It seems like the end of the world. Nothing is ever going to get better, in fact, things are only getting worse. So, why in the world are people flocking to gold like Bill Clinton does to questionably-looking interns? Why would people buy something that only old women and famous rappers cover themselves with? Why is the price of gold at an all time high? This has been the most asked question that has been flooding my inbox, so let’s answer it.

Keep reading to find out why this guy is actually an investing mastermind

Meet: Inflation

Remember that time you punched the bartender in the kidney for diluting your manly Cosmopolitan with water? Well, that’s exactly what the government is doing with your money. Think of all the trillions of dollars the US government has in debt. Think of all the money that it keeps on printing, the stimulus-es, capital injections, social security, drug money, whatever. All this causes inflation. It causes the worth of your money to go down.

It means that your $1 will be worth 96 cents next year. And your 96 cents will be worth 92 cents the year after that. And 88 cents the year after that. And so on. Now imagine if that $1 actually represented all the money out there. Now imagine that it’s going to be worth half has much in a few years.

That too was my reaction

Meet: your solution to inflation

And it’s not going to help to take that wad of cash out of your mattress and stick it in the bank. Because what if the bank goes down? You lose your money. So, you need something that will hold its value when your cash becomes as useful as a wad of toilet paper.

That’s why people buy gold. Why? Because gold actually has some sort of real worth.

Meet: your biggest fear

Have you heard of those stories of hyperinflation? Of people in Germany  having to buy a loaf of bread with a wheelbarrow full of cash in the 1940s? Or the $100 trillion bill in Zimbabwe? Imagine having to pay a hooker  with a truckload full of $100 bills for a half hour of service. That’s precisely what people want to avoid.

He's in line to buy himself a stick of gum

You see, cash has no value. Is a $100 bill really worth $100? Is a $20 bill worth $20? Probably not. In fact, our cash is only worth as much as we are told that it’s worth.  I know that my $20 bill is worth $20 because that’s what I am told. But what happens if I am suddenly told that it’s only worth $10? Well, there’s not really anything I can do, because, in the end, it’s just a piece of paper (or whatever cash is made out of) with some drawings on it. And how much can that possibly be worth?

That’s precisely why people are so damn scared when they hear things like the freaking United States of freaking America is about to default on its freaking debt, or go bankrupt, or whatever the news is telling us is going to happen. Imagine working your entire life and amassing a fortune and suddenly it’s all worth as much as a 32 inch television with only one working speaker.

Meet: your solution to your biggest fear

However, how much is a hunk of gold worth? It’s worth as a much as a hunk of gold! It has real, tangible value that you can touch, smell, lick and melt and then take a bath in (not recommended). Its worth is located inside it. What you see is how much it is worth. No one can tell me that my briefcase full of gold is worth as much a teaspoon’s worth. Why? Because it’s right there! It’s right in front of your eyes, glistening under the sun and making 50 Cent drool with envy.

That’s why people flock to gold in tough economic times like rabid pigeons do after a few crumbs of bread. It’s literally their salvation. And that’s exactly why the price of gold skyrockets anytime there’s a hint of economic unrest. That’s why gold is currently at an all time high. Nobody wants to be left with a wad of worthless papers.

And then how would Hugh Hefner get all these women?

And how much more assurance does that give you? That you can automatically expect the price of gold to rise when everything else is tumbling? It’s one thing to know that, if and imminently when everything goes to hell, that at least your gold will be worth something. But how much nicer is it to have something whose value will rise amidst all of this doom and housewives crying over their  cut of supply of Louis Vuitton purses?

Exactly.

And that, my friend, is why people invest in gold.

Choosing an online brokerage works much the same way as choosing a credit card. And just like you would choose a credit card based on the rate of interest, fees, penalties, reward points and prefer that it not be sold to you by that creepy guy who works at that supermarket, you’re going to want to choose an online brokerage account based on certain criteria as well.

The first mistake that people make is by jumping into the brokerage with the lowest commissions – never do this. There are plenty of online brokerages with low commissions that entice new customers but they are able to do so only because they skimp out on such rather important things as customer service and, you know, actually functioning. Let’s take a look at the factors that you should consider when opening an online brokerage account.

You should choose your brokerage the same way you choose your erectile dysfunciton medication

Commission Fees

As you already know, online brokerages charge a commission fee for every transaction. One of the cheapest big-name online brokerages today is OptionsHouse (www.optionshouse.com), which charges $2.95 per stock trade. The next big and cheap brokerage would be TradeKing (www.tradeking.com), which charges $4.95 per trade. The good thing about these two brokerages is that they charge the same fee for regular stock trades as well as broker assisted trades where human brokers complete the transaction for you.

