Since having ideas and recognising opportunities is so crucial to your business.  You need to do everything possible to heighten your awareness in this area.  You also need to be able to use your knowledge of your customers and their needs, your industry and the new advances in your industry to come up with ideas for products and services for your business.  For example, the internet is filled with ideas. Yet, how many do you think you will remember once you’ve closed down your browser?

Being exposed to a new idea is one thing, but what you do with it once you have it is just as important as getting it in the first place.

Studies on retention show that you remember:

•             10% of what you read,
•             22% of what you hear,
•             37% of what you see,
•             56% of what you see and hear, and up to
•             86% of what you see, hear and do.

So an idea that is heard but not acted on is only half as likely to be retained as an idea that is actually put into practice. With that concept in mind then, it is important to understand that if the information presented in this book is to be of any real value to you, it must not only be read, it must be applied. That is to say, it must be experienced, or acted on. And that means it’s going to take some effort on your part.

In their book, The Knowing-Doing Gap, authors, Jeffrey Pheffer and Robert L. Sutton mention that every year there are 1,700 new business books published, $60 billion spent on training, $43 billion spent on consultants, and our universities turn out 80,000 graduates with MBA’s. Yet, most businesses continue to operate day in and day out in much the same ways as they have always done.

Again, and this theme will keep coming up because it is so important, knowledge without action is no better than no knowledge at all. Just knowing isn’t enough. You’ve got to do something with what you to know.

The ideas presented in this blog work. They’re not theory. They’re not speculation on what “should” work. And they’re not philosophical musings. These ideas, concepts and techniques are currently in use by business owners across the country in one form or another. They’re being proven in actual field use day in and day out.

They work for others, and they can work for you.  You are going to have to take the time to study them, understand them, and make the necessary modifications to tailor them to your own personal and business style and operation. And then finally, you’re going to have to apply them in your business.

I saw this today from Simon Black, the Sovereign Man newsletter and had to reprint it here.  As everyone is running around thinking that the DOW Jones index is just so high – that everything must be good again in the world.

The Dow Jones Industrial Average, one of the key benchmarks of the US stock market, has soundly surpassed its all-time high. And most of the investing world is toasting their collective success and celebrating the recovery.

It’s a funny thing, really. Most investors only think in terms of ‘nominal’ numbers, i.e. Dow 14,000+ is 40% higher than Dow 10,000 (back in November 2009). But few think in terms of ‘real’ numbers… inflation-adjusted averages.

Everyone knows that inflation exists. We can all look back on prices from the past and realize instantly how much more expensive things have become. Conversely, though, most people don’t think about the stock market like this.

The reality is, though, that when you adjust for inflation, the Dow is well below its highs from over a decade ago.

I thought I’d put this into a bit of perspective. 

Take beef, for example. Based on USDA retail price data, today the Dow will buy you 3,332 pounds of beef in the supermarket. This sounds like a lot. But it’s actually about 20% less than the 4,046 pounds of beef the Dow would buy back in December 1999.

And if beef’s not your thing, let’s look at fruit. Based on the wholesale price of bananas, the Dow currently buys you a whopping 15.35 tons of the tropical fruit.

But this is exactly the same amount of bananas the Dow would buy back in February 2008, when the Dow was just 12,266. And it’s a massive 60% drop from June 1999 when the Dow bought 38.51 tons of bananas. 

Gasoline is an even more interesting example. Today, the Dow will buy roughly 3,812 gallons of unleaded, non-premium gasoline in the United States. This is almost exactly the same as last January, just fifteen months ago, when the Dow was only 12,633.

But to match its high of 10,718 gallons set in March 1999, the Dow would need to almost triple from where it’s at today.

Look, there’s nothing wrong with investing in great companies. But it’s important to recognize that the ‘buy and hold’ strategy espoused by the vast majority of financial advisors has been a serial loser for the last 10-15 years.

Given that you can’t eat or fuel up your car with stock certificates, it’s important to remember that we all live in an inflation-adjusted world. And that there are serious, serious consequences to out of control money printing by central banks.

