the good thing is that we are out of the recession, and moving into the recovery phase. anyone who has taken economics with public policy knows that the government will step in from time to time to ‘boost’ our economy, as a jump start — aka government stimulus plans.

so now the question i ask, as a self-proclaimed american capitalist, is how do i profit from this?

well, if you can afford to buy a house, you can buy right now at record low interest rates, with a foreclosed home.. then get some friends to live with you and pay your mortgage off without you paying a dime (well maybe property taxes & general maintenance - but as you’ve learned from my previous post, you build equity in your investment).

but we can’t all buy a house right now – although the government is making it easier more and more each day. so what do you do to cash in on the real estate market (who is in the slump right now – but will ‘boom’ soon)?

the answer is REIT, or a real estate investment trust. basically a REIT is a way for corporations who invest in real estate to avoid corporate taxes, because we live in the best damn country there is.  the good thing is, you can buy shares of the REIT at fairly low prices right now (remember – the market is down, which means prices are low) but once the recovery catches up to speed, you’ll see more real estate sales.

you can invest in all types of REIT’s, some that invest in strictly commercial property, residential, apartments, etc. i’ve found a few REIT’s that i truly believe will be booming here in the next few years – and i’ve made the decision to invest in them.

again, from an economic stand point, we are in the recovery phrase of our recession. once we ‘recover’ as an economy, things will get back to ‘normal’, and you will see tremendous growth in the markets that were affected by the great recession / real estate bubble.

for further reading:

• real estate investment trust
• foreclosure.com
• REIT listings
• seeking alpha: time to invest in REIT?

one of the best things that can happen to consumers is a price war. to the naked eye, most people don’t even realize they are going on – but they are. a price war is defined as ‘a term used in business to indicate a state of intense competitive rivalry accompanied by a multi-lateral series of price reduction’.

when i think of price war, i think of incentive first. why is it in a company’s best interst to lower their prices, sometimes losing money on a product? market share. simply put, it’s good business. it’s a company going out, taking a loss for your business. wouldn’t it be nice if all companies wanted your business like this?

sure would, but the truth is most companies don’t have to compete for your business like this. most of the time, firms have such a steady inflow of customers that they rarely care about your business, because there is always someone in line behind you. when i see business like this, i take mental notes. i take mental notes, because this is bad business. any good business knows you put customers first, always. i always buy from places who want my business.

quick tip: it’s 10 times easier, and cheaper, to retain a customer than find a new one. happy customers means happy business owners, with fat pockets.

back to price wars – how can this help us (consumers)? well, if you can notice a price war, then you can strategically plan your purchase. about 6 months ago, a good friend of mine wanted to purchase an apple macbook. we checked them out online, and they were in the $1,200 price range. i started noticing a trend on network television – apple vs. microsoft. they were buying valuable time on commercial space saying how their product was better.. then the biggest hit happened. microsoft took a low-blow at apple on their prices, with this commercial.

boom. instantly, apple lowered its prices on their macbooks to $999.99. they took a $200 loss on their product – all because of microsoft. now lets look more in depth with that commercial.. hp, microsoft, and best buy all marketed in there – what do they have in common? they all compete with apple. here comes the price war.

my point is, if you can sit back and watch the market – you will be able to identify when these kind of price wars happen. remember, in price wars, only the consumer wins. the firms will both take a loss and justify their losses for market share. keep this in mind for investment opportunities as well..

for further reading:

• what is economic game theory?
• price fixing

i went on to talk with my good friend for about an hour or so, giving him pieces of information and wisdom i had learned throughout my tenure at business school. as i come closer to graduation, i feel that some of the basic things i learned in business school, should have been taught in high school. maybe if we standardized financial education in highschool, we can avoid the house of cards, social security problem, and focus on retiring well. quick fact: 1/4 americans have long term health care life insurance for assisted living, yet 1/2 of americans will need assisted living. scary, isn’t it?

since the middle class is obviously shrinking in america, you need to start making sure that you can do all you can to be sure you’re on the top of the totem pole. it won’t be hard, it won’t be impossible, and with a little effort each day – you can change your quality of life drastically. invest in your future with education today.

basic finance – asset vs. liability

an asset is defined as: any item of economic value owned by an individual or corporation, especially that which could be converted to cash.

a liability is defined as: an obligation that legally binds an individual or company to settle a debt.

so how does this affect you? well lets look at it like this. you’ve got your career, and you’re living in a 1 bedroom apartment, paying $450 in rent per month; among other various bills (water, electric, etc). when you hand over the $450 to the apartment complex, or your $450 to your land lord, you are getting utility (a measure of the relative satisfaction from, or desirability of, consumption of various goods and services) but you are earning no equity (the value of an ownership interest in property, including shareholders’ equity in a business).

so you’re flushing $450 away per month in rent (liability) – sounds like you need to own your home by building equity (asset). this is why it is crucial to own your house, or be on the path to ownership. by living in a house you are paying off, eventually you will have an asset (your house) with equity – which you can one day use as collateral (a borrower’s pledge of specific property to a lender, to secure repayment of a loan) to own something bigger, and better one day.

now don’t get me wrong – sometimes it benefits you more to rent, as a home owner you will have to pay property tax each year, repair your home from your own pocket, and put in sweat equity. a good rule of thumb, is that if you are staying in one place less than 5 years, rent. if you are staying in one place more than 5 years, own.

so what have we learned here? by owning assets, or on the way to owning assets, you have equity in your assets – which increases your net worth on paper. you will be building credit, building equity, and taking a big stride in the right direction to the american dream. it’s always better to own, not rent.

want to do some further reading? great. i recommend you check out the following:

• good debt vs. bad debt
• why we want you to be rich by donald trump & robert kiyosaki
• teachmefinance.com
• fool.com

here is why i love apple, and why you will too. steve jobs, the ceo of apple, is a genius. the man behind the magic controls the direction of the company, and how to portray that to the rest of the world – then buy. apple inc. ($AAPL) is a company who specializes in personal computing, handheld media devices, and other forms of consumer ‘cutting edge’ technology. or is it?

steve jobs understands, in my opinion, one of the best qualities in sales: hype. before the launch of the iPhone, mr. jobs released a viral video of a sort of magic phone – one that did not rely on a keypad, only a screen. it was the first of its kind. many press conferences were held, and mr. jobs first stated saying that the phone would have 2gb of memory – 4x more than any phone of its kind. little did john q. public know, this was a very smart marketing ploy by apple.

as the weeks went on, there was much speculation on the iPhone, and it’s 2gb storage space. just before the release of the iPhone, mr. jobs gave another press conference - stating that the iPhone would actually have 4gb, and be affordable to nearly every consumer, exclusively to at&t.  another media frenzy. hype, hype, and more hype.

the iPhone was released, and consumers were blown away. a smart phone that did every thing that the blackberry didn’t. a phone that incorporated 3rd party programmers to sell their own applications at their own price via the App Store. a phone which put GPS in the pocket of who ever owned one. e-mail, text message, and internet was already standard on other phones – the iPhone had it all, plus more.

this article isn’t about the iPhone though, it’s about apple inc; and why i love apple as a company. apple is known for being innovative in the market. they understand the consumers demand before the consumer can have the demand. they have the answers before the consumer has the questions, for a relatively low price. in my opinion, i believe it is the goal of apple to have every person using an apple product – iTunes, iPhone, iPod, iTouch, MacBook, etc. no other company in the industry can begin to compete with apple with this kind of brand loyalty. microsoft is the closest competitor, who seems to be following apples every move.

i had never been in an apple store before, so i went in one. the first thing i noticed was the abundance of people in the store. there must have been at least 250 people in the store, over 75 apple employees. in sales, every good salesman knows the first rule is to get the person to try the product. i looked around at the store and noticed one thing- everyone was trying the product. this is apples key to their success. they have 50 iphones, ipods, imacs, iwhatever out for john q. public to play with, because they are confident the product sells it self. and it’s true. so we have the most innovative consumer driven technology company who runs retail stores world wide putting their products in store for consumers to use, with 1 on 1 individual customer service in store. show me another company who is doing that, i challenge you.

beyond the stores, the products, and the hype is the brand loyalty. apple has their hand in many noble causes getting young minds to think the ‘apple way’. build brand loyalty from the start, and you have a generation of consumers to your product. so where does this leave microsoft?

i was watching an interview with bill gates on msnbc, and a mba from columbia asked bill about apple as a company. bill gates gave the most proper response by smiling, and said that they were a great competitor, who is innovating the industry – no further comment. bill knows that microsoft needs to start making moves, or losing market share.

if you take a look at the financial statements of apple inc, they turned 1.82 EPS, while microsoft turned .40 EPS. EPS stands for earnings per share, a good indicator of a company’s profitability. apple reported a net gain of 45 while microsoft reported a net loss of -3. looks like the tide is turning from the microsoft era, to the apple era.

this is why i love apple, and why you will too – because their business is ethical, future forward, and innovative. i tip my hat off to steve jobs, and everything he has accomplished. i can’t wait to see how he will impact the world further, only time will tell.