Customer Service

Customer service is something that’s especially important for when it comes to online brokerage accounts. A good brokerage should be there for you when you have a question, a technical issue or just need someone to talk to because you’re feeling lonely. Although you can’t quite gauge just how good a brokerage’s customer service is without actually being a customer, you can always rely on the experience of others. For this reason, magazines such as SmartMoney and Kiplinger’s release online brokerage rankings based on certain criteria, one of those criteria being Customer Service. TradeKing is the brokerage that seems to really enjoy coming out on top in the Customer Service rankings as well as being rated the #1 Online Broker.

Minimum Deposit

Some online brokerages won’t let you open an account with them unless you deposit a certain amount of money – watch out for this. This tactic is especially annoying for those who don’t have much money, especially students. Many of the top brokerages are moving away from this annoying setback but a few of the bigger name brokerages such as E*TRADE (www.etrade.com) and Scottrade (www.scottrade.com) continue to stick to their guns. Thankfully, the majority of new brokerages don’t require a minimum deposit; this includes such brokerages as TradeKing, OptionsHouse, Zecco (www.zecco.com) and Firstrade (www.firstrade.com).

Account Maintenance Fees and Inactivity Fees

Some sneaky buggers really enjoy squeezing out every last penny out of you and will charge you fees simply for having an account open (usually called an account maintenance fee). They will even charge you fees if you don’t make any trades, called inactivity fees. One brokerage that really enjoys to do this is E*TRADE along with other offerings from the bigger banks. No matter – we will just avoid them. TradeKing, Firstrade and OptionsHouse are a few brokerages that have no such fees.

Above: the brokerage's CEO, he desperately needs your money

Extras

Brokerages will attempt to offer you everything and the kitchen sink to convince you to choose to do business with them above all others. To be completely blunt, most of these ‘extras’ are just crappy add-ons that are provided with more features and for free elsewhere (which we will go over later). A lot of the time these offerings include such things as free technical analysis tools, charts, calculators, news and screeners that you can find for free elsewhere.

Then again, sometimes the offerings can be somewhat decent.  For instance, TradeKing offers access to the stock resource behemoth Barron’s along with thousands of fundamental analysis reports and other online tools.

Did you know that people actually made a ton of money in the last market crash? And that just as many people are making a ton of money in this market crash? And that an equal amount of people will make a ton of money in the next market crash? And did you know that you too can make enough money to buy the Statue of David and use it as a coat hanger?

How you ask? How can you possibly be making money amidst these terrible markets? With stock prices falling faster than a rocket-propelled anvil? By shorting stocks. So, what is it and how can you do it? Keep reading.

Short selling – what is it and how does it work?

Do you know how you’ve always been taught that the way to make money in investing is through buying low and selling high? For instance, buy shares of a stock for $10 per share and then sell them for $20 per share. That $10 in between is your profit. Go buy yourself something nice!

Well, short selling is the exact opposite. In this case, your goal is to buy shares of stock at a high price and then sell them for a lower price – and the difference in between is your profit.

Before, you would buy shares of a company like Apple because you believe that its stock price will skyrocket because of the upcoming releases of the iPhone 5, iPad 7, iPill, iPlane, iPajamas and iPlunger and all the money that the company will rake in from this.

However, with short selling, you would instead invest in a company like Hewlett-Packard (HP) because they’ve just replaced their CEO for the 7^th time this week, shut down their recently purchased Smartphone division, failed miserably at their first try at releasing a tablet, are considering getting out of the PC business (they are the biggest PC maker in the world) and they have the worst board of directors in history.

See: HP's Board of Directors

Getting the idea?

Short selling – how it (technically) works

How short selling technically works is where it gets kind of tricky. Thankfully, you don’t have to know exactly how this works – just that it does work. But for those inquisitive minds out there – here is the explanation.

The first step of short selling a stock is the opposite of regular investing – in order to enter a position you must first sell those shares. How can you possibly sell something that you don’t own, you ask? That’s because you’re not selling your own shares – you’re selling somebody else’s.

When you short sell a stock, instead of buying shares of a stock like you would regularly, your broker instead lends you these shares. These shares can come from their own accounts, their customers, the garbage can in the storeroom closet – it doesn’t matter, you now have possession of these shares.

Eventually, you must square off this loan – you have to “close” it. This is the equivalent of selling your stock in regular investing; just here you exit your position by buying back the same number of shares that your broker originally lent you.

If the price of the stock dropped during this time, you’ve made yourself a profit on the difference. However, if the price of the stock rose during this time, it means that you have to buy it back at a higher price, so you lose money. It’s all very backwards!

An example

You hate Research in Motion, the Blackberry maker. You believe that this company isn’t even worth half of what it’s trading at today and that its management team is as useful as a brain-dead porcupine incessantly smashing its head against a can of expired milk. You decide to short sell it. You place a short order on 1,000 shares of Research in Motion (RIMM) for $20 per share – a total of $20,000.

Scenario 1:

RIMM shares are now trading at $10 per share. Meaning, the shares that you are shorting are now worth a total of $10,000, down from $20,000. What does this mean? It means that you’ve just made yourself a cool $10,000 ($20,000 – $10,000).

