PHIL TOWN

GARRETT POSTS ON CLF Z VALUE

Rulers, All of us on Phil’s blog have the common goal of financial security long after our ability to work for “the man.” Therefore, it’s extremely important as Rule #1 Investors that we have a basic understanding of our “Big 5” Growth Rate numbers. When Phil gets in your face with his Green Beret and says, “Ruler, give me The Big 5!” You should be able to snap to attention and yell out, “Sir, Yes Sir. The Big 5 Growth Rate Numbers are ROIC, EPS, Sales, Cash Flow and Book Value, Sir!” Either that or suffer the loss of thousands of dollars. Your choice! Since CLF is getting hammered Mr. Market is giving us a real-time educational opportunity to discuss Book Value Per Share and our coined term “Rule #1 Zombie Value!” Today Book Value is playing an important role in helping me determine CLF’s Value. Why? Simply because it’s harder to get an accurate value for CLF’s with such declining Big 5 numbers. The expression we like to use is “Don’t try to catch a falling knife.” If you haven’t noticed yet, CLF is a falling knife! When you see the “falling knife” scenario happen, it means we need to wait for a solid floor and a reversal in the trend. Trying to “guess” where or when the bottom might occur is not managing our risk. We need to use what I call the three “F’s” - Fibs, Floors and plain ol’ Facts to help us determine the floor. Because we manage our own portfolio like a professional hedge fund manager, we can utilize Rule #1 Option Stockpiling strategies to lower our basis well below the lowest point when the trend finally does reverse. Cool, huh? You’ll learn how to do that in Atlanta in April. So in this “falling knife” scenario, looking at BVPS and calculating our Zombie Book Value (ZBV) is a good means to determine CLF’s value. Think of an ugly, vacant house in your town. It probably isn’t worth the lumber that’s holding it up. But darn…that ugly house starts to look pretty sexy if you could buy it for 50% less than what the land is worth that it’s barely standing upon - just tear it down, and start over. Everything has a price. Even CLF. At some price, it’s going to be worth something to somebody as long as it has some assets it could sell. And by looking at CLF’s financial statements I can see what value those assets are. Let’s look at Book Value which is sometimes called “Equity Value.” It’s expressed as a dollar amount. We like to see that number in a “per share” price so we can look at an apples to apples comparison to our share price today. When we do that, we now call it Book Value “Per Share.” Quoting our investing bible, Payback Time, Phil writes that “Book Value grows from earnings that don’t have to be spent to maintain the business. Its rate of growth is ultimately reflected in the rate of growth of the stock price, since the stock price will increase with the growth of the real owner value.” That’s one reason why I like to lean towards BVPS Growth Rates when estimating future GR’s for our sticker price. It’s harder for those financial gurus to cheat on the number. However, today I’m more interested in what CLF’s value would be if “for some strange reason, it suddenly stopped doing business, collected all the money the business was owed, sold off everything it owned, and then paid off all its debts, the amount of money you’d have left would be its Equity.” And CLF gave us a snapshot what that number would be when they filed their 2012 Annual Report. I can find that number on numerous free websites and it’s $32.51 BVPS. At the moment I’m writing this CLF is trading at $21.70. That ugly house may start to look rather “sexy” if it drops even lower. Does this mean that I should buy it? No! Mr. Market is sometimes irrational but most of the times, he’s right! Maybe MANAGEMENT has made some decisions since then and the market has priced this correctly. Let’s take a look at CLF’s Zombie Value. How can we get a value that’s actually lower than its Book Value is? After all, we just said it was “the amount of money you’d have left.” Companies buy stuff. And to keep it simple, some of that stuff is worth more to them than it is to us as investors. What’s the value of the trademark “Rule #1”? I don’t know. But suppose Phil had to sell his company because he invested everything he owns into Enron. His accountant would put a value on that Trademark. I’m not interested in paying for that name as an investor if I buy the Rule #1 Company. I’ll take his software but I don’t want to pay for the name “Rule #1” because I’m going to erase it from history and convert everything into my company called “Investor University.” To me, those are “Garbage Assets” or “GA” - stuff I’m going to subtract from the Book Value. Companies have to list their GA’s on their balance sheet. They call them “Intangibles, Cost in Excess, and/or Goodwill”….just “Garbage Assets” to me when I’m trying to determine what a company is worth if it were walking among the “living dead”…a Zombie Company…think airlines like Pan Am, TWA, Northwest. They flew in bankruptcy as a Zombie Company, sucking the life out of profitable airlines, until someone like Carl Ichan came along and bought them and sold off their parts. He made millions buying zombies. We can make money off the living dead too! Here’s how you calculate the RZBV for CLF: Open CLF’s 10K 2012 Annual Report to the “Balance Sheet” First we need to get rid of our “Garbage Assets” that we don’t want to pay for as an investor. Write down “Total Assets” (TA): $13,575 Write down “Intangibles” (I): $167 Write down “Cost in Excess (CE) or Goodwill” : $129 Add I + CE =’s Garbage Assets (GA): $167 + $129 =’s $296 TA – GA =’s “Rule #1 Tangible Assets” (RTA): $13,576 - $296 =’s $13,279 Now that we have a new number of assets called “RTA” that will determine our Rule #1 Zombie Value (RZV). Let’s figure that out: Write down “Total Liabilities” (TL): $8,942 RTA – TL =’s Rule #1 Zombie Value (RZV): $13,279 - $8,942 =’s $4,337 Next, I want to convert $4,337 into a “per share” number so I can compare it to today’s trading price. Divide the Rule #1 Zombie Value of $4,337 million by the number of shares outstanding. Where do we find that? On the TownToolBox, select "Stock at Glance" and select "CFL". You'll notice that the number of "Shares Outstanding" is 142,479,076. $4,337,000,000 / 142,479,076 ='s $30.43 Zombie Value Per Share based on 4th Quarter Data. This is where you have to know your biz or at least confirm your numbers. CLF issued a bunch more shares in the first quarter and diluted their shareholders value contributing to CLF's falling price. Their actual "Shares Outstanding" is 158,200,000. So let's use the most recent data to derive a more accurate Z Value. Therefore, $4,337,000,000 Zombie Value / 158,200,000 current shares outstanding ='s $27.41 per share. Because I seek a high Margin of Safety, I'm going to give myself a discount. 50% ZMOS is $13.71 and a 30% ZMOS is $19.19. This certainly isn't the entire story. But it's part of the chapter as I do my Rule #1 Homework and create a "Story" where CLF is going to be in 20 years. If I can't create certainty, then I don't invest. To Your Wealth! Garrett Hey...Read this: I am not an adviser. I am not licensed. I am not offering advice because I have no idea what might be right for you and I'm not trained in any way to know what is right for you. Anything I post is for my own general education and is probably not appropriate for you.

JOEY MILLER ON THE RECENT 10-10 TRADE

There was some blog discussion yesterday on a recent 10-10 Trade that Joey Miller teaches in one of our advanced courses on cash flow trading that may have caused some confusion about the merits of the trade that I asked Joey to respond to.  

Joey is the head of derivatives trading for the Rule One Capital hedge fund and has an astonishing track record for consecutive successful trades.  In addition, he's an astute investor and I listen to what he says about lots of things including derivative trading.  What he wrote below is about the trade in question and more and is well worth a read

-- Phil

From Joey Miller, Rule One Capital hedge fund derivatives CIO

The 10-10 trade we teach has done quite well.  It has not had a loss for over a year including this recent trade.  In fact, if you followed the rules, you've never had a losing year.  Of course, I have to say that this fact, while compelling and confirming how profitable this trade can be, does not guarantee there will not be a losing trade or losing years in the future with the 10-10 system.

The 10-10 strategy can be backtested and I have taught every student to backtest the system before they ever trade it live. Every student should have gone back 10-20 years to see how the trade performs across all sorts of markets so there will be no surprises when the market makes a sudden move. If a student has not done their homework they have no business trading this system because without the background it is very easy to get caught up by ERI.  If we strongly suggest something to our students its because we know you'll need it.  What I have noticed is some students do not take our advice about backtesting.  They only "forward test".  That means they don't do the homework, they place trades without preparation and they allow the market to educate them real time.  This, as you can imagine, can be painful.  While it might seem like a faster way to go than to do all that slow homework, Phil has a saying from his Special Forces days that applies big time to things that are dangerous: "Slow is smooth.  Smooth is fast".

Don't be in a rush.  Prepare, take it slow and get it right the first time.  Its faster in the long run.

We just entered another new 10 day low this morning so now I think we've entered into a trade that could be a problem.  Statistically speaking, 7% of the time the 10-10 trade will lose.  In this case, it is still premature to think about closing it out as we will not know for another 8-10 trading days if it is, in fact, a losing trade. On the flip side there is still a good chance it will be a winner.  

If we used good money management and did not allocate anything to this trade other than a piece of our risky-biz cash or if we did the 22 trades over the last year and as a result of that success we've already built a solid cushion of profit to feed a small loss into, taking a loss here isn't a problem.  Its just part of the game. We strive for perfection but it alludes us.

One last point: I do not endorse rolling all profits into the next trade.  It is too much akin to keeping your profits on the blackjack table. Eventually you'll have a bad hand and lose it all. This would be an epic money management failure as a trader.

On a side note, the 10-10 system is a great way to identify an oversold market 93% of the time and all investors can benefit from the signal if they are looking to re-traunch at a new low.  This signal can be used to reduce risk if used appropriately.

Also let me note that I have a few students who try to guess which 10-10 trades to enter and which ones to sit out, some who rely their gut instincts and some who go so far as to change the system completely. If you are doing any of these things please consider these a sign that this system may not be appropriate for you.

 

Onto the RUT system.

The RUT system we teach has not had a losing trade in 18 months. Given the last 18 months of market machinations, I think this track record suggests its a pretty robust system.  If you follow the rules, the results are consistent and compelling.

That being said, on occasion, I get calls from students who want to talk about the best adjustment for their trade. Let me remind you here; If you roll a position up and out or down and out, please note what you are doing is closing a trade at a loss and then placing a new trade to recoup the loss.  Its not rational to treat the rollout as anything else.  

I like the first part of the adjustment as I feel the best adjustment to a losing trade is to close it. Once closed, I would use the steps we taught you to see if it makes sense to place a new trade at that time. In the case of the recent February RUT trade, we closed at a profit and then did not enter a new trade for March since volatility was too low.  If you were in a losing trade in February, by the same logic, rolling the trade forward would have been a bad decision.

 

I also have encouraged all traders to back test the RUT system to see how it has performed for the last 10 years.  You'll see that it has been one of the most consistent strategies in the market. For those of you who are coming in Atlanta, you are going to love it, and I'll show you with real data how we made money in January, how we made money with no adjustments needed in February and why we stayed out of March. 

Here's my main points: Always backtest a system, paper trade until you are comfortable, build into your trading plan what you are going to do if the trade goes against you, never trade money you cannot afford to lose, and never over-allocate in a leveraged instrument. Remember, the market can stay irrational longer than you can stay liquid. If you have a trade that goes the wrong way and you are losing sleep over it, you either did not backtest the system to get your head right or you over-allocated and can't take the loss with equinamity or this simply is not a system that fits into your personality. 

See you in Atlanta!

Joey Miller 

UPDATE ON ATLANTA COURSE AND UPDATE ON MACRO

We've been buried getting the course ready and finishing the Rule #1 tutorial videos.  Give us a few more days to get them onto www.ruleoneinvesting.com and set up permissions for all of you who are attending the course.  We'll shoot you an email when the tutorials are ready for viewing.  

Meantime, beware this market.  The underlying fundamentals are improving for the moment but sometime in the next couple of years the insane debt we've created to avoid the pain of bankruptcy for the rich idiots on wall street and the bankers who made such a pile of stupid loans - all the cronies of the last several Presidents.  

The horror of this policy is that its being done in the name of protecting the little guy but its the big guy who doesn't have to give up his home in the Hamptons and its the middle class firemen and school teachers, who are going to pay the price.  These Harvard clowns have purchased a huge pile of irredeemable debt and the only thing they can do with it is monetize it by printing money.  It is all Bernanke knows how to do.  Granted, it might have saved a freeze of the entire financial system but we're way past that.  Now he's trying to save every bank that ever made a stupid loan.  

Maybe Big Brother feels guilty for demanding banks drop their lending standards but I doubt it.  I think they know who butters their bread and are acting accordingly.  For them its a no brainer: pander to the firemen and the teachers by talking up unions but save the Big Guys by loading them up with money the unions are going to have to pay for by higher taxes in the form of insidious inflation.

It is coming.  I just don't know when.

Now go play.

AND THE WINNERS HAVE BEEN NOTIFIED

We just sent out the emails to the winners and to the students who have requested a seat to re-take the course.  If you did not receive an email, you did not win.  We are so sorry but not everyone can come at once and we must limit the total number of attendees or the students won't get the full benefit.  

If you did receive an email, be sure you follow up on the instructions in a timely manner.  There is a waitlist (and you've been notified if you are on it) and we will put someone in your place if you do not follow through according to the directions.

Congratulations to all of you who won!  Joey, Jeff, Garrett, Michelle, Melissa and I are looking forward to seeing you there.

Oh, by the way, the 'twist' is that we had so many great essays that we decided to bite the bullet and pay for another Rule #1 Cash Flow Beta Workshop for a 2nd 100 winners.  The workshop will be on April 19-21 in Atlanta and it will be taught by Joey, Jeff, Garrett and me.  

The way we did this is Michelle read every essay and organized them so that I could read them without the hassle of finding where the essay went or got attached or whatever.  That was a huge job so thank you, Michelle.  Then I read every single one of them.  And there were a lot.  Then I went over the ones on the margin with Melissa and we selected the top 100 essays for March 1-3 and then next 100 were selected for April 19-21.  The difference between the two groups of essays was entirely subjective but what all the winners had in common was heartfelt desire to learn.  If your essay was not selected for either course, hang in there and try again next year.

Thank you all for all of your efforts.  These are going to be amazing courses.  I can't wait to get started.

Now go play.

MELISSA WILL HAVE THIS POSTED BY 12 MIDNIGHT ET

Sorry, y'all.  We just couldn't get it all done.  As you will see there was a lot to do.  Melissa is putting a new twist on the whole thing and she will be posting out the emails to you all no later than midnight tonight.  It should be before that but she's feeling a bit under pressure from missing the first two deadlines.

Again, sorry y'all.  I'm a DWYSYWD kind of guy.  (Do What You Say You Will Do).

Now go play.

WINNERS EMAILS WILL BE SENT AT 4PM ET

Hi Rulers, 

The response for the Free Cash Flow Beta Workshop in Atlanta March 1-3 was awesome and a bit overwhelming.  We've been reading and re-reading essays all week in St. Martin, on the plane back and this morning.  We're wrapping the process up now.  Emails to all of you who submitted an essay and to the Cash Flow grads who want to come to the course will go out today at 4pm.

There were a huge number of really heartfelt essays.  We'll do our best to see that those people are rewarded for their courage and their effort to learn.

Now go play,

Phil

DEADLINE: All entries due by 12 Midnight ET TONIGHT

Just a quick reminder: All entries for the free cash flow beta course in Atlanta are due in by midnight tonight, about 6 hours from when I post this.  

We have a lot of entries and we're going to be evaluating them this weekend (and we're already well into it in spite of being in St. Martin in the Caribbean).  We'll be announcing the winners and the top twenty on the waitlist on Monday morning.  

Good luck, y'all.  

Now go play.

 

SPECIAL ONE-TIME FREE CASH FLOW COURSE IN ATLANTA MAR 1-3

We're going to do a special FREE 3-Day course for y'all in Atlanta, GA beginning on Friday, March 1 through Sunday, March 3, 2013.  This is a $4,995 course.

THAT'S CORRECT: 3-DAYS WITH ME, JOEY, JEFF AND GARRETT ABSOLUTELY FREE.  YOU WILL SAVE $4,995.

We love this blog and all of our Rule #1 and Payback Time readers and we received so many requests to have another contest to win a free seat at our 3-Day Rule #1 Cash Flow Options Course that Melissa and I have decided to do a special one-time-only course again this year.  

Of course there are limits to what we can do so we're not going to rent out the Atlanta Phillips Arena.  We're going to keep the course small and intimate like our regular courses so we can teach you well.

We're going to do this for 100 of you (and your spouses/partners/significant others/kid/parent/cousin person).

You read that right: 100 of y'all are going to be our guests in this 3-day course plus your guest if you want to bring him/her. So ... 200 seats max.  

Garrett has convinced us that you guys deserve it.  Melissa and I agree.  The information we teach about Rule #1 basics and options is so unique in the world of investing that we don't want you guys to have to wait for the next book to learn about it.  And I'm tired of pussy-footing around on the blog and not talking about this stuff.  It's time you got out of elementary school and started learning how we really do things.

This class is going to be incredible.  I'm leading the course along with Joey Miller and my brother, Jeff Town and superstar blogger, Garrett Woolley.  If you want to meet Garrett, Jeff, Joey, Melissa and me along with our top staff, here's your chance.    

If you haven't done anything like this with us before, ask around and you'll find out we do everything we can to make your experience life-changing.  We do a lot of 1:1 coaching during the course for anyone who is feeling a bit overwhelmed by the pace but don't worry: If you read my book, you'll be in good shape to rock on to the next level of investing success.

This particular 3-Day Atlanta Special Workshop is going to be three days packed with our unique Rule #1-oriented training on how to invest in stocks and options with the least risk of losing money and the most opportunity for increasing your cash flow.  

This may be the opportunity to get that hands-on training that can take you to the next level that many of you have been waiting for.

Here's a few things the course attendees will learn:

-How to know the difference between a really wonderful company and one that just looks like it in the tools

-How to nail down the real Sticker price

-How to use the Sticker to spot a great options trade for instant cash flow

-How to sell option insurance and collect cash with a ROP trade (something I do all the time)

-How to profit whether your stock goes up or goes down in a ROSS trade

-How to make cash flow happen with a 94% statistical probability of being on the winning side of the trade by doing a ROC trade

-How you can target a 50% compounded annual growth rate for your options portfolio

-How my partner recently did 70 winning options trades in a row

-When to use an option trade instead of a stock investment

-When to use an option trade with a stock investment

-How to protect against taking a loss in your stock without the insurance costing you anything

-How to leverage your long position to maximize your return (and how a couple of guys did that and turned $110,000 into over $100 million in 5 years).

-How and when to get out of a losing options trade and how to turn it into a winning options trade

-How to allocate your options capital to the correct number of options trades each month

-How to do the Rule One 10-10 trade to get repeatable cash flow

... and a whole lot more.

 

Now lets talk about how you get to go the course.

The course is free.  You invest in getting to Atlanta, your hotel room (approx $100/night) and food.  We'll pick up the coffee, the training room, the internet, instructor's travel/hotels/food/cars and the instructors fees. Lest you think this is trivial on our part, I'll tell you what it costs us: We estimate its going to be almost $60,000.

So you gotta be asking yourself why we'd spend that just to give away a $4,995 course.  Are we altruists?  Do we just love people?  Are we nuts?

Well, if you don't know us yet you'll learn that one of our favorite books is Atlas Shrugged so probably the altruistic motive is out.  And I love my wife ...but loving y'all's got nothing to do with it.  And no we're not crazy. I'll tell you why we're doing this: Same reason I wrote both books and spent over $1 million on publicity to promote them - we want to change the world we live in and the only way to do it is to change one person at a time (well, 100-200 at a time is okay too).

Our courses change lives.  That's why we do them.  And that's why we're going to let a bunch of you take this course for free.

Okay so back to you.  What's it going to take to get you to get off your butt and do this?  Are you skeptical and that gives you an excuse to procrastinate your way along in life?  The last time we offered a few free seats we had a concerned father of a young woman calling us to demand to know what the catch was.  He said he was sure we were going to be selling her something at the course.  We said no, we aren't.  No selling allowed. Just pure education, as best as we know how to do it.  This dad was very perplexed.  He couldn't think how we were going to take advantage of his daughter but he just knew we were somehow.  

I gotta tell you that when Melissa and I decided to do let some of you attend our courses for free I didn't expect skepticism in response but on hindsight its a pretty natural response to something that looks too good to be true.  A $4,995 3-Day course for free?  Riiiiiiiiight.  Except its true.  So if you're skeptical and concerned, we understand, and we can tell you that you're in for a great weekend of education.  We have thousands of students who without exception have told us this course is worth every penny of the $4,995 that they paid.  And we start teaching in the morning of Day One, you'll know you're in the right place.  So don't be too concerned about being too concerned but also don't let your inner skeptic keep you from an experience of a lifetime and from what many students say is a life-changing experience. 

(As an aside, the daughter loved the course so much she sent all the ladies on our staff a big box of skin-care products afterwards.)

Now, how to get to the course.  

Simple.  Just like last time.  All you gotta do is sit down and write about 200-400 words.  Maximum 400. Some of you learned to your embarassment last time that we are not going to teach you if can't follow simple instructions.  Do not write more than 400 words or we will toss your entry into the round file.  We let Garrett get away with breaking the 400 word rule in the first contest and he's been writing 2000 word essays on the blog ever since.

What should you write about?  Tell us what it will do to your life if you become wealthy through Rule #1 investing.  What will you do with the money?  Who will you help?  How will you change the world we live in? What will the money mean to your kids, your parents, your retirement, your life now?  Tell us your dream for your life.

But only 400 words.

And don't worry about the grammer or the way you say it.  Just say it from the heart.  Tell it like we're standing there talking.  All we care about is that you're telling us your dream.

The DEADLINE for all entries is 12:00 midnight EST, FRIDAY, JANUARY 25, 2013.  You've got 9 days. Get to it.  

Here's who wins:  The first 100 good ones win 2 free seats each one of which is worth $4,995.  When the seats are gone, they're gone. After that you get wait-listed.

SEND YOUR ENTRY TO: Registration@ruleoneinvesting.com.  Be sure to put your full name on your entry. And keep it under 400 words.

WINNERS WILL BE ANNOUNCED VIA EMAIL ON MONDAY, JANUARY 28, 2013.

If you win a seat, be ready for 3 incredible days of the best investing training on the planet and should you think I'm exaggerating, ask around on the blog and the people who've been to the previous version of this training will tell you what they think.

By the way, this message is going out to 40,000 people who are active in our database from our books and blog.  First entries in get first priority with the judges.  First 100 good ones win.  Early counts.

There will be 100 winners and there will be a wait-list.  Some of the winners are likely to not be able to make it to the course so the people on the top of the wait-list will also be notified that they are on the wait-list and that they will be contacted the minute a seat opens up.  And if we can accommodate more than 200, the wait-list group will be the first to be invited in.

If you've already attended the Rule #1 Cash Flow course, either the 3-Day or the CR-280 and want to re-take it, this is your chance to do that and we'll make room for you. This course is a Beta.  We're making some changes to the Cash Flow course. We'd love to have you there. You guys are our best students and anything we can do to help you get to this course, we'll do if we can.  You don't need to write anything.  Just let us know you want to re-take the course and you're in.

 

EUROPE SPEAKS ABOUT ITS UNEMPLOYMENT PROBLEM: STEPHEN REPORTS FROM GERMAN

Let's take a look at how Europe is doing with its socialist democracies.  We know that a number of countries got all politically correct about paying people more money with more health care and better retirement and, predictably, the people's representatives kept asking for more and more until people were retiring with full pensions at 50 and, finally, there was no money for it and those countries entered into a long-term fiscal crisis.  Many Greeks have fallen from middle class to subsistance and are barely eeking out a living at all. Things are better in Spain, Portugal and Italy but not for kids who want a job.  Unemployment among 18-30 year olds is running in a range of 20%-50%. Lest you think this is not a big deal, how would you like it if you had to leave your country and move to some foreign place just to have a chance to get a start in life. Spanish, Italian, Portugese and Irish are leaving their families and homes for greener pastures in the Eurozone.  And in places where the kids can't get out, they've got revolution. The Arab Spring is driven in part by the same age group facing a bleak future but without the ability to get out of the country and start somewhere new.  

Stephen writes us from Germany with insights into the problem and a look at the German solution:

Rulers, I'm so sick of this EUSSR. Yes there is very high youth unemployment in most member states of the EU. Between 25% ( France) and 57% (Greece). Even a rich country like Sweden has a youth unemployment rate of 23%. Now what would a sane political leader do? Deregulate? Lowering minimum wages? Get rid of red tape? No! They give taxpayers money to emloyers to make them employ young people or sanction companies who won't employ young people. So why does a company employ workers?

The answer is very simple: If a worker will produce more than the combined costs of wage, taxes, health care, pension and insurance the employer has to pay , than he will be hired, when a worker doesn't produce more,than the costs of hiring he won't get a job. So how much can a young unexperienced kid, coming right out of school produce for his boss? I don't know, but in France, Greece, Portugal, etc., it must be less than the costs of hiring, otherwise youth unemployment wouldn't be so high. In Germany the youth unemployment rate is 8%. In France the general unemployment rate is 10.14 %, but the youth unemployment rate is 25% So where is the difference? In most countries in Europe there is a very high minimum wage (9.43€ in France; if you are under 18 and if you have less than 6 month job experience your employer can pay you a lower wage).

So let's compare this to the situation in Germany. I'm a teacher in a trade school, teaching young students, becoming house painters or car painters. When this young men and women start their apprenticeship with the age of 15 they work 4 days a week and go to trade school once a week. Their wage is 450€/month in the first year, 500€/month in the second year and 650€/month in the last year of their apprenticeship. They work 40hours/week, so their hourly wage is 2.80€ before taxes and about 2€ after taxes. After 3 years they have to pass an exam and then they become well educated journeyman and have usually no problem to find a good paid job. Most of the time their master craftsman keeps them in his business.

I think this is one of the reasons, why we don't have high youth unemployment. It is very hard for a young kid to produce goods and services which are worth more than 10€/hour. But everyone should be able to produce goods and services worth more than 3€/ hour. And after some time of on the job training and education he/she can produce more and gets a higher wage.

I would love to hear your comments from all over the world. Please tell me how you deal with youth unemployment in your countries.

P.S. What does this socialist intervention in the economy mean to us as Rule#1 investors? More public debt, more money printing to finance the debt, higher taxes, like the 75% tax rate for the rich in France, more unemployment and therefore more government interventions in the economy. How long can this insanity last? I don't know, but the Soviet Union existed 70 years.....so maybe I should look for another country to live in...

MERRY CHRISTMAS - GIFTS ARE ON THE WAY

Merry Christmas and Happy New Year, Rulers!

The purpose of this blog is to help y'all become competent and rich investors who can count on a lifetime of successful investing using the Rule #1 basic strategy.  To help you along on that journey we're planning what we think is a pretty nice gift to the Ruler community.  

I can't tell you what it is yet.  It's still being wrapped.  But I think you'll like it a lot.  

So watch for a post in the near future ... sometime in the next couple of weeks, for sure.

Until then, have a great holiday.

Now, really, go play.