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It is the nature of all greatness not to be exact. He that wrestles with us strengthens our nerves and sharpens our skill. Our antagonist is our helper.
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How many people can you name who are exceptional at picking stock market winners with consistency? Wall Street has a winner every now and then who guessed and timed the market just right and hit it big with their prediction. But after that, most of the time their market predictions tend to falter. In short, no one is great all of the time.

A few, like Warren Buffet, do well over time, but Mr. Buffet never picks startup companies. He picks companies that show a solid track record over time. And even in the current financial climate, his numbers drop and his selections falter.

Not all money is equal. I can spend money on Starbucks coffee every day, or I can use that money to pay down my car loan, or I can use it to pay for an online class.

In the first example, I just spend it. The money is gone and I have nothing to show for it. My money is worth only its face value.
In the second example, I pay down the principal on my loan, and so I actually shave money from the interest I would otherwise pay - which in effect makes my money more valuable. My money is now worth its face value plus the interest I don't have to pay.
In the third example, I invest in myself. If the class makes me more marketable, then my money might mean continued employment or a higher salary. My money is again worth more than its face value.

When an investor puts money into a company, they want a return on investment. To achieve that, they need to know that the product is wanted in the market, that the company is able to sustain production equal to demand, and that the costs have been wrung out of the production to maximize profit.

The question for the investor is: which company represents the best ongoing value? Because all money invested is not equal.

Would an investor put money into an enterprise that consistently loses money? Of course not.
Would an investor put money into an enterprise that will only use the money to pay down its debts? Not likely, because debt reduction alone doesn't generate more revenue.
Would an investor put money into an enterprise that will use the money to improve the product or the marketing or the customer relations?

The bailout / stimulus money is being given to enterprises that would potentially fail without the money. Why is this a good investment?

And why should we believe that anyone within the government will choose the right companies for an investment that will stimulate the economy? The tax dollars of you and your children are being redirected toward companies seemingly incapable of sustaining a profit to continue to exist. Is the company's product wanted in the market? Is the company able to sustain production equal to demand? Have the costs been wrung out to maximize profit?

Few people are asking these questions, and the government isn't too keen on the details of where all of this money is going.

Doesn't this beg for accountability?


by Brett Rogers, 1/26/2009 11:43:40 AM


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