophy. I believe in the innate goodness of men. I believe that all people have the ability to achieve great things in this world, everyone.

The only two thing that can hold you back are wrong thinking or wrong government. It believed that men basically have the same innate ability to do well in life if given a chance. This means freedom. After all I am an American who has spend a good part of my life in Eastern Europe. I can compare two economies, one that is free and one that is not.

What does this have to do with laissez-faire?

With this freedom from the burden of government people strive to be the best they can be, individuals will be happier and so will society.

The poor will become middle class relatively fast with laissez-faire.

Laissez faire means ‘let do’ translated from French or ‘let it be’. Adam Smith never uses the term in his Wealth of Nations nor in his The Theory of Moral Sentiments. This is surprizing as it often connected to Adam Smith.  I think simply because it was a french expression. However, there is another reason.

I think people confuse his idea of the invisible hand with laissez-faire. The invisible hand is more about unintended consequences of individual action on society as a whole. While laissez-faire is a philosophy where the government is hands off business. And does not compete, regulate, tax business excessively. Similar ideas but slightly different focus. The classical liberal thinkers like Adam Smith wanted to answer the question how to maximizes your happiness.

The origins of laissez-faire

This French word import dates back several hundred years. It comes from M. Le Gendre when he and some French business leaders where asked my the French Mercantilist economic minister what the government could do to help their business. His reply was laissez-faire, lets us be. Every job creator, knows the best thing government can do is let the markets work. Vincent de Gournay was the French 1750s version of Ronald Reagan. The French commerce minster fought hard against encroaching government regulation. He tried to deregulate business and the result was positive. We need this today.

In English it first appear two years before Wealth of Nations, in 1774 in 1774, Principles of Trade by George Whatley,he coauthored the book with Benjamin Franklin. The first classical economics to use the term was Jeremy Bentham.

What does Adam Smith have to do with laissez-faire?

It is interesting that Adam smith does not use this term once in any of his works. Smith was describing something similar, but more radical and detailed than the simple notion of ‘let us be’.  Adam Smith was making an argument that when government protects individuals freedoms. This is classical liberalism. I rather than business, societies will thrive, people will be happy.

Adam Smith laissez-faire economics did not mean:

• Greed
• Selfishness
• No government
• Taking advantage of workers

Adam Smith is one of the most referenced economists of all time, but I think many people use his thinking to support their own views on Political economy without reading him. I have created a free e-book of Adam Smith’s wealth of nations. This book was not written for the capitalist class, but for all people especially the poor. I created a free e-book that has his complete Wealth of nations for free to download if you want to read him directly and read about laissez-faire  economics first hand.