Rule #1: Phil Town on Investing

Twittering Rule #1

I'm going to start twittering in earnest pretty soon - in the next few days.  I'm thinking it will be fun to do some pithy, quick and easy bits that might be some help for your investing. 

I'll be tweeting about Rule #1, of course, but also about other resources I think would be useful to a Rule #1 investor.  As I come on them, I'll let you guys know with a quick Tweet. 

Also any motivational stuff I see, I'll pop into a Tweet, too.  And I'll put in some good "where to find it" info as I think of it or learn about it.  Where to find better tools for free, for example.  More and more stuff is coming on the internet for zippo.  Which is awesome if you know about it. 

And I'll be putting in some companies to keep an eye on that are looking particularly Rule #1-ish.  And any books or articles that are worth a look.  And I'd love to Tweet about any CEO antics you should know about.  So if you want to keep up with this stuff, follow me on Twitter at http://twitter.com/Phil_Town.

Now go play.

Latest PAYBACK TIME Cover

Here's Random House's latest cover for my next book, Payback Time (release date: February).  What do you guys think?

Now go play.

New MSNBC Your Business Video: Allocation of Capital

May 31 episode synopsis:

Jennifer Hill, vide-president of Astia, and Phil Town, investment advisor and author of the book "Rule #1," answer viewer questions about the best way to allocate your capital and cutting back employees' work schedules. (MSNBC)

Click here to view, or watch below:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Your Homework: Game Stop (GME)

Take a look at GameStop (GME) with Juergen (see letter below) for the last year.  Assuming he's right about the 4Ms and the price being at or below MOS, how would you do trading it?  The price dropped from $55 to $30, a loss of 46% if you bought and held.  Instead, moving in and out, you would have done pretty okay.  Not great, but a whole lot better than a 46% loss. 

M is for Management

One of the toughest jobs we have as investors is to choose a good management team to invest in.  Picking the jockey can be as important as picking the horse. 

I want to invest with passionate, honest, self-effacing - people who are committed to the business over themselves. Think Steve Jobs at Apple.  Well, except for the self-effacing part.  So think the CEOs running virtually all of Buffett's private companies.  They are all rich, but they keep working hard because they love their businesses. 

A great example of a bad example is Rick Wagoner at GM.  I've never met Rick.  He played b-ball at Duke.  Who knows, maybe I'd like him.  Maybe he had issues at GM that no one could fix.  I don't know. 

What I do know is he failed the shareholders on a scale rarely seen in history.  And it's not like he's new to the business: He was appointed the Chief Financial Officer in 1992. He's been at or near the top of the business now for 17 years. GM's problems must be laid at his feet.  But why has it taken all these years to fire him?  Didn't GM have a board of directors?

The Ceiling (and What's Coming Next for Banks)

Recently I received an interesting comment from Hanno:

It seems that we reached the Ceiling right now. If we look at the Dow in a 10 year history chart, we can see, that it was going down for over a year. This rebound we are seeing now is not lasting. The charts show it in the little time-frame: If the value goes down straight and also very much than there is always a counter motion following. This is what we can see now with the big indices. The 8000 points at the Dow seem to be the Ceiling of it. Well, I think, that we will going to hit the 200 day MA in the next 2-3 months. So we will be in a sideway until then. If this happens, than this could be the sign of a lasting rebound in the next half year from then. But mention folks, this is just my opinion. And I am not sure but this mess could be finished at the end of this year. We will see.

My response:

We've been right on about 8000 as a ceiling.  There are ways to make money when you have that situation, but they more advanced.  We'll get in to that sort of thing in the future sometime, but for right now the 8000 ceiling is holding. 

Meanwhile, the banks are doing better, but commercial real estate is the next shoe and it's going to drop this year.  Banks are carrying big portfolios of commercial real estate loans and no one knows what they are worth right now.

Here's the problem: