Beating The Stock Market » Government Involvement

Economic Recovery?

joanne — Thu, 15 Apr 2010 12:00:54 +0000

The Federal Reserve Chairman Ben Bernanke stated today that the economic recovery is sustainable. Along with the news of retail sales are up in the last month, one would think that this is the time to get in on the stock market. Well before you do, you need to be aware of a few things first.

The stock market (Dow Jones Industrial Average) has reached a new twelve month high after climbing 12% over the last two months and over 40 % year-to-date. Those are some great impressive gains, but does that mean that the markets will continue on this upward path? Well that’s anyone’s guess.

The last time the Dow was at these levels along with the S&P sitting at 1200, was in September of 2008. You have to ask yourself, “What was the condition of the economy in September 2008?” I did some research into this issue and found that this might not be the time to invest in the stock market.

In Sept., 2008, unemployment was at 6.2%. The foreclosure rate hasn’t slowed down. It’s estimated that 1 in every 538 homes are in foreclosure as of march 2010. The Federal reserve has printed so much more U.S. currency that it’s not even funny.

My point being that you should be waiting for a healthy pull back (8%-10%) before investing any capital.
You also have to look into the future of the economy too. Economics believe that the unemployment rate will still be at 8.4% at the end of 2011. Home prices will remain at near flat levels for the next two years. They also expect the economy to only grow 3% in 2010.

Share and Enjoy:

The Dow At 9000, Where Do We Go From Here?

billy — Fri, 24 Jul 2009 12:04:07 +0000

Who would have thought that this could have happened so soon? Either way, it was reached. The DOW close above 9000 (9069.29 to be exact). The S&P 500 has been on a tear, closing at 976.29. Lets not forget that the NASDAQ is now at 1973.60. The past two weeks of trading have been great for the markets.
.
With that being said, what are we to expect in the coming weeks? If you’ve been listening to the talk on the street, you’ve heard both sides of the possibilities. “It’s only going to get higher” or “the markets are going to correct themselves”. Those are the only two choices.
.
After listening to all the opinions that where flying today, I would have to agree that the markets are due for a correction. How can it not? I don’t know about you, but I don’t really see a reason to be all optimistic about the stock market. Add on to the fact that many traders and investors have made a lot of money in the last four months. There will be some profit taking very soon.
.
With all the talk about health care and the Cap and Trade bill, if these two bills pass, corporations are going to find it hard to keep making the earnings that the investors want to see. The taxes that will be imposed onto these industries are going to break them as well as the country’s GDP.
.
In the last few months I’ve made some great gains in the markets and I’m not willing to give them back anytime soon. At this time I’m sitting more than half my portfolio on the sidelines, while I wait for the other shoe to drop (and it will). Don’t get me wrong, I do believe that there will be some gains to be made in many other sectors and that’s why I’m watching the tech sector. They (tech sector) don’t have the government issues to deal with, like most of the others ones.
.
Which ever way you plan on playing the markets in the coming weeks, do your due diligence.

Share and Enjoy:

Finance, Energy And Politics, Oh My

billy — Wed, 10 Jun 2009 16:09:57 +0000

It seems that the stock market doesn’t react the way it should when important economic news is released. Over the last two months there has been negative news reports released that would normally cause the indicies to drop, but instead they have responded in the opposite manner.
.
The same goes for the good news that is also released. Look at how the news came out yesterday about the billions of dollars that will be paid back by ten of the major banks. You would think that the news would make investors and traders want to invest in these companies, making the price rise, well it’s wasn’t the case. As a sidebar comment, It amazes me that the money isn’t being returned to the Fed’s, instead it will be held by the Treasury Department just in case it will be needed again. My opinion is that the money will be used in the department’s slush fund and never returned to the tax payer.
.
The talk is out again about drilling in the Gulf of Mexico. The talks should have never halted. How are we to ever take control of our economy if we are depending on foreign countries to supply us with our energy needs? Oil is abundant in the gulf and we are not taking advantage of it, but I guess it’s OK since Russia is working with Cuba to drill in the gulf. That’s real good that they are doing so, this way they can also sell oil to us and we won’t be dependent on the Middle East. If you’re not sure, that last comment was a sarcastic one. Keep an eye on the alternative energy sector for some good gains. When oil gets above $70-$80 per barrel, solar and wind energy becomes more feasible and profitable as an investment.
.
The politicians are not doing the job that they were sent to Washington to do. The spending in this country is way out of control and needs to be pulled back. The private sector has to take charge of their future. We can not expect the government to come to their rescue. If the company can’t make a profit, then it needs to close no matter how many people it will affect. In the long run, having the Federal government get involved will only hurt more than it would have originally.
.
Keep your eyes on the stock market and be ready to raise capital (cash). I expect a pull back soon enough.

Share and Enjoy:

Pork Barrel Spending Stimulus Package

billy — Wed, 25 Feb 2009 15:59:53 +0000

.
The stimulus package was passed last week and Wall Street is letting Washington know that they are not happy. Since the package was passed, the DOW has dropped nearly 500 basis points, reaching a twelve year low of 7077.35 and closing at 7114 on Monday.
.
The current stimulus package will cost American tax payers $778 billion. That’s after they’ve cut out all the unnecessary spending that was originally in the plan. Unfortunately, the Democrats that control the House are now in the process of passing another bill that will add up to about $410 billion in what they are calling “needed to fill the gaps that the first stimulus package left out”.
.
This administration has only been in office for one month and they have already passed bills that will spend more money than the previous one did in it’s last year. Something that this administration campaigned on not doing.
.
All this spending is going to have to be covered by some sort of tax increase and the one that will be hit first will be the capitol gains tax. It presently sits at 15%, but as President Obama stated on the campaign trail is that he feels that it needs to be raised to 25%-30%. If that is to happen, then expect the stock market to drop well below the 7000 mark.
.
As this administration start to show their true agenda for this country, Wall Street will have no choice but to pull out their money to avoid unnecessary tax burdens.
.
As for the economy, it won’t be any better. How can a company increase their profits, as well as their work force, if they become more tax burdened. If a business can not make a good profit, it will not attract stock holders. It all ties into one another.
.
For the last couple of months, I’ve only been trading stocks that have taken a beaten because of the market as a whole has dropped. I don’t have the confidence in the stock market any longer and will do what I can to pull out the capitol that I have out of it. I stated before that I don’t typically short stocks and in times like this it too doesn’t sound like a great idea, but in bad economies, it’s much easier to make a profit shorting stocks than it is to go long.
.
Whatever you decide to do with your trades, be aware that this economic turmoil is far from over.

Share and Enjoy:

The Stimulus Plan Doesn’t Stimulate Anything

billy — Wed, 11 Feb 2009 00:02:46 +0000

.
Well, it’s been three weeks since Obama has taken office and he’s already having a hell of a time trying to get his administration candidates approved as well as the stimulus package. To top it all off it seems that Wall Street along with Main Street have not confidence in the new President.
.
The Dow had a horrible day today because of all the “politics as usual” mentality going on in Washington. The government laid out it plan for the financial bailout which basically told us nothing in regards to specifics. It seems that all that Tim Geithner told everyone was that the government will spend more than $1 trillion in private and public support, but really nothing else.
.
Wall Street went on a selling spree to unload many stocks to take refuge in safer investment like gold and bonds. The DOW fell 382 points today which is over a 4.5% drop.
.
The Treasury’s plan is to restore the credit markets. To work towards removing the bad assets from the bank’s books. They also state that it would help open the path for consumer and business loans. If it is anything like the first TARP plan, they know that they’re going to spend $1 trillion, but they have no clue as to how they’re going to spend it.
.
All I got to say is that after last night press conference and today’s treasury announcement, they’re proving to me that this administration has no idea on how to fix this problem and take care of their lobbyist and other cronies at the same time. It’s sad to think that if they really wanted to end this nightmare of a recession, all they have to do is stop the federal spending, cut the taxes and the rest will take care of itself in a short period of time.
.
Why would the government need to raise taxes if they aren’t spending as much money? If they have to cut jobs, so be it. If the corporate taxes were less along with payroll taxes, companies would be able to hire the people they would be laid off from the federal jobs that were cut to save on spending. I’m not a genius, but it doesn’t take a rocket scientist to figure that out. Go to any Ivory league college and ask an economic professor and they will tell you the same thing. The less they spend, the less they will need to raise taxes.
.
As for the stock market, the DOW close at 7,888 and at this level it’s nothing but a buying opportunity for traders who are looking to a few good deals. Do your research and buy incrementally.
Happy trading.

