Agora Financial’s Rude Awakening

Jump to Comments

Baltimore, Maryland

• The Dow bounces back – what a difference nothing can make!
• Back to where we were before the last big drop,
• The three principals of all great fortunes and plenty more…

Joel Bowman reporting from Paris, France…

So here we are…back to where we were last week. Had you been out golfing during the past few days, you might not even notice that 600 or so points have been both gained and lost while you were away.

With all the volatility in the markets these days, it’s easy to forget the simply lessons. “Don’t lose money,” for example, is one rule that is becoming increasingly difficult to follow.

That’s why we thought a column on “getting back to basics” might be of interest to you. It’s a little longer than your usual Rude, so we’ll dive right in. Send any comments to the address below and, as always, please enjoy the read…

— Bulletin Board Elite – Final 661 Spots —

JUMPER No. 1, Jan. 18, 2007 : Defense stock soars 2,341% in 12 months — then another 47% after joining the NASDAQ Capital Market

Those who’d bought just $1,000 worth of this little-known defense stock only a year earlier could have been sitting on $24,410. And after its first four months on the NASDAQ — when this “jumper” zoomed up another 47% in value by May 22 — they’d have been able to cash in for more than $33,148.93!

But that’s nothing compared to what one microcap expert has lined up.

In fact, he’s sitting on 18 companies that have just as much potential if not more … If you are one of the first 661 to sign up, you will receive the names and analysis for all 18, plus any other ones he comes out with in the coming year.

So , check this out right here before it’s too late . This offer closes tomorrow,July 31, 2008.    

——————————————–

Remembering 1980
By Christopher Hancock

It’s 1980.

Reagan defeats Carter. Lennon falls to Chapman’s bullet. Mount St. Helens erupts, killing 57. CNN, the first all-news network, hits the airwaves. 3M introduces the Post-it note. The Cold War escalates. The U.S. boycotts the Moscow Olympics. Saddam attacks Iran. Japan surpasses the U.S. as the world’s largest automaker, while Americans sit transfixed to find out who shot J.R. But this was the year’s greatest story…

The 3 Principles of All Great Fortunes

Until 1980, IBM, the world’s top computer company, controlled the mainframe computer market.

The Fortune 500 were the only ones with pockets deep enough to afford them. So the idea of taking something that required a company’s war chest down to something accessible to John Q. Public seemed a bit absurd to most at Big Blue.

But eventually, the starched white shirts couldn’t help but notice the tremendous ripple effect startup companies with unconventional names like Apple were making. In fact, IBM’s own engineers began turning to first-generation PCs to do the work their own mainframe computers wouldn’t support.At that time, only a few personal computers were available to the public.

Mostly, hobbyists used them. Picture ham radio guys in basements — that pretty much summed up the general scene. For these market “insiders,” the long-term potential seemed self-evident. Computers were on the verge of taking off. Creating the PC for that generation would rival what Henry Ford did for his.

Big Blue began to grasp the potential. It wanted a piece of the action. But it had to act fast. The white shoes of the East Coast were out to court the flip-flops of the West.

So IBM decided to make a personal computer. This it could do… well, partly. The hardware seemed easy enough. But the software — the programs instructing the hardware exactly what to do — posed a whole different set of problems.

IBM had two choices. One was Gary Kildall, the 38-year-old computer science Ph.D. who invented the PC’s first operating system, CP/M. The other option: a 24-year-old Harvard dropout specializing in BASIC computer language.As one observer put it: “One would hit the jackpot; the other would be forgotten…A footnote in the history of the personal computer.”

As it turns out, IBM needed both an operating system like Kildall’s and the BASIC computer language software pioneered by Bill Gates.

Gates jumped at the chance. Kildall balked.

IBM, however, still needed an operating system similar to Kildall’s CP/M. Gates turned to a local programmer named Tim Paterson.

A few years earlier, Paterson had purchased a CP/M manual from a retail computer store for $5. He created an operating system quite similar to Kildall’s. In fact, the only discernable difference between the two may have been the name printed on top.

Gates quickly made Paterson an offer. $50,000 bought Microsoft the rights to Paterson’s system.

But the true stroke of genius — the vision that propelled Gates to among the likes of Vanderbilt, Hearst, Rockefeller and Morgan — came next.

For all intents and purposes, Gates gave his software to IBM. He encouraged its use. Gates instinctively knew the real cash flow would stem from selling the high-margin software, not the hardware. And that’s how Gates made his fortune. IBM would market Microsoft to the world. Microsoft would then license its technology to third-party clone makers like Dell and Gateway. And so the story goes.