Anyone who doesn’t understand this system need only refer to the rules of the popular board game ‘Monopoly’:

“The Bank never goes broke. If the Bank runs out of money, the Banker may issue as much as needed by writing on any ordinary paper.”

The average investor when entering the share market typically buys a stock in the hope that it will go up.  This is called entering LONG.

You BUY Yahoo at $15, wait and hope that the markets rise, then, say, SELL at $19 leaving you with a gain of $4.

This maybe all well and good in the 1980’s, 1990’s and some of the 2000’s – but what happens when the markets start to trend down?

Is it possible to make money when markets drop?

In fact there is – it’s called SHORT selling.

In simple terms you select a stock in which you think will go down.  You SELL Apple at say, $700 and over time it drops to $540.  In which case you BUY it to close out the transaction – you net $160 less the costs for borrowing.

What has really happened here, as this seems to be around the wrong way?

You say I sold it first then bought it back?  Yes, the process of going SHORT involves you selling a stock you don’t own.  You “borrow” it from your broker – sort of like renting it.  When it drops you buy it back, so you can hand it back to your broker.  There is some borrowing costs, but otherwise it’s as simple as clicking a mouse.

Lets assume you picked wrong and the stock actually went up when you wanted it to go down.  For example, you sold Microsoft at $28 and it when to $29.  So to get out you have to buy it back at $29 – effectively losing $1 plus costs of borrowing.

So the risks are similar to going LONG.  If the markets go the way you didn’t intend, then you can lose out.

Going SHORT has a lot of advantages as it adds another way to profit from the markets.  You don’t have to wait for things to go up.

Having a percentage of your portfolio in stocks that are SHORT is a good way of diversifying and not being reliant on a LONG bias like most people in the stock market are.

The way we use this is our Funds is to be equally LONG and SHORT at any instant.  So in effect we’re benefiting whether the market goes up or down.  This is called being Market Neutral.

One US bank, JP Morgan Chase, which was seen as too-big-to-fail US bank has derivative exposure equal to the world GDP ($70 trillion).

The four largest US banks have derivative exposure of $227 trillion, which is 3.3 times world GDP and many times the banks’ risk capital.

Many derivatives are simply bets that the price of a stock, bond,
 or other financial instrument will rise or fall. For example, 
suppose an investor owns the bond of a company. The bond pays well,
and the investor wants to keep the bond. However, the investor is
 worried that the company might not be able to pay off the bond, in
 which case the investment would be lost. The investor decides to 
hedge the investment by paying a premium to an insurance company 
for which the insurance company promises to insure the investor
 against any loss in the bond’s value.

One problem with derivatives is that investors can insure or
 hedge against the decline in value of financial instruments even
though they do not own the instrument. In other words, hundreds or
thousands of investors can bet on the future values of financial
assets without owning the assets. This is one way in which derivatives
 can balloon in amount.  

Hopefully, the derivative exposure – essentially uncovered bets on 
interest rates, mortgages, currency exchange rates, and prices of oil
 and other commodities and equities – nets out in some way so that the 
net exposure to risk is far less than $227 trillion.

Nevertheless,
 if enough of these bets go wrong, banks can go bust.

  So far the “euro crisis” promoted by the US and Western media has
 protected the US dollar by sending euro holders fleeing into dollars,
 and the Federal Reserve’s purchase of the banks’ bad bets has kept
 economic Armageddon at bay.

However, the Federal Reserve cannot 
forever create new dollars with which to purchase the banks’ bad 
bets and with which to finance the huge annual operating deficits 
of the US government without undermining confidence in the dollar.

  Sooner or later the world is going to abandon the US dollar as the
currency in which international accounts are settled. With this drop 
in the demand for the dollar, its price or exchange rate will fall, 
and import prices will rise.

The average investor when entering the share market typically buys a stock in the hope that it will go up.  This is called entering LONG.

You BUY Yahoo at $15, wait and hope that the markets rise, then, say, SELL at $19 leaving you with a gain of $4.

This maybe all well and good in the 1980’s, 1990’s and some of the 2000’s – but what happens when the markets start to trend down?

Is it possible to make money when markets drop?

More…