(Tia gives a dissertation on the world's economic history when things were good in the eighties but then went through a downturn. She continues next with the stock market as she maps out a strategy of investing that would make Warren Buffett proud.) 

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Russ: what is causing these collapses in the first place? I mean we never have really discussed that.

Tia: okay what is causing it......

Russ: is it drought or a rice shortage or what?

Tia:  actually it is quite a number of factors. It's the fact that there was a boom and during the boom, they used money to buy things and because they were having a boom, people extended them credit and they used that credit after.......well not so much after but whilst they were having the boom to be able to purchase more stuff. Now the notes are becoming due and of course the boom has long gone.

Russ: right.

Tia: let us take Japan. In the mid-'80s they went crazy and started buying properties all over the United States. And the banks were having a boom and the stock market was having a boom in Japan and the Nikkei average was climbing and climbing and climbing and everybody was having a wonderful time. So, U.S. businesses go, "oh, well Japan's a good investment, let's loan them, the banks and the companies, money so that they can buy property at exorbitantly high rates and in turn we will get paid back plus the interest and we'll have more money."

Russ: right.

Tia: so, that happened, the Japanese paid exorbitant fees for such places as Heavenly (Ski Resort) and they stretched themselves. Then things started to happen that no longer was there a boom but the cycle had gone a complete circle and was going the same way but in reverse, that things were contracting. There was no longer the money going around to make the loans....to be able to pay the loans and in turn they had to start selling off their assets to make these loans.

Russ: so basically Heavenly, Steamboat.

Tia: Sable Point.

Russ: Sable Point, all were sold to cover the interest rates and the loans that were borrowed from.

Tia: correct. However, and this is where it gets a little tricky and this is going to open up your eyes up tremendously Russ, whilst the Japanese were buying and having finally bought their companies, let us take the Japanese that bought Heavenly.........

Russ: right.

Tia: they were still in a point of boom. So, with the money that they had, they went out and got more loans to put in more equipment. When they sold, they sold the debts as well. So that for example Steamboat, Heavenly and Sable Point owed X number of millions of dollars. When the Japanese sold out, those debts were transferred to the new owners. The Japanese did not negotiate a very good deal unfortunately, in fact they have a balloon payment coming up. So, when the new owners of Heavenly bought Heavenly, they took on the debts and also have to make those payments.

Russ: so they're hoping for a really good year right now?

Tia: oh yeah. They're hoping for a couple of really good years.

Russ: well they might get them.

Tia: well they might.

Russ: hmmm, okay......

Tia: they might.

Russ: now and so basically we're seeing the collapse coming from outside in?

Tia: what did I say a year and six months ago?

Russ: right but what about Germany, France, England, those countries?

Tia: they're getting affected as well.

Russ: well I know England has a really strong...

Tia: economy?

Russ: well no, they've got a really strong possessions within Hong Kong and China.

Tia: uh-huh.

Russ: they're very committed to those areas.

Tia: yes.

Russ: so a lot of their investments and everything are all tied to those banks and everything.

Tia: not as much as they once were, a lot of people did get out......

Russ: okay.

Tia: and re-invested elsewhere in such places as the United States and Japan.

Russ: okay.

Tia: Japan again and their own markets. So, let us look at those countries. Well the British stock market, the Paris stock exchange and Frankfurt are all doing the same thing as the United States. Up and down, up and down, up and down like a yo yo. And because they're invested and are pulling their money out of foreign markets which is making the foreign markets go down and up and down as investors chop and change as investors do looking for a quick profit, their markets do the same thing. Because if you take money or take shares from one place, sell them let us say in the United kingdom, you sell your shares, let's say you have a million shares in the BBC. I don't think you can do that because it's a national corporation. Let us say British Petroleum, BP. You have a million shares in BP right?

Russ: right.

Kiri: you sell those million right? Which means that the price has to go down.

Russ: right.

Tia: okay whether or not you've made a profit, the price goes down okay? It depends on the margin of profit from the initial investment. You take that and invest it in let us say Japan. which makes the price in Japan go up. Now you make a profit and the following day you see the market starts to go back down so you sell there which makes the market go down even more preferably for a profit and reinvest it, let us say back in the London market which means the London market goes back up whereas the other day it went down, you're now watching it as it goes back up. Or you pick a market where it is going up and invest in there and force it up even higher and then if you're clever enough, if you're playing the 24 hour game, you would go from let us say, let us start off with Japan, you sell in Japan in the morning and as evening comes around, you buy into the British stock market as that is going up and at the end of the day as it has gone up, you sell there just as the market reaches lunchtime 12 o'clock New York time or Chicago, you buy in there as that goes up which means that you're making money. But as you're pulling out of each market, you're pulling out when it starts to go down.

Russ: hmm interesting.

Tia: see what I'm....what's happening?

Russ: right.

Tia: but those are making real quick profits real fast and making a real quick turnaround. Where you were may be making a $1,000.00 on each market.

Russ: right.

Tia: but there again can also easily lose that or you may only be making a few hundred clear profit after trader's fees.

Russ: okay so how fragile is the markets right now?

Tia: very fragile. By looking at the markets and the increases like 86 points today and the drop last Friday of I forget how high it was or how low it was.

Russ: well something that is interesting is, I was watching TV the other day and it was like four or five in the morning and the Nikkei and the Hong Kong and the Chinese Hang Seng had all lost massive amounts of...

Tia: money.

Russ: right.

Tia: uh-huh.

Russ: and basically they were looking at a major collapse or major crash....well not crash but a downturn in the American stock market.

Tia: uh-huh.

Russ: and then by the end of the day everything was up.

Tia: yes.

Russ: all across the board.

Tia: uh-huh.

Russ: what happened?

Tia: well what happened was that investors saw an opportunity to make a quick profit because it was down and they rush in which pushes it up.

Russ: hmm.

Tia: let us say you start off in the morning when it was down 130 points right?

Russ: right.

Tia: and you put in $10,000 into the market right? You may make a couple hundred dollars profit by the end of the day.

Russ: hmm.

Tia: would you like to make a couple hundred dollars profit in one day?

Russ: I wouldn't want to lose a couple hundred dollars on it just in case.

Tia: but that's what ended up happening.

Russ: right.

Tia: is that all these investors rushed in because it was down low and pushed the price up and made a profit. Whereas if some bad news had come out right?

Russ: right.

Tia: they could just as easily pulled out and not rushed in and said, "okay, let's wait until Tuesday morning or Monday morning and see what happens then over the weekend."

Russ: interesting. Well thank you Tia, that was very informative.

Tia: uh-huh. It's not so much watching the market, it is watching how or rather knowing how people react.

Russ: hmm, yeah well you can't control the news.

Tia: correct but how people react to the news, if you know that right?

Russ: right.

Tia: then you can make a profit. How are people going to react to good news and bad news and what is good news and bad news? Let us say in 1929 right? You picked a small little company, let us say you picked a small fledgling company called McDonnell Douglas or Fairchild. Okay, you invested let us say a $1,000.00 and bought something like a 1,000 shares. Do you know how much that thousand shares would be worth today?

Russ: $450,000.00.

Tia: that's a lot of money isn't it?

Russ: uh-huh.

Tia: where did you get that figure from?

Russ: stock for McDonnell Douglas is earning $45.00 a share right now.

Tia: uh-huh. Pretty good profit huh?

Russ: pretty good.