The moral of our story goes something like this. All great fortunes require three main ingredients: vision, risk and a stroke of luck. Gates envisioned the impact software would play in every facet of modern society. He took a great risk to drop out of Harvard. And lest we forget, what a stroke of luck to stumble upon Tim Paterson’s clone.

Here’s the Final Word on True Wealth Creation

There’s no billionaire trade secret hidden in some UBS vault deep below the Swiss Alps.

Take a look at the Forbes 400. The price of admission to this year’s club will run you a mere billion and change. But look a little deeper at the names that adorn that coveted list. What do you see?

For starters, we’re talking the kind of real wealth that doesn’t stem from market tips or even 25 years of impressive investment banking acumen. How many day traders ever make that list? How many Wall Street bankers have ever cracked the top 10?

More often than not, the world’s wealthiest individuals built the world’s greatest companies. They built these fortunes over decades, not trading days. Bill Gates developed a single program. Sam Walton opened a single store. Rockefeller built a single refinery.

Unfortunately, conventional wealth creation has changed. Capital markets continue evolving at a pace only the brightest minds can effectively comprehend. Financial transactions today require much more than the man on the floor waving his fingers and tossing little scraps of white paper. Modern financial strategies include a combination of futures or options, exchange-traded funds or other derivative instruments.

The reasons are self-evident. Developments like the Internet, cell phones, lightning-fast courier services, airplanes, FedEx and UPS have sent the financial world into overdrive.

Our brave new world offers Johnny Day Trader the ability to simply pull out his BlackBerry, punch three buttons and send millions of dollars from Tokyo to London without so much as a pause from his bonefishing expedition on some remote Bahamian flat on a calm summer day.

Consequently, many have come to believe that more transactions and more financial sophistication equate to more wealth in a more expedited manner. We’ve been told to expect more for less. Productivity gains foster the belief we can still have eight-minute abs after consuming a pizza delivered in less than 30 minutes.

Modern productivity has produced an entitlement class of children playing children’s games…a generation weaned on the bottle of instant gratification. A generation that’s been told to expect more for less…that’s been assured that it’s O.K. to spend more than you make…because in the end, the government will be there to brace your fall.

Successful investing requires a combination of patience, realistic expectations — and, most importantly — buying shares of businesses at the right prices. You want companies trading near or below their intrinsic values with established earning power. That’s basically it.

In the investing world, there are a couple of asset managers we admire who truly follow this investing philosophy.

Curtis R. Jensen, co-chief investment officer and portfolio manager of Third Avenue Small-Cap Value Fund, recently wrote:

“Recognizing that some of the world’s great fortunes have been cobbled together through the long-term ownership of a few mundane businesses, we try to emulate the approach employed by some of these same industrialists, a group we might label as ‘Main Street’ business owners.”

Jensen’s list of “Main Street” key investors includes:

· Warren Buffett (Berkshire Hathaway)  
· Carl Icahn (Mylan Laboratories, Nabisco, Texaco, USX, TWA)  
· T. Boone Pickens (Mesa Petroleum, Gulf Oil, Phillips Petroleum, Diamond Shamrock, Newmont Mining)
· Laurence Tisch (Loews Corp., CBS, tobacco, insurance, hotels)
· Philip Anschutz (Regal Entertainment, Qwest Communications, Southern Pacific Transportation).

As we said, great businesses, like great fortunes, take decades to produce. As we’ve also said before, we’re sure that tech stocks, swank hedge funds with their excessive fees and other “insider” investments make great stories. It makes you feel good to proudly tell your neighbor that your broker just slipped you into some exclusive private nanotechnology company that promises to turn the Earth on its axis, reverse the spin and solve the world’s energy problems all at the same time.

Meanwhile, the value investor will keep a good portion of his money in a boring company that supplies the world with the cheapest steel and trades at a very fair price. He’ll find a company like Posco (PKX:NYSE), one of the top 10. He’ll drip the $1.56 in annual dividends and watch his capital grow. And he’ll make his investment just as everyone should make their investments…with a margin of safety.

And Always remember to follow rule No. 1: Don’t lose money.

—- Resource Trader Alert Guest Pass Offer —-

An ultra-rich trading expert now offers you…

A Behind-the-Scenes “Guest Pass” to Profit in the World’s Most Secretive” Millionaire’s Market “

Beginning tomorrow at 7:10 a.m. EST , you can use your “guest pass” to go behind the scenes in the financial community’s best-kept secret: the “Millionaire’s Market.”

Once inside, you’ll have a chance to legally “withdraw” $810 or more per week — and you’ll be able to deposit the money directly into your retirement account! Grab Your Pass Here

——————————————–

[Rude Endnote: Long flight. Must sleep. Will check email when we wake.

Until tomorrow…

Cheers,

Joel Bowman
Rude Awakening

aussiejoel@the-rude-awakening.com