Share and Enjoy:

Post Election Stock Market

billy — Wed, 21 Jan 2009 06:31:13 +0000

Now that Barack Obama has been sworn into office as the 44th President, it’s time for him to get down to business and start doing the job that he’s been running for for the last two years. Who know if he’s really going to turn this economy around, but time will tell.
.
On the day he took office, the stock market had it’s worse inaugural day of trading in history. The DOW fell 332 points. It started off bad right after Nancy Pelosi made statements about putting certain taxes in place. It did come back a little bit, but never was able to break even at any point of the day.
.
Obama was sworn in at 12:00pm eastern standard time and then proceeded to make a speech that didn’t give any confidence to the markets. Unfortunately I don’t think his first week in office will do any good for the markets. I expect the market to drop quite a bit more before it has a turn for the better. The DOW closed below 8000 points on this historic day (in more way than one).
.
Be cautious with any trades this week until we see some strength in the markets.
.
We will have to wait and see what happens to the rest of the TARP money. It looks like there will be a lot of bickering in Washington before the money will be put to use. So like I said, be careful with your trades. If things go south over the next week, we’ll be able to pick up some beaten stocks at some great prices.
Happy Trading.

Share and Enjoy:

Federal Reserve Interest Rates Rallies The Stock Market

billy — Wed, 17 Dec 2008 05:50:16 +0000

Finally after a year of looking like he knows nothing, Ben Bernanke takes drastic measures to get the economy back on track. The Federal Reserve interest rates have been lowered to it’s lowest in history. The benchmark interest rate has been lowered to zero to 0.25%, making it easier and cheaper to borrow money and pay their mortgages.
.
With the Fed’s actions, the stock market rallied like it had no sign of a lack of confidence. The DOW gained 4.2%, and the NASDAQ and the S&P 500 over 5%. It’s a clear sign that they (Federal Reserve) is willing to do anything and everything to avoid a depression. Investors pumped capital into the markets right after the announcement was made shortly after 2:00pm Tuesday.
.
Several banks have lowered their prime lending rates to 3.25% and it look like more will follow in the coming days. It’s now a matter of people (who still have fears of the economy), are willing to borrow money and take on more debt.
.
The only bad thing about the rate being lowered to these levels is that there is no where else to go. The Federal Reserve has always had the power of cutting the interest rate as a tool against economic troubles. At this point though I would think that unless World War III was to break out, the worst of the problems are behind us.
.
I’ve felt that Ben Bernanke has always been behind the curve when it came to putting stability in the economy, but this move has shown that he’s finally up to speed with what needs to be done.
.
This has been the sign I’ve been waiting for for me to get back in the stock market a lot more aggressively and I started doing that this week when many buying opportunities were available on Monday. If you were the many that have been doing your research and waiting on the sidelines, I suggest you start taking positions in those companies that you found attractive. I don’t recommend you going all in yet since there is that margin of the unexpected still there, but putting about 50% of your capital to work just might be the thing to do right now.
.
Be patient and happy trading.

Share and Enjoy:

Perferred Stock

billy — Wed, 10 Dec 2008 05:47:00 +0000

When the average trader buys and sells stock, it’s typically the common shares that are traded. As in the importance of the different types of ways of being a shareholder, Owners of common stocks are at the bottom of the ladder. In cases of bankruptcy, common stocks are the last to “get paid”. First is the bondholders, perferred shareholder and any other debt holders.
.
With the preferred shares, it works a little different. They don’t call it preferred for nothing. The share is almost like a bond in regards to having a fixed dividend. It preforms as a fixed income security, but it’s not necessarily guaranteed.
.
The reason I bring this up to you is because I’ve been looking at the stocks of two companies that have been in the news lately, you have heard of them. The two stocks I speak of is General Motors and Ford Motor company. I will break each one down separately.
.
General Motors (NYSE:GM), the common shares were recently as low as $1.70 a couple of weeks ago and now it sits at $4.70 per share (a gain of almost 280%). That would have been a great payday for you if you were willing to take a chance and gamble on the stock. I didn’t take advantage of it because I don’t consider stock trading a form of gambling. The dividend for the common shares will be history once the “bailout” is approved. In regards to the preferred, it will continue to pay out it’s 37% yield per share at it’s current price of $4.25 per share. The payout will be on January 15th, 2009 for shareholders on record on December 26th, 2008. The symbol for General Motors preferred is (NYSE:GPM)
.
Ford Motors company (NYSE:F) is also another company that has had their common shares beaten up to their low of $1.01 just a couple of weeks ago too. It now trades at $3.23 per share ( a gain of over 300%). Again another beautiful gain for anyone willing to take that chance too. As for the preferred shares of this company, it’s trading at $9.20 per share and returns a 35% yield per share. The symbol for Ford’s preferred is (NYSE:FPS). I do know that the payout is due within the next month.
.
The reason I bring this up is for my readers who are willing to take on the risk of trading the common shares, then let me recommend that you sell now and move into the preferred stocks. After doing the research on these stocks I will also pick up some shares this week. In this coming payout, it will be a 17% yield or better, depending on my cost basis.
.
I just hope that I’m not too late since it’s expected that Congress will approve the rescue plan and I’ll miss the jump in the price (however big it may be), which is something else I’ll be banking on for this trade to be ideal.
Do your research and happy trading.

