The stock markets have been on a tear for the last three weeks or so it seems. In the last fourteen trading days the DOW has finished in the green for ten of those days. Even though the DOW sit at 8761.42 and was as high as 9000 on Monday, there has been a charge from the bulls that makes you wonder if we have reached the bottom.
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I don’t believe we have, but I do like to think that we did.
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The commodity sector had a beautiful day today and that typically shows that the bottom is near if not here. Basic materials as a whole gained over 5% today with coal leading the way with a gain of over 15%. It goes to show you that the analyst and the “expert” either don’t know what’s going on or that they are not telling us average traders everything. I’ve listened for the last month to them report that commodities are in the tank and will remain there for sometime. So why the rally today? I wish I knew.
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The steel industry has been dropping like a lead balloon, but Cliff Natural Resources Inc. (NYSE:CLF) gained 18% today and is up nearly 38% in just one week. Steel Dynamics Inc. (NASDAQ:STLD) gained 15% today and is also up nearly 60% for the week.
With signs and gains like these, one would think the worst is behind us.
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In the last two weeks we’ve heard that the recession is officially here, so I’m lead to believe that it’s not over. I’m expect a big pull back in these prices as the profit takers come in and remove so of their capital. I’m also looking for the DOW to drop back to the 8000 level in the near future.
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If my readers have any insight to share, please do so in the comments to help enlighten me in any way.
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photo by plan my green
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Now with the price of oil being down over 60% since it’s July high of $147 per barrel, it seems that ethanol and other
alternative energy sources have fallen out of flavor with investors. It was obvious to see that we needed to find other means to supply our fuel needs when we were paying $4.11 per gallon of gas (national average July 7, 2008), but with the price of gas now at $1.89 (Nov. 24,2008) people and investors are being blinded by how cheap it is at the moment.
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Ethanol is a fuel source that is derived from corn. A fuel source that has been in use for many years. Unfortunately, it has cause the price of corn to be very volatile and may cause a food shortage if we’re not careful.
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Other alternative energies consist of wind, solar, nuclear and natural gas. All of which we can produce and manufactured in our own backyard without the assistance of foreign countries.
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The problem is that with the price of oil falling to where it was in March 2007, it has made the idea of alternative energies less competitive. The credit crisis has also made it even harder to get the funding that is needed to expand on these ideas.
T.Boone Pickens plan of have a
major wind farm built in Texas has been delayed because of the lack of financial lending.
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It now seems that President-elect
Obama is getting on board with Mr Pickens and his ideas to free this country from the dependency of foreign oils. Word is spreading that within the next stimulus package, alternative energies will be added in.
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Out of the choices that were listed in this post, ethanol is the one that Obama is favoring the most. If that’s the case, ethanol stocks may be something that might interest you. I do not recommend any ethanol stocks because of what is going on with the industry. VeraSun Corp. (NASDAQ:VSE) has filed bankruptcy last week and it’s leading competitor Poet LLC, a private held company is looking to acquire them.
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What a difference a year makes. Last year at this time the stock market was on a tear, it just came off it all time high of 14,136 and looked like it was taking a healthy pull back, waiting to go up again. Then all of a sudden all the walls started to fall from the house of cards that had been built over the last few years. Signs of trouble from the sub-prime mortgage were starting to show.
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Fast-forward back to November 2008. The stock markets have lost nearly 50% from where they were last year and everyone is running for some sort of safe place to hide their money until the storm has passed. Jim Cramer from TheStreet.com
has been suggesting hiding out in strong companies that have some great dividends.
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What are dividends? Dividends are what some companies give to their shareholders. Basically dividends are cash that the company distributes from their cash reserves because they don’t have anything else to do with the profits that they make every year.
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Dividend payouts are figured on a percentage basis of what the share is worth at the time. When stocks drop in value, the yield on those dividends rises. Let’s say that a company’s stock is valued at $100 and they give a $5 dividend payout for the year (typically broken up in four payments), the yield of those dividends are 5%. Now if the company is now trading at $40 per share, the yield would be calculated at 12.5%. That would be some great returns on your investment. You can’t get that in any other type of investments.
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The problem comes in where the yield is too high for the company to keep paying out that dividend. So the company will cut the dividend to help the company keep some cash flow. So what is considered the “sweet-spot” yield for dividends? It’s hard to really pinpoint it. Typically look for those strong companies that give any where in the 3%-7% yield, but anything that is over 10% is considered too high to really expect it to stay there.
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Don’t get me wrong there are some that continue to give double digit yields, but they’re few and far between. The only one that I can say that kept their dividend payout the same this past month was Atlas Pipeline Partners (NYSE:APL). The stock was trading at $18 per share and their quarterly payout was $0.96 per share. That was a 5% yield just for the quarter, if you calculate it for the year it comes out to a 20% yield. I don’t expect it to be the same when they pay out their next dividend in February 2009. The company is in trouble now that oil has come down so much, so my advice is to stay away from Atlas.
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