Have you ever felt the need to be on guard when buying a car, major appliance, new home, or anything that involves a sales person? Or, have you ever had a career in sales which means spending weeks if not months in advanced training sessions where the entire goal of the training is how to convince someone that they should pay $1000 for something that is really worth $200. When you’re the seller, it’s almost like you’re trained to speak in deceptive code. And once you master this new language, those you are selling to naturally over pay which means profits for you. Trading is no different. The goal is to buy low and sell high, which is what I often write about with supply and demand. To buy low (at demand) however, someone needs to be convinced that whatever you’re buying is worth selling at that price. Conversely, when you sell high (at supply), someone needs to be convinced that what you are selling is worth buying at that high price. The one who ends up on the right side of that equation and ends up consistently profitable is the one who can decipher “code” and understand the reality of the situation. Let me decipher some code for you here in hopes that it will have a positive impact on your financial life, and then some…
- Your broker tells you “this stock is a good investment for you.” Remember that much of the time they also represent the seller of the stock and are ultimately accountable to their shareholders, not clients. So, you may want to ask them if they are buying the stock at these prices as well for themselves.
- When you see an advertisement to open a Spot Forex account and the ad says “No commissions, “while that sounds like free trading, it really means the broker gets paid in the spread which is typically much more expensive than today’s cheap commissions.
- When the bid on your level 2 screen is ten times the size of the offer , the news is outstanding, yet price can’t move higher, this typically means institutions are selling and price is just about to collapse.
- Your financial planner says, “Annuities are a smart investment for you.” This again means the sale of that annuity is a better investment for them. Careful with long capital lock up periods, the annuity company knows that you are likely to ask for your investment capital early and pay huge surrender charges.
- When a financial institution says a certain company is great, they have strong management, a healthy pipeline or products, and they see earnings strong for the next few years… Most average investors will buy the stock, but be careful because the financial institution didn’t say “buy the stock.” They know most will buy the stock but that’s not what they said. Soon after, you may very well see that financial institution selling that stock. This is also much like how upgrades work.
- Your financial planner say’s “I have a great variable annuity for you.” Run for the hills because your subject to stock market losses, 3 -5% fee’s from the insurance and management company, and your money is locked up with surrender charges that can reach 10%. Variable annuities are almost never a good solution for anyone.
- How many times have you heard “max out your 401K?” Have you really thought through the tax consequences that can cost you hundreds of thousands of dollars in lost money in your pocket when you need that money the most. This push to max out your 401K ultimately comes from Wall Street as this means more money flowing into mutual funds which run high fees and tremendous wealth for Wall Street. Certainly take advantage of a company match, I am talking about above and beyond that.
This code is not limited to trading and investing. Let’s decipher some more code…
- When your wife asks, “does this dress make me look heavy?” What that really means is “tell me I look thin in this dress no matter what.”
- When your boyfriend says “It’s not you, it’s me.” It’s really you.
- For young readers, when your mom or dad asks “Is today garbage day?” This really means: “take out the garbage, now.”
- When you’re driving to a restaurant with your husband and you ask him if he knows where he is going and he says, “I think so.” This really means he has no idea.
Being able to decipher code in the markets and in life always gets you closer to the truth which means more money in your pocket and healthier happy relationships. Learn to know the difference…
Hope this was helpful. Have a great day.
Sam Seiden – firstname.lastname@example.org