Share and Enjoy:

Is America Doomed?

billy — Sun, 07 Dec 2008 06:01:45 +0000

What is going to happen to America? It seems that the true meaning of capitalism is being destroyed. The problem is capitalism is being destroyed by the very people who say they’re trying to preserve it. How can this be? It’s how I see it. What are your thoughts? here’s mine.

First we started with the financial sector, now it’s the American auto industry. When are the taxpayers going to see the return on their investment in these sectors? At the rate it’s going, I doubt it will ever happen in our life time.

Yes, I know that the government is saying that this will help the economy, but aren’t they the same people who put us in this mess?

In the 1990’s NAFTA was signed and many business’ went over the border to make the products that were being built here in this country. Ford and General Motors have opened factories in Canada and Mexico since NAFTA was past.

When the bill was past in 1996 to help all American buy their own home. I’m sure the politicians were aware of the fact that it would be done with taxpayer’s money through Fannie Mae and Freddie Mac with the help of adjustable mortgage rates. It helped people get into homes that they couldn’t even afford.

Twenty plus years ago we heard that there was going to be more energy efficient cars within ten years. How come my 2005 truck gets the same mileage as the 1985 Grand Am I owned fifteen years ago? What’s with these CAFE laws and all the other regulations that are put on the automakers when the cars haven’t really improved over the decades.

Now after all this crap that has gone on for too long, the companies that are in trouble are going to the people who caused these problems for help. All the while the American people sit in their living rooms watching mindless TV and are none the wiser. Go figure.

I know that this isn’t a political site, but in all actuality this post isn’t about politics. It’s about the way Capitalism is being destroyed by people who have their own agenda. Wall Street and Main Street are one and the same and from where I live, it doesn’t look like capitalism to me.

We need to stop bailing out these companies that don’t handle their business in a proper manner. If you can’t make the business profitable then you shouldn’t be in business.

Share and Enjoy:

Auto Bailout Heats Up

billy — Fri, 05 Dec 2008 05:02:53 +0000

Again the CEO’s of the big three automakers are back in Washington to see if they can still get an auto bailout from Congress. General Motors, Ford and Chrysler are still looking for money to help keep them afloat.

What amazes me is that the three CEO’s think that if they drive down in hybrid cars (instead of their corporate jets like they did last time), that they are going to have any more of a chance to get the money to fuel their needs.

After going back to the drawing board, the companies came back to show what they’re going to do to improve the condition of the three giants. Of course it’s no longer $25 billion that will be needed to save them, this week it’s at $34 billion. Who knows where it will be when it’s all said and done.

As long as the UAW has a hold on the three companies, they will go out of business. The legacy costs are out of control. There are over 15,000 retirees that get paid $31 per hour from their pension plan for not doing anything for the company. The UAW has caused the costs of cars, truck and SUV’s to get out of control. It’s said that $2000 of of the price of every vehicle is due to legacy costs.
With obligations like that how are these companies ever going to turn a profit? There is no way for any company to be able to stay in business if the payroll cost are going up while the workforce is shrinking. How are they to keep their prices in line with their competition?

If you haven’t noticed, you don’t see any of the foreign automakers that build cars here in this country in Washington looking for a handout. It’s because the UAW has no existence in their factories and before you say that it’s not fair that those workers don’t have the right to have an union. They don’t want it, they make on average $35 per hour to work on an assembly line that the robots do most of the work. Before you say that $28-$42 per hour isn’t much for someone living in New York City, these workers are in Alabama and Tennessee, two of the poorest states in this country.

I have always bought American made cars because I believe in keeping my money in this country. It’s not that I’m against the rest of the world, it’s because I’m an American and proud of it. I will continue to buy American made cars as long as they are still American made cars. I know that no matter what happens to these three companies, there will always be cars made here in this country.
Even if the three of them were to go into bankruptcy and close their doors, someone else will buy their equipment and start to build a new automobile made here in America.

Share and Enjoy: