INSTITUTE of HIGHER EARNING: Higher Earning Report Newsletter for 07/20/08

The 'Wealth Wednesday' calls gave me a sense of financial empowerment.
I learned to manage my finances and plan for retirement on a modest budget. Gordon helped me outline a game plan based on my personal risk tolerance. He gave me hope that I could provide for and protect my family during good times and bad. Not too often are you presented with an opportunity to better yourself at practically no cost. The knowledge he provided will pay off for the rest of my life. I feel lucky to have met him.
~ TERRY LASKOWSKI, Indiana

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Our FREE 'Higher Earning Report' e-mail newsletter is published occasionally by The Institute Of Higher Earning. Helping you trade and invest successfully so you can retire debt free and fabulously wealthy before you're too old, tired or senile to enjoy it. Besides, why should the kids have all the fun? Click any link below to browse back issues of the 'Higher Earning Report' from the past year.

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Issue for ...
July 20, 2008
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'Hunker In The Bunker'

(... from a hardened underground trading silo somewhere deep in New Hampshire where the license plate reads 'Get Pips Or Die,' armed only with a 1983 Tandy TRS-80, a 56K modem, dialup and a week's supply of Cheezits, Gordon writes...)

Dear Friend,

It's time to blow the ballast tanks on the economy and set the diving planes to 25 degrees down bubble. S&P earnings have technically broken through key support and our economic indicators are flashing red. The bear market has officially resumed.

That's right, resumed, not begun. The claws came out in August 2007 when the subprime market cracked. This bear probably won't hibernate again for well over a year and until then, he's hungry. Very hungry. What's on the table? Your retirement.

From this point forward, millions of stock portfolios, retirement accounts and IRAs entrusted to the loving hands of fee-based financial planners will head south. With each passing day another few billion dollars of retirement wealth will evaporate back into the computers it came from. Would-be retirees will emerge from retirement to pass out hamburgers at drive-thrus for minimum wage.

But not our members! For we are steering our financial arks around those big scary economic icebergs and out into open, profitable blue waters, with spinnakers set high, pants hitched up and tiller grasped firmly in hand. Sorry, I got carried away with the Captains Courageous metaphor there. Pretty soon I'll be wondering who stole the raspberry jam.

Since the market is headed down, let's examine thebehavior of average (dare we say typical?) soon-to-be-impoverished small town Americans caught up in the angst and agony of a brutal bear market...

When a market drops 5%, the average investor (we'll call him Phil) shrugs it off. It's just a 'hiccup,' he says. 'It'll come back up soon.'

When the market drops 10%, Phil gets antsy. Maybe he should think about switching mutual funds. But he's got a Scarlet O'Hara streak in him and he'll think about that tomorrow. Right now there's a game on.

When the market drops 15% (this is when the Money Honies on MSNBC start thoughtfully chewing their lower lips, a secret bearish indicator), Phil picks up the phone and calls his financial planner, Ted. Ted reassures him that's it's just a bump on the highway to perpetual profits and, besides, everyone else is down, too, so Phil shouldn't worry about it. Clearly, neither Phil nor Ted majored in logic.

When the market drops 20% and radio talk show hosts tell us we're in a bear market (they looked up the definition on Wikipedia just before air time), Phil starts to panic.

Remember, at this point his 20% draw down is still just an 'unrealized loss.' Like those decaying zombies in 'The Bodysnatchers,' the market could still somehow manage to crawl up to the surface. After all, hasn't the market always come back up, eventually?

Yes, Phil, it has. After the Great Crash of 1929 it came back up, in 1954, 25 years later -- an entire generation later -- when it finally reached its 1929 high. But Phil still just can't bring himself to call his broker and tell him to sell, because that would convert an unrealized loss into a realized loss, and realized losses are forever. So Phil waits and does nothing.

Then the market drops 25% and Phil begins to get angry. At whom, one must wonder? Why, at Phil, of course. Phil knows that he should have taken action and gotten out of those sinking stocks and pathetic mutual funds many percentage points ago, but he couldn't.

You see, a funny thing happens to badly losing investors on the way to the basement, portfolio-wise, that is. Their higher mental functions seize up and their reptilian hindbrain goes into survival lockdown mode.

Ten thousand years ago, Phil would have been hiding in a dark corner of his cave, waiting nervously for a band of rival paleolithic traders to pass. Today, 10,000 years later, Phil is hiding in a dark corner of his mental cave, waiting for the big scary shadow of a declining market to pass.

Then the market goes down 30% and Phil goes completely numb. The fire in the cave has gone out. Phil is long past the point of selling, now. He can't even think. He's become fully catatonic, investment-wise. You could knock him over with a page from the Wall Street Journal.

Then the market goes down 40%, and... and... something wildly feral suddenly awakens within Phil. A primitive, prehistoric surge of testosterone (or was it just antacid?) races through Phil's veins as his inner hairy beast strides to the phone and, in a manly voice, instructs his broker to 'SELL!!!!' RIGHT NOW!!! PLEEEEEEEASE???? I DON'T CARE WHAT THE PRICE IS, OK??? JUST GET ME OUT!!!'

Phil was trying to stay calm. But something snapped, and he totally lost it. Likewise, millions of other now suddenly virile investors across the fruited plain have seized their inner Wooly Mammoth by the tusks and are bellowing 'SELL' to their brokers, too.

And with this avalanche of selling pressure comes the stomach-churning, lunch-relieving market plunge we contrarian bargain hunters have been waiting so patiently for, as we calmly relax in our air-conditioned trading rooms with a martini and reruns of 'The Millionaire.'

You see, in order for Phil to be able to sell, there must be someone to take the other side of the trade. In other words, a buyer must emerge for Phil to sell his battered shares *to.*

Here at the Institute we are proud (and more than a little pleased) to be able to step up and fulfill this valuable civic function, relieving Phil of his juicily depressed shares just as the market rounds a nice bottom and bursts back up.

But for now, we're in the infancy of the drop and Phil is just beginning to enter denial mode. What are his choices at this point? (...cue the cheesy organ music)

Stay tuned for next week's installment of "The Daze of our Lives" when Phil and Margie argue at the kitchen table over whether Phil should stay with Ted (Ted is Bob's brother-in-law... ouch!) or go with the biggest financial planning ad in the Yellow Pages.

But it's not a fair fight: Margie came to the argument armed with common sense, Phil's track record and a maternal instinct to protect her babies, one of them being her retirement nest egg.

'And now a word from Smith Blarney, where we make money the old fashioned way... We steal it...'.

And May The Pip Be With You,

Gordon Philips for
THE INSTITUTE OF HIGHER EARNING
gordon@higherearning.com

.· ´¨¨)) -:¦:-¸.·´ .·´¨¨))
((¸¸.·´ ..·´ When you wish -:¦:- -:¦:-
-:¦:- ((¸¸.·´* upon a pip... -:¦:- -:¦:-

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WHAT IS THE HIGHER EARNING REPORT?
* A highly prestigious weekly newsletter.
* A deeply cathartic literary experience.
* A financial air bag for your portfolio.
* A compass for your economic ark.
* A road map to riches ("You Are Here --> X")

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PUBLISHED WEEKLY BY:
The Institute Of Higher Earning
P.O. Box 113
Milford, NH 03055 USA
800-504-2340

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YOUR EDITOR
Gordon Philips, Senior Researcher, Head Trader,
Custodian, Home Schooling Referee and Complaint
Department Manager for the Institute

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OUR SLOGANS
'Conquering Debt. Mastering Money.'
'Build Your Own Ark. Quick.'
'So Many Trades, So Little Time.'
'Economy Bad? Grow Your Own.'
'What Goes Up...'

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FAVORITE $ SONGS:
'Million Dollar Girl' -- Eddie Money
'For The Love Of Money' -- The O'Jays
'This Golden Ring' -- Gary Lewis and the Playboys
'Ain't Too Proud To Beg' -- The Temptations

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LAST BOOK READ:
'Predictably Irrational: The Hidden Forces That Shape Our Decisions,' by Dan Ariely

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CURRENTLY READING:
'Kluge: The Haphazard Construction of the Human Mind,' by Gary Marcus

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FREE WEDNESDAY NIGHT 'OPEN HOUSE' -- JOIN US!
Join the Institute on a FREE telephone conference call this Wednesday night at 8:00PM U.S. Eastern time (5:00PM on the extreme left coast) and get your questions about Forex trading, debt elimination, saving and investing, fiat money, precious metals and how to protect your family in the event of a cataclysmic meltdown of the entire U.S. financial system answered.

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WHY THE INSTITUTE?
Because you...
* Are still working at a J.O.B. (Just Over Broke)?
* Aren't getting enough pips (what's a pip?.)
* Got drunk and hired a financial planner?
* Keep donating your pips back to the market?
* Have too much month left at the end of your money?
* Have so much debt you're thinking of selling it on Ebay?
* Feel like someone threw a prosperity party and you weren't invited?
* Need some solid education and support from some very nice people?

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TELL A FRIEND
Got some friends you don't need any more?... I mean, got some friends whom you're trying to educate about debt, finance, Forex, and the blatant price manipulation of the stock, gold and silver markets? Why keep these pithy pecuniary perspectives all to yourself? Forward them today's issue and invite them to sign up for the Higher Earning Report. Or not.

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DISCLAIMER
Information from The Institute Of Higher Earning is provided for educational and informational purposes only. No one on our utterly wonderful staff is licensed to utter personalized financial advice. Before trading or investing we suggest that you seek the counsel of a registered financial advisor who is thoroughly versed in the equities and currency markets and can demonstrate consistent success in both. Warning: this may be a protracted search. Our work is based on what we've learned as financial journalists and graduates summa cum laude from The School Of Hard Knocks. It may contain errors and you shouldn't make any investment decision based solely on what you read here (watch MSNBC first ;-.) There is risk inherent in all forms of trading and investing, from baseball cards to church bingo, so don't trade or invest with money that you cannot afford to watch go up in smoke and still sleep well. If in doubt, consult spouse.

Thank you.

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