The Man Who Invented Christmas

The Man Who Invented Christmas

by Alexander Green, Investment U Chief Investment Strategist
Monday, December 26, 2011: Issue #1672

[Editor's Note: Alexander Green, author of the best-selling book Beyond Wealth, originally wrote this essay for his Oxford Club weekly newsletter Spiritual Wealth.

In the spirit of the holidays we decided to depart from our normal financial topics to bring you Alex's inspiring anecdote of Charles Dickens, "The Man Who Invented Christmas."]

Last weekend, my family, some friends and I attended a performance of “A Christmas Carol” at the American Shakespeare Center in Staunton, Virginia.

It was superb. The kids particularly enjoyed it and were surprised to learn that the author – Charles Dickens – is the man most responsible for the modern celebration of the season. This is a story that deserves to be more widely known…

Dickens is one of the greatest writers in the English language. He published 20 novels in his lifetime. None has ever gone out of print.

Yet in 1843, Dickens’ popularity was at a low, his critical reputation in tatters, his bank account overdrawn. Facing bankruptcy, he considered giving up writing fiction altogether.

In a feverish six-week period before Christmas, however, he wrote a small book he hoped would keep his creditors at bay. His publishers turned it down. So using his meager savings, Dickens put it out himself. It was an exercise in vanity publishing – and the author told friends it might be the end of his career as a novelist.

Yet the publication of A Christmas Carol caused an immediate sensation, selling out the first printing – several thousand copies -in four days. A second printing sold out before the New Year, and then a third. Widespread theatrical adaptations spread the story to an exponentially larger audience still.

And it wasn’t just a commercial success. Even Dickens’ chief rival and foremost critic, William Makepeace Thackeray, bowed his head before the power of the book: “The last two people I heard speak of it were women; neither knew the other, or the author, and both said, by way of criticism, ‘God bless him!’ What a feeling this is for a writer to be able to inspire, and what a reward to reap!”

Today we all know the tale of tight-fisted Scrooge – “Bah! Humbug!” – and his dramatic change of heart after being visited by the ghosts of Christmas Past, Present and Future.

But A Christmas Carol didn’t just restore Dickens’ reputation and financial health. It also breathed new life into what was then a second-tier holiday that had fallen into disfavor.

As Les Standiford notes, in early nineteenth century England, the Christmas holiday “was a relatively minor affair that ranked far below Easter, causing little more stir than Memorial Day or St. George’s Day today. In the eyes of the relatively enlightened Anglican Church, moreover, the entire enterprise smacked vaguely of paganism, and were there Puritans still around, acknowledging the holiday might have landed one in the stocks.”

The date of Christmas itself is an arbitrary one, of course. There is no reference in the gospels to the birth of Jesus taking place on December 25, or in any specific month. When Luke says, “For unto you is born this day in the city of David a Savior,” there isn’t the slightest indication when that was.

And while the day was marked on Christian calendars, celebrations were muted. That changed when A Christmas Carol became an instant smash, stirring English men and women to both celebrate the holiday and remember the plight of the less fortunate. This was exactly the author’s intent.

Dickens grew up in poverty and was forced into child labor. (His father, a naval pay clerk who struggled to meet his obligations, was thrown into debtor’s prison.) Yet despite these handicaps, Dickens educated himself, worked diligently, and rose to international prominence as a master writer and storyteller.

He was a great believer in self-determination and, in particular, the transformative power of education. With learning, he said, a man “acquires for himself that property of soul which has in all times upheld struggling men of every degree.”

Yet in the London of Dickens’ day, only one child in three attended school. Some worked in shops, others in factories. Still others resorted to theft or prostitution to live. Dickens was determined to expose their plight. A Christmas Carol, in particular, is a bald-faced parable, something few novelists attempt… and even fewer successfully execute.

Dickens said his novels were for the edification of his audience. His goal was not just to entertain, but to enlighten. And A Christmas Carol was designed to deliver “a sledge-hammer blow” on behalf of the poor and less fortunate.

It worked. Scrooge – a character as well known as any in fiction – is now synonymous with “miser.” Yet through his remarkable transformation, the author reminds us that it is never too late to change, to free ourselves from selfish preoccupations.

Dickens’ biographer Peter Ackroyd and other commentators have credited the novelist with single-handedly creating the modern Christmas holiday. No, not the contemporary orgy of shopping, spending and ostentatious display. In A Christmas Carol, there are no Christmas trees, gaudy decorations or – apart from “the big, prize turkey” at the end – any presents at all. The only gifts exchanged are love, friendship and goodwill.

In one small book, Dickens changed the culture, inspired his contemporaries, and helped restore a holiday they were eager to revive.

More than a century and half later, A Christmas Carol is still a tonic for our spirits – and an annual reminder of the benefits of friendship, charity and celebration.

Good investing,

Alexander Green

Capitalize on the Most Dangerous Tech Trend in 2012

Capitalize on the Most Dangerous Tech Trend in 2012

by Alexander Green, Investment U Chief Investment Strategist
Thursday, December 16, 2011: Issue #1666

[Editor's Note: Independent Online reported on Thursday, "Hackers are bombarding the world's computer controlled energy sector, conducting industrial espionage and threatening potential global havoc through oil supply disruption."

Ludolf Luehmann, an IT manager at Shell Europe's biggest company, told the publication, "It will cost lives and it will cost production, it will cost money, cause fires and cause loss of containment, environmental damage - huge, huge damage."

In light of this chilling warning, along with recent developments on the latest super-bug, Duqu, we decided that Alexander Green's May article about cyber crime and cyber security was as relevant as ever. Alex has been pounding the table on cyber security stocks since 2009 and believes that 2012 will be the tipping point. Find out why he's so bullish on the sector below…]

Do you want to score big in the stock market? Then recognize an unstoppable trend and get on the gravy train before it’s too late.

In the 80s, for example, investors scored big in cable television and cellphones. Huge money was made again in the 90s on internet and technology shares. Commodities like oil and gas – and gold and silver – made investors millions over the past decade. Now an even bigger trend is emerging. Yet I estimate that not one investor in 10 has a nickel invested yet.

Consider this your wake-up call.

The internet was originally intended for a few thousand researchers, not billions of users who don’t know or trust each other. The designers placed a premium on ease of use and decentralization, not privacy and security. They never dreamed the internet would ultimately be used for trillions of commercial transactions.

And where there are great gobs of money, you will always find thieves…

Cybercrime Tops Physical Crime in 2011

Last year, for example, one out of every four companies had information, goods, or money successfully stolen by cyber criminals. (For the first year ever, the total cost of electronic theft actually topped that of physical theft.) Your social security number, personal history and medical information, your credit card numbers, even the cash you have in trusted financial institutions, are all at potential risk.

You may have read the reports a few weeks ago that Sony was forced to shut down its PlayStation network due to hackers who stole users’ information. Even top technology companies are often powerless to stop cyber crime. Sony recently admitted that it had already been hacked several times before.

This is not unusual. Companies are reluctant to admit that they have been violated by cyber criminals. Why? Number one, they don’t want to reveal their vulnerabilities to other potential hackers. Even more importantly, they are scared – and for good reason – that they’ll lose the confidence of their customers.

Yet that’s about to change. I expect the SEC to soon compel public companies to disclose their cyber-attack vulnerabilities. A group of lawmakers – including Jay Rockefeller, the powerful Chairman of the Senate Commerce Committee – has already sent a letter to the SEC asking it to issue guidance on cyber security.

The letter says, “In light of the growing threat and the national security and economic ramifications of successful attacks against American businesses, it is essential that corporate leaders know their responsibility for managing and disclosing information security risk.”

This is no idle threat. A 2009 study by insurance underwriter Hiscox found that 38 percent of Fortune 500 companies neglected to disclose the risk of data-security breaches in their public filings.

Capitalizing on Cyber Security

Does anyone really believe the SEC isn’t going to move on this issue? (Update: In October, the SEC announced that it was finally going to require more disclosure from companies on cyber attacks.)

The questions that you should be asking as an investor are, “Who is likely to benefit from this development?” and, “Where should I invest to capitalize on this trend?”

A small cadre of companies is working to protect consumers, businesses and government agencies against a wide array of cyber threats. Most of them are already highly profitable.

But tens of billions more of government money will soon be spent beefing up national security, protecting U.S. infrastructure and safeguarding the financial system. And businesses – increasingly aware that everything from research papers to client lists are being targeted by criminals and corporate spies – will soon spend billions more in this area, too.

This is a ride you won’t want to miss.

Good investing,

Alexander Green

Do Trailing Stops Really Work?

Do Trailing Stops Really Work?

by Alexander Green, Chief Investment Strategist
Monday, June 18, 2011: Issue #1558

Editor’s Note: This week Investment U’s Chief Investment Strategist, Alexander Green, is in Seattle for an annual investment conference. Given his priorities to his subscribers, Investment U will be running one of his classic pieces on trailing stops. We hope you enjoy…

Somebody recently told me over lunch that one of the most controversial aspects of our investment policy is trailing stops.

But they shouldn’t be.

If you don’t have a premeditated sell discipline – and the vast majority of investors don’t – you’re flying by the seat of your pants. And that rarely leads to superior investment performance.

But do trailing stops really work?

Survey Says: Use Trailing Stops

In a word: Yes. Trailing stops protect your profits and your trading capital. And there’s much more than just anecdotal evidence.

In a study published in The Journal of Portfolio Management, Christophe Faugere, Hany A. Shawky and David M. Smith – finance professors at the State University of New York at Albany – researched the performance of money managers who oversee pension funds, endowments and high-net-worth accounts.

Because most institutions work under strict investment guidelines, these academics were able to analyze performance based on differing approaches to selling stocks.

The result? Institutional managers who fared best were those with restrictive rules that didn’t allow much leeway for holding stocks for emotional reasons. Managers who relied on “flexible” sell strategies did far worse.

Count me as unsurprised. Institutional money managers are just as prone to rationalizing as individual investors when they make a mistake. (Hence the old Wall Street chestnut, “What does a broker call a trade gone wrong? A long-term investment.”)

Trailing Stops: Providing Protection… Securing Profits

The culprit is almost always pride, ego, or emotion. Without any kind of sell strategy, emotions come into play. And emotions are almost always wrong.

But by adhering to a disciplined trailing stop strategy, our investment system mows down emotion-driven trading errors like a field full of dandelions.

It cures greed. Eliminates fear. And does away with wishful thinking – as in, “I hope this stock turns around and starts going the right way.”

Of course, trailing stops aren’t the only sell discipline out there. But they’re one of the easiest to implement. They serve two purposes…

• They make sure we never let a small loss become an unacceptable loss.
• They keep us from selling stocks while they’re still trending up.

Maneuver Past the Market Makers With TradeStops.com

The one knock against using trailing stops is that unscrupulous market makers will sometimes take out your stop order right before a stock takes off.

But Richard Smith, President and Founder of TradeStops.com – and a PhD in mathematics – has a service that provides an ingenious solution.

If you visit www.tradestops.com, you can enter the stocks you own, the price you paid and the percentage trailing stop you want to use. There are several valuable benefits…

• If any of your stocks close beneath your selected stop, TradeStops sends a message – to your cell phone, e-mail, or account page – alerting you.
• Some brokerage firms, like Fidelity, offer trailing stop alerts with their accounts. But they generally expire after 30 or 60 days. TradeStops information never expires and even offers a 30-day risk-free trial.
• You can track up to 50 stocks at a time. (And whenever you stop out of one, you can replace it with another.)
• TradeStops is easy to use. It’s specifically designed for technophobes.
• It’s reasonably priced. There are additional services available for dedicated short-term traders who want even more.

It’s important to note that TradeStops notifies you of stops, not your broker. And it doesn’t enter sell orders. But the key is to make sure you have an acknowledged point where you’d be willing to sell any individual stock.

Trailing stops don’t just offer to cut your losses and protect your profits. They guarantee it.

Good investing,

Alexander Green

What Your Investment Guru Isn’t Telling You

What Your Investment Guru Isn’t Telling You

by Alexander Green, Chief Investment Strategist
Monday, February 28, 2011: Issue #1458

Two weeks ago, I spoke at The World Money Show in Orlando – one of the largest investment conferences in the country. More than 11,000 investors registered to attend.

(Unfortunately, the conference room was far too small. It filled up half an hour before I spoke and we ended up turning away a couple of hundred people. Not good.)

In my talk, I argued that the only certainty in the world is uncertainty. Then I demonstrated how investors can effectively capitalize on this uncertainty, starting with the seven factors that determine the future value of your portfolio…

Seven Factors That Shape the Value of Your Portfolio

Those seven factors are:

• The amount you save.
• The length of time it compounds.
• Your asset allocation.
• Your security selection.
• Your annual compounded return (as a result of 3 and 4).
• The expenses you absorb.
• The taxes you pay.

As I walked around the event, however, I listened to other speakers talking instead about the outlook for the stock market. And I kept hearing the same thing.

No, not persistent bullishness or bearishness. There’s always plenty of both at a conference of this size. The universal part was analysts confirming just how right their previous market forecasts had been.

Count me as skeptical.

“I Wasn’t Wrong… Just Early”

If I flipped a coin and said “heads” and it came up heads, would you be impressed? If not, why not?

What if I flipped it again and said “tails” and it came up tails this time. Would that impress you?

Maybe on the next coin flip, I get it wrong. Then I remind you that no system is perfect and that no one bats a thousand. Does that add to my stature and make my next prediction more credible?

The idea is laughable.

Yet listen to some market gurus and you’d think they’re all a bunch of smart guys who never get blindsided by events. Even those who missed the boat generally claim that they weren’t wrong… “just early.”

I suspect that more than a little revisionist history is going on here. The truth is that even the market forecasters who are right are generally dead wrong.

Let me give you an example…

The Bear Philosophy: Every Silver Lining Has a Cloud

I know a famously bearish investment analyst – one who has been bearish not just for years but for decades. He sincerely believes that every silver lining has its cloud.

Just before the financial crisis of 2007-2009, he let his readers know that we were on the edge of catastrophe. He predicted that inflation would soar, the dollar would crash, foreigners would repatriate their assets and the stock market would keel over.

And it did.

Today, he insists he “called the recent market crash.” It’s true he was bearish before the market tanked – and I hate to quibble – but…

• Inflation is 1.2%.
• The dollar is up against the euro and the yen.
• Foreigners have clearly not repatriated their assets.

Yet he crows about how much money you would have made if you’d listened to his analysis before the recent meltdown. Of course, you’d also have made a ton if you’d bet large on my first call of “heads” a few minutes ago.

What? You say my forecast had nothing to do with the result, that my success was meaningless?

That brings me to analysts who are busy claiming that they called the recent spike in oil and gold prices…

The Core Principles for Investment Success

Think about it: Who foresaw that a frustrated market vendor in Tunisia would set himself ablaze in the street – a move that would ultimately bring down the Tunisian government? In turn, who knew that would lead to a successful uprising in Egypt and then anarchy in Libya – developments that would cause oil (and thus gold) to soar?

Who? Precisely no one.

There’s a lot of money to be made in the prophecy racket… I mean, the market forecasting business. But here’s the industry’s dirty little secret:

Real investment success doesn’t come from following the right predictions. It comes from following the right principles:

• Allocate your assets properly.
• Diversify your portfolio broadly.
• Buy quality investments.
• Reduce your investment costs.
• Tax-manage your portfolio.

Yes, you can make it a lot more complicated than this. But you really don’t need to.

Good investing,

Alexander Green