Scenario 2:

RIMM shares are now trading at $30 per share, the shares are worth $30,000. What does this mean? It means that you’ve just lost yourself $10,000 ($20,000 – $30,000 = -$10,000).

Makes sense?

Opportunities 

It may not always be easy to tell what the next big thing is. However, it’s a hell of a lot easier to tell what’s going to be destroyed and will no longer exist in a few years. Think of how the advent of the automobile made the horse extinct or how the internet made sure the only use you’ll ever have for a newspaper would to use as a flyswatter or a doorstop.

So, what are some industries or specific stocks that look like they won’t exist in the near future?

You can thank Al Gore for creating the internet and inadvertently causing most of the upcoming points

Newspapers

The iPad, phones, internet and whatever other fancy gizmos are all turning newspapers obsolete. When was the last time you read a newspaper? Why would you ever subscribe to a newspaper anyway? I want information and articles from a wide range of sources and authors in all different kinds of formats (such as in the form of this here awesome blog). Newspapers don’t do that for me. And then my hands get all black and I have to wash them after I read them. So, I say, good riddance.

TV companies/broadcasters

I watch TV maybe an hour a week, if I’m lucky. Why? Because I have Netflix, Youtube, torrents and a whole other bunch of stuff that lets me get my content when I want it where I want it. Now that I can download my Seinfeld reruns in under a minute and stream it to any screen in my house, what use will I ever have for TV?

Any kind of physical media

Movies, music, books, magazines, porn, whatever – all of this stuff is now available on the internet. Why would anyone in the world ever even consider putting on pants and going to a store when whatever it is they need can be instantaneously streamed to their computer screens at home? That’s why Blockbuster and Barnes & Noble are now bankrupt and why Netflix and the Amazon Kindle rule the world.

Any retail store

Adding to the above point, why would anyone in their right mind want to go to a store or a mall? Who wants to meander around those freakishly glossy floors, dodging giant congregations of giggling schoolgirls and then have to face people you really don’t want to face just to buy whatever crap you really don’t need? Why not just have it shipped right to your door? And pay less for it? Thanks, Amazon (and other online retailers, if you exist).

A lot of important things happened in 2007. Nancy Pelosi became the first female Speaker of the House, Russia cut off oil supplies to a big chunk of Eastern Europe, and Greece had its worst heat wave in a century. Much more important than any of those events was the release of one of my favorite movies of all time, American Gangster.

Introducing: the greatest movie since American Pie 2

The movie chronicled Frank Lucas’ rise to power from a life of petty crime to a drug kingpin. More significantly, what it also showed, in pretty great detail, was how a business can enter a market and completely dominate it. Especially one as saturated as heroin.

In fact, if you were to run some of his business practices against what some of the world’s top companies do today, you wouldn’t find much of a difference in their strategies. What you will also find is that these companies go on to be extremely successful – and their stock performance reflects this (as evident by investors riding platinum-encrusted horses to brunch at their villas every morning).

Let’s see some of the business practices that Frank Lucas used in American Gangster. And then compare that to how Reed Hastings (CEO of Netflix) grew his company to what it is today. You may be surprised by the similarities.

[Note: in order for a more friendly and safe read I have replaced all instances of the word ‘heroin’ with magical fairy-tale sounding things from here on out.]

Frank Lucas saw an opportunity and took advantage of it

Before Frank Lucas, if you wanted to inject some ‘angel juice’ in your body you would have to pay a premium price for a substandard product. This wasn’t the most ideal situation. What Frank noticed was that one of the main reasons ‘mermaid nectar’ was so expensive was due to all the middlemen.

Think about it like with any product in retail stores today. Let’s use Microsoft and their Xbox 360 product as an example. Microsoft manufactures this product and then sells it to a wholesaler for a profit. Now the wholesaler has to make money, so they sell the Xbox to a retail store such as Best Buy for an increased price. And now, so that Best Buy can make money, it has to sell the Xbox to consumers for an increased price as well. From the very beginning to the end, this one product went through 3 price increases before being toppled off on us poor unsuspecting consumers [there are probably more steps, but let’s keep it simple for example’s sake].

Bill had to make money somehow, after all

I can’t even begin to imagine how many bumps in price ‘troll chowder’ goes through before being unloaded on to the consumer. I’m guessing at least 68, but my drug dealing skills aren’t at their prime.

So, what Frank noticed was that he could simply cut out the middleman (being the wholesaler in the above example) and be able to provide the product directly from the “manufacturer” to the end user, the “consumer”. And why was this a good thing? We’ll get to that in a second.

Netflix also saw an opportunity and took advantage of it

Before Netflix people would visit these things called ‘rental stores’ such as Blockbuster and rent these things called ‘DVDs.’ Netflix figured people shouldn’t have to put on pants to get their movie fix so they started a mail-order DVD company. It took off like crazy.

After that they figured that people were too lazy to have to walk over to that mailbox 14 seconds away from their home to mail the DVD back so they came out with online movie streaming services. Now people could get movies and TV shows straight to their computers with the click of a few buttons. That’s when Netflix really took off. It was at this point that it was made very clear that Americans really do not like pants.

This is what it would always be like if we could all have our way

Frank sold a product that was better than the competition’s for a price less than the competition’s

By going straight to the source, Frank was able to sell the purest ‘gypsy medicine’ out of anyone. While the competition watered down the purity of their product so that they could make as much money as possible to upgrade their baby seal torturing facilities, Frank’s product was 98-99% pure.

Now, one would expect that, because a product is of such superior quality, one would sell it for a significantly superior price, right? Wrong. Because Frank avoided all 1.3 billion middlemen, his profit margin was still so high that he could afford to sell his product at a price far less than that of his competitors’. While still making more money.

As logic would have it, for some reason people flocked to this superior and significantly cheaper product. As logic would also have it, the other suppliers of an equivalent product, one which was significantly more expensive yet of far inferior quality ran into tough times. Many were run out of business, the other ones faced very hard times, having to trade in their Rolls Royce’s for Ferraris.

Netflix also undercut its competitors while providing a quality service

First off, Netflix had a vast library of movies and TV shows for its customers (at least on the DVD side of things, streaming is still catching up). The company also provided it to them quickly, efficiently and with minimal hassle. More importantly, it charged a price significantly lower than that of the competition – unlimited movies and TV shows every month for the price of a single rental and a half at Blockbuster.

Needless-to-say, Blockbuster is now bankrupt. Ironically, as soon as Netflix put its biggest competitors out of business it jacked up its prices. And why the hell not? Who’s going to compete with them?

Lucas developed a damn good brand

There’s not much point in having a great product at a great price if your customers aren’t going to recognize it. Frank expertly countered this problem by giving his ‘unicorn tears’ a catchy name that was instantly recognizable – he called it Blue Magic.

While the competitors were selling their ‘leprechaun dust’ the same way one would sell a sack of potatoes, Frank was packaging his to a certain standard that would allow customers to instantly recognize it and know of its quality. Without ever having tried it.

Anyone who regularly used ‘pixie elixir’ demanded Blue Magic. Any dealer who sold ‘ogre potion’ supplied themselves only with Blue Magic. What was the point of stocking up on anything else? Think of it the same way that stores will stock up on iPhones while Windows Phones are left gathering dust in the back room incinerator. Why? Because that’s what the consumers want! That’s how you know you’ve got a damn good brand.

Do you know what other company had a damn good brand? Netflix.

Do you know how you have a good brand? When the vast majority of your customers come from word-of-mouth marketing from satisfied customers. Exactly like with Netflix. ‘Nuff said.

The Aftermath

We all know what happened later. Frank Lucas was arrested and lost all his money. And then he died. Reed Hastings split up Netflix in two for some unknown reason. And then Netflix stock tanked.

However, something tells me ol’ Reed isn’t going to die anytime soon. He may make some more stupid decisions. He may even make some great decisions. Hell, we don’t even know if his latest decisions were that stupid – maybe he knows something we don’t? He did, after all, build up the company to what it is today. I guess only time will tell.

So, what is the moral of this story? Listen to drug dealers.

This was originally a part of my book, but then I removed it for some unknown reason…

I know I talk (or write) a lot about how much money can be made in the stock market and that a good chunk of my whimsical teachings (see: idiotic jokes) are centered on great (and ridiculous) riches. Then again, how motivational would it be to keep on listening to someone constantly tell you how much money you’re going to lose? What would be the point of investing in the first place? Unfortunately, this is where I have to explain that the stock market will not guarantee you the ability to purchase a new $14,000 suit every hour of the day. It may not even leave you with enough left over to buy a pack of super-powered hunting dogs for your protection.

Nor will it guarantee you this solid gold toilet, shockingly

The truth of the matter is, it is very easy to lose money in the markets and that’s something you have to be prepared for. Unexpected things can and do happen. You may have purchased shares of a company thinking that nothing can possibly go wrong and, out of nowhere, it can turn out that its entire foundation is based on lies and thrown out packets of potato peelings (remember that whole Enron or WorldCom thing, anyone?).

Then again, whenever you engage in any activity there is always some element of risk involved. For instance, when you’re riding your bike to class or work, everyone knows there’s a chance of you hitting a bump and ending up with bits of your head all over the road. There is even risk when you are reading a book; those sharp corners plus your eyes can equal an unpleasant trip to the hospital.

That’s why you have the option of wearing a helmet when you go biking and can wrap your books in foam when you are reading in order to mitigate the risk of bodily harm as much as possible. Of course, there are also many people who choose not to be prepared with a helmet handy for when they are falling off their bikes head-first into the concrete in slow motion.

And why you should use protection when having sex

Granted, a very small portion of people end up with pieces of their heads missing when they go biking, so, it would make sense for them not to want to wear those clunky helmets. Then there are those bikers who rampage down the middle of the road while keying cars and running over koala bears. For these types of reckless people a helmet would be a good idea, yet these are the people who are most likely to avoid wearing protective gear in the first place.

This analogy of bikers and risk applies directly to investing. As there are different types of bikers, there are different types of investors. Some choose to be safe and take certain precautions in order to avoid losing all their invested money, which is the equivalent of wearing a helmet while biking. Others are too busy recklessly investing without doing a smidge of research and thus end up colliding into a wall of money loss. The stock market’s collection of helmets ranges from risk management techniques such as dollar cost averaging, diversification, stop-losses and a whole bunch of other risk mitigating tools (read my book to learn how to do all this).

However, without a doubt, the greatest risk mitigating tool is to just thoroughly research your investments and to develop an investing strategy that you will follow no matter what…even if someone presses a gun to your head and forces you to do ballet moves in the middle of a busy intersection in a tutu. Why? Because preserving your money is more important than preserving your dignity!

And it's definitely more important than THIS

Just remember, and as Warren Buffett likes to say, ‘risk comes from not knowing what you’re doing.’ Just use common sense: if you’ve never heard of a computer before, then deciding to invest in a computer company wouldn’t be a very wise nor informed decision, would it?

The same thing applies to biotech stocks, banking stocks and stocks in any other industry which non-professionals will barely be able to understand how they works. If a company releases a major announcement and you have absolutely no idea whether this news is good, bad or is even relevant, how can you possibly expect to make any money off of this investment without some sheer dumb luck?

A little bit of common sense never hurt anyone.

Remember Hurricane Irene? Remember how the mighty New York was supposed to come to a grinding halt? That entire cities would be flooded with monstrous amounts of water? That entire buildings would crumble beneath Irene’s wake? That Jesus would come down from heaven and fist fight Gaddafi?

And, yet, New York still continued to churn on. A few places experienced an above average amount of water. Skyscrapers continued to scrape the sky. And Jesus stayed up in heaven, chilling with his new girlfriend.

And we cannot forget August 2011's devestating earthquake either

So, what are the lessons that we can take from our reaction to Hurricane Irene? And how does it relate to investing? Here are three things.

1. Don’t listen to the news

I always tell people to never listen to the news. Then they proceed to tell me I’m crazy and proceed to lock themselves in their bomb shelters and pout.

Well, I ask you, was the news coverage of Hurricane Irene at all justified? Was there a single point in time where you turned on your TV and were not blasted by a newscaster shouting at you to barricade all your doors and windows and move to Africa? And then what happened? People panicked. And not much else.

Can you really trust a 'news organization' that spends a fourth of the time talking about this? THIS!!!???

And how does this relate to investing? Well, after freak weather, do you know the next thing that the media loves to hype to epic proportions? Yeah – the markets, the economy, stocks and all that fun stuff – all things that affect the state of your investments.

So, that’s why, when the Dow falls a few points, newscasters will scream at you to sell your kidneys. That’s why, when unemployment shifts up 0.0004%, they will tell you it’s the end of the world. That’s why, when Obama sneezes and accidentally gets some saliva on some…never mind, you get it.

And, of course, investors will panic and sell off all of their stocks and other investments. And then what happens? The markets crash. And we all lose money. Isn’t it funny how we are the exact cause of the thing that worries us most?

So, what lesson are we left with here? Don’t listen to the news. Or, at least, don’t panic. If you know listening to people spew crap about how we are all going to die and lose our money will make you panic, then don’t listen to it. The markets will continue to go up in the long run anyways, they always do.

2. Take precautions anyway

It’s not easy lounging about in your hammock while people are running around and screaming hysterically all around you while tying themselves down to concrete boulders. And it’s certainly not easy to stay calm and collected while you see your investments get cut by 10%, 20% or even 30%, even though you know everything’s going to be fine in the end.

He was ready. Were you?

That’s why you’re going to want to take necessary precautions anyway, as long as they’re not absurd ones. That’s why some people did barricade their windows with planks of wood in case strong winds were to hurl some objects into them. And that’s why you may want to diversify and/or set some trailing stop-losses (as I explain how to do in my book).

But don’t uproot the wife and kids and drive down to Mexico while constantly looking back behind you in fear of the hurricane creeping up behind you. And don’t sell of all your stocks and investments because they dropped a few points.

Irrationality never benefited anyone.

3. Be ready

Okay, I lied. Irrationality definitely can and definitely has benefited a whole lot of people. How?

Well, let’s start with the Hurricane Irene debacle. The news networks know people are irrational and thus love to panic. What else do they know? Stories that make people panic sell newspapers. A lot of them. So, they’ll make you panic, they will take advantage of your irrationality and they will get rich off of it. Notice how the exact same thing happened with the ‘devastating’ earthquake last week. That’s why the CEO of the Weather Network just bought a $69 million yacht for himself a couple days ago [citation needed].

When life gives you hurricanes, make kayaks

And how can you, as an investor, benefit? Well, you know that people will react irrationally to events that aren’t so major, and will thus push down stock prices to lows that simply aren’t worth it. So…that’s where you can swoop in with a giant platinum spoon and scoop up stocks for dirt cheap prices.

Warren Buffett does it all the time, so why shouldn’t you?

Do you want to make more money than a brothel, bar or cocaine dealer does whenever Charlie Sheen is in town? And do you want to make it from stocks?

He was the sole reason Columbia got into cocaine

Good, me too. In that case, you may want to invest in stocks that are growing their sales, and fast. Why? Well, if a company is bringing in more money, wouldn’t it be logical to assume that it’s going to be making more money as well? Yeah.

Of course, sales aren’t the only important factor to look for, but we’re just going to focus on that. Why? Because I said so.

Here’s what you want to look for:

1. Year over year growth. That means that, if a company made $1 million in 2010, you want it to make $2 million in 2011. And $4 million in 2012. And $32922626346346346 trillion in 2013.
2. Steady or increasing growth. If a company grew 20% in 2008, 15% in 2009 and then 8% in 2010, then you have a company that is fizzling. You want growth either to be increasing or remaining the same at the very least. That means you want to see a company grow its sales 15% in 2009, then 25% in 2010, 34% in 2011 and so on.
3. Growing faster than the competition. If that nuclear power plant across the street is growing its sales by 20% every year, you want your nuclear power plant to be growing its sales by 30% every year. Why? Because you want to invest in the best of the best. Because that’s where the big money is.

So that’s what you look for. Don’t believe me? Take a look at some of these companies.

Green Coffee Mountain Roasters (GMCR)

Grew sales from $225 million in 2006 to $1.3 billion in 2010. And its stock? It went from $3.69 in 2007 to $100 per share as of today. That means you could have turned a $10,000 investment into $271,000 in just over 4 years.

Priceline.com (PCLN)

Sales grew 274% since 2006, with the stock exploding from $20 in 2006 to $521 today. That’s 2,600% growth – meaning you could have turned $1,000 into $26,000 in just 5 years. Yeah, that’s right.

Apple (AAPL)

Not sure if you heard of this small company, but they more than tripled their sales since 2006. And their stock? It went from $6 in 2006 to $390 today…meaning, $2,000 invested into this company would have turned into $130,000 in the time it takes a Ford Focus to break down.

Other stocks?

What are some other stocks growing their sales as fast as an old man in a rocket-propelled wheelchair chasing after a coupon whose stock prices haven’t quite caught on yet? Check these babies out: Bridgepoint Education (BPI), Lulu Lemon (LULU) and rue21 (RUE).

But don’t just willy-nilly invest in these stocks because I said so. Make sure you do proper research first. And read my book, it really helps with all this stuff.

I learn a lot from just about anything and nothing. For instance, I learned how to negotiate from listening to old people scream at the TV. I learned the meaning of life from peeling an avocado. And I learned how to foretell your investment success (or lack thereof) by buying a printer.

And this taught me the meaning of love

This post is dedicated to discussing the latter, believe it or not. Technically, this post is an extension of a guest post I just did at The Digerati Life, so make sure you read that as well!

The overview

Originally I walked into Staples determined to come out with a machine that spits ink on a piece of paper at my demand, preferably for under $12. Instead, I came out with a machine that can connect to the internet from anywhere in the world, download apps, automatically order supplies online and a million other features, for $500. Oh, and it can also print. So, what happened?

Why did I end up paying such a high up-front cost? And how does this have anything to do with investing? Keep reading.

And how can I preferably avoid this fate?

The choice of printer

In exchange for buying the second most expensive printer ever made, I was getting an extremely efficient printer that uses only a fraction of the ink regular printers use, requires half the energy to run, saves paper (double-sided printing) and does a whole bunch of other cool stuff. So, even though I had to sell my first-born child to buy this thing, I knew that in the long run I would be saving money. And getting more girls than ever (who doesn’t love a sexy printer?).

The investment style

Compare this to my investing style (that my book oh-so comprehensively covers). I buy great companies trading for amazing prices. To be able to do this, you have to sniff out stocks that are undervalued and then you have to wait until they grow in price, for months, maybe years. It may take a long time, but I am certain that, in the end, I will have made a lot of money. Like, a lot. You just need patience.

Who are some other investors that fall into this category? Let’s see… Warren Buffett, Peter Lynch, Benjamin Graham, John Templeton, and a few thousand others to start. And yes, they all make more money than you.

How does my choice of printer compare to my investment style?

If you didn’t already notice, both choices come with immediate (and not-so great) conks, where the real reward will come later.

In the case of the printer, I had to pay a whole lot of money initially, but I would save money in the long-run. How? The ink for the printer is super cheap, it saves paper, it uses very little energy, it can enslave the human race, etc…

Same thing with my investment style. Initially I am left twiddling my thumbs and waiting for something to actually happen. But some time down the road, I will be rewarded by giant sacks of cash as my stocks grow several times in value.

See how it ties together?

Another printer choice versus investment style

Now, take a friend of mine as another example. He went into the store looking for a printer with the lowest base price imaginable…and he got it. However, he also got a printer that is extremely inefficient, wastes a whole ton of ink and spontaneously combusts into flames somewhere between 9 to 10 every morning.

And his investment style? Also very short-term minded, investing in stocks that his neighbor’s tarantula told him is a sure thing and selling them as soon as they drop a ninth of a point. This investment style is very similar to that of all those people who lost all their money in the crash of 2000, 2008, the imminently upcoming one and will again in the next 17,416 crashes.

I think he only made money on a stock once. And then spent it all on ink for his new printer.

If you’re wondering why the somewhat…umm…unusual topic on this here website, it’s because I originally wrote this article for a Christian website but it got rejected…I wonder why…

It’s no secret that these markets are as stable as a rickety swing set built in the 1940s in the middle of a hurricane.  And we simpletons aren’t faring much better, wondering whether our retirement accounts will lead us to lounging on a hammock in the Bahamas. Or eating out of a can of uncooked beans in a dark alley while shooing away rats the size of small rhinoceroses.

Not only being an investor myself, but having just written a book on investing, you could say I may have been feeling a little more unsettled than most.

For some reason I felt this picture was very fitting

And as when all things are looking down or uncertain, there was always the man upstairs that would always look after me and be there for me. Who would hold me up in my time of need and be the guiding light in my life when I needed him most. Unfortunately, Frank, the guy who lives a floor above me and would bring me soup every now and then, was on vacation. So now I had to find someone new to hold me up. But who…

Suddenly a bright light engulfed my entire apartment. As if seemingly out of nowhere. It felt like this majestic force, filling up everything it touched with an overpowering sense of joy and serenity. It was magical, even out of this world. Yes, my giant 24 inch monitor turned on.

So, not wanting to let a good opportunity go to waste (every time this monitor turns on, the power goes out to half of my block), I decided to put it to good use. So to the mighty Google I went, searching for inspirational quotes. And one particular one really struck me. By someone you may have heard of before. A guy named Jesus?

 “Look at the birds, free and unfettered, not tied down to a job description, careless in the care of God. And you count far more to him than birds. Has anyone by fussing in front of the mirror ever gotten taller by so much as an inch? All this time and money wasted on fashion—do you think it makes that much difference? Instead of looking at the fashions, walk out into the fields and look at the wildflowers. [...] What I’m trying to do here is to get you to relax, to not be so preoccupied with getting, so you can respond to God’s giving.”

He's got yo' back

As I understood, he is telling us to stop fretting about all of these man-made anxieties and just go out and enjoy nature. Stop worrying about these day-to-day worries and just be happy. Just look at what that God guy gave us and enjoy it!

Stop worrying about an impending hurricane. Stop worrying about whether or not you’re going to get fired tomorrow. Stop worrying about potentially getting cancer because you accidentally licked that tire. Stop worrying about how that guy may have misinterpreted what you said about his small appendage. Whatever. Just stop worrying. Start living.

Remember, life never throws something at you that you can’t handle. Otherwise we’d all be dead.

And that’s when I realized I should take this very approach to investing. And so should you.

Why worry about the daily fluctuations of the market? Up, down, left, right, diagonal or hexagonal, the market is always moving. However, there is always one direction that is in its nature to move. Up.

Just look at this chart (from Stocks for the Long Run, by Jeremy Siegel).

If you had invested $1 in 1801 into stocks, you would have almost $800,000 in 2001. That means, if you had invested $10,000, you would have had $7,551,630,000 in 2001. You would have a whole lot more today, 10 years later.

Now think about all of the events that transpired over these 200+ years. Wars, famine, poverty, crashes, world wars, hippies, nuclear meltdowns, crises, pandemics, global warming, epidemics, tsunamis, The Backstreet Boys and hurricanes. And yet you still would have turned a single dollar into over $7.5 billion.

And I can guarantee you that these types of events will continue to transpire. We will have more wars. We will have more natural disasters. Lady Gaga and Justin Bieber are still very much in power. But, despite all this, something tells me the stock market will revert back to its nature as it always does. And it will grow. And grow some more. And make us investors a whole lot of moneybags.

That’s why I will never again pay attention to these down days in the market. I’m not going to rip all my hair out and sell it whenever the markets drop a few points. And I’m certainly not going to sell my cousin’s children to slavery just because some of my gains were wiped out that day.

There's no need for this. Ever. Please, just. Don't.

Why? Because I know time will fix everything. I know that I am invested in great companies with great prospects. And I know I bought them for a great price. What’s there to worry about? Everything’s going to be just fine.

And that’s why you should think the same way.

Thanks for clarifying that for me, Jesus.

It’s no secret that companies with excellent management end up performing better than a rocket propelled racehorse competing against a couple of starving ponies with boulders chained to their backs. And it’s also no secret that these companies’ stocks performed just as well and made their shareholders a whole ton of moneybags.

So, how would someone locate these here rich-making companies with such excellent management? You may be happy, even ecstatic, to hear that you may not have to read a single business book, annual report or stock chart to be able to do this. Nope, in fact, all you may really need is to be able to withstand watching explosions go off on screen every few seconds.

Introducing: the greatest director in human history

THE Michael Bay.

Transformers, Armageddon, Bad Boys 2, Transformers: Revenge of the Fallen, The Rock, Transformers: Dark of the Moon, Peal Harbor…what do all these movies have in common? They all made well over $100 million each. What else do they have in common? They have epic explosions go off every 7.3 seconds, freakishly hot women needlessly parade across the screen and some more explosions.

Meaning, they were all directed by Michael Bay.

Whether you like Michael Bay or believe he should be eaten alive by sharks, no one can deny that his movies were successful. With the exception of two movies, every single one of his projects made over $100 million. Overall, his movies have made billions. In fact, he was the youngest director ever to reach the $1 billion mark. That makes him one of the world’s most bankable directors – ever.

And how did he accomplish this? I’m sure most of us can agree it wasn’t due to his exquisite movie-making prowess. What much more of us can probably agree on is that he accomplished all this by being a damn good businessman. In fact, if you were to give him a giant corporation to run, I would bet my left testicle that he would be one of the greatest CEOs of all time (provided he doesn’t explode the company headquarters).

The genius tactics

"And then PCHCHCUUU KABOOM PCCHH!!!! Got it?"

Let’s look at some of the business tactics that Bay uses throughout the production of his movies. And then we’ll see why you should look for management to be thinking and acting much the same way in companies that you are investing in.

1. In case you were wondering why all of the Autobots (the good guys) in the Transformers movies were from that car company that nearly goes bankrupt 9 times every 8 weeks (General Motors), that’s no accident.

To save money, the filmmakers entered into a production deal with General Motors. In exchange, they received 3 versions of each car on the Autobot team plus around 200 cars that were blown up (obviously). In case you were wondering what made the Chevrolet Camaro as popular as deep fried oxygen, this movie certainly helped.

2. Also to keep the movie under budget, a deal was made with the freaking U.S. Department of Defense and was, in fact, the largest project the military has ever assisted since Black Hawk Down. They were provided with jets, helicopters and even had soldiers serve as extras with authentic uniforms.

In return, the soldiers got an advanced screening for free (after which point they became very angry for being featured in a movie where they all got blown up several times).

3. In the third Transformers movie, a sum total of 532 cars were destroyed (see: blown up). This must have cost the production team a pretty penny you may think. Think again. Apparently, all 532 cars were just given away by an insurance company completely free of charge as they were all flood damaged.

When I first read that my head exploded from the sheer genius, and somewhere Michael Bay smiled.

"So we can either donate all of these cars to charity...or explode them all. I think we've made the right choice here, guys!"

4. Another way Bay was able to save a ton of money on production? He literally reused entire scenes from his older movies (albeit added a few explosions on top, seriously). During a highway chase scene in Transformers 3, a transformer is thrown into oncoming traffic and demolishes a car. This EXACT same crash happens in one of his other movies, The Island, however a piece of metal is replaced with a giant robot.

5. Leading actor’s arm gets horribly disfigured in a terrific car crash? While other lesser filmmakers would shut down production until their leading man can recover, Bay treaded on.  He simply filmed second unit scenes while Shia LaBeouf recovered and rewrote whole parts of the movie to simply account for the injury. Somehow, production was only delayed by 2 days.

I tip my hat to you, Bay (my hat then exploded in a ball of flames).

6. Want to film explosions over sacred Native American land? Sure! The filmmakers were allowed to destroy 12 real trees and planted 6,000 new ones in return. No word yet if the new trees were laced with explosives.

Just from these points alone, here is what we’ve seen Michael Bay do to get his films where they are today:

• Saving money wherever possible while sacrificing almost nothing
• Making deals with everyone and their pet unicorns to get what he wants
• Being able to alter his course during unexpected events
• Providing a product that millions of people will pay for on a repeated basis
• And making a whole lot of money as a result.

Now compare this to any other leading company today. Take a look at their management, the company’s performance and how the stock is doing. And you will find that Michael Bay isn’t so different from Steve Jobs or Eric Schmidt or Bill Gates or Jack Welsh or any other outstanding CEO who lead their company to greatness.

And that’s exactly what you want to look for (preferably with fewer explosions, though).

Is Steve Jobs so different from Michael Bay? If that iPhone were to be engulfed in a ball of flames then they would practically be twin brothers