Tuesday, August 31, 2010

Watch for a Bottom

Finally!! The worst August for equities since 2001 has ended. August was certainly not a good month but its time to put that behind us and continue looking forward to the future.

On Tuesday, consumer confidence rose modestly and home sales were up. That is pretty good news however, the pessimism of the market brought down mid day gains to just around $5. This leads me ask, if the economic reports continue to be bullish this week, can traders change their view and turn bullish? We will have to wait and find out.

In the mean time, you should be picking up some beaten down stocks that are rather conservative, large-caps such as JNJ, INTC, KO, and JOYG.  These stocks all pay a decent dividend that can help you wait out any further correction.  These types of stocks are going to be a safer bet than a company with volatile sales.

Many traders and strategists are predicting the market to be hitting a bottom within the next week or so.  We think you should take it easy and not flip so fast because if the market isn't finished with its decline, you can be burnt.  That's why we are suggesting the types of stocks that were listed above.  They will withstand the decline and/or go up with a resumed bull market.  Safety and security, as well as profitability is what we are going for at the moment.

**Keep a look out the rest of this week when we will announce the Stock of the Month for September

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

Sunday, August 29, 2010

The Value of Options

Have you ever wanted to learn about options? Do you think they are too hard to learn and understand? Fear no more! Today, I am recommending an options book that got me started on options.  The book is: Getting Started With Options by Michael Thomsett.  This book is the complete beginner (and expert) guide to getting into option trading.  Thomsett is very descriptive in his writing and uses repetition to fully make the material understandable.  There are various "real-life" scenarios that he gives so that you can understand in a 1st person view.  This is an effect way of learning options because it is applied to real life and not just explanations and confusing definitions. 

The beginning of the book is obviously the intro to options and the basic understandings.  The author explains the basic definitions of put, call, strike price, expiration date, intrinsic value, extrinsic value, and more.  Thomsett goes into specific strategies for puts and calls such as when you would want to use a put or a call.  As the book progresses, more "advanced" methods of options are explained such as straddles, butterfly, condor, etc.  Do not be overwhelmed if you do not understand some of this terminology, Thomsett writes this book as if you are hearing this word for the first time and know absolutely nothing.

I highly recommend this book to help begin your prosperous journey of options.  Options are a very fun asset that can gross a lot more than stocks and bonds.  This book is on the Invest Chief Book List, which will be unveiled in the coming weeks.

You can buy, Getting Started With Options by Michael Thomsett, on the link below from Amazon. Your purchase from the link below also helps out Invest Chief (thank you!).

Tuesday, August 24, 2010

Its Dark Out There...But There Is A Light

Today the market was hit pretty hard by some unfortunate news: existing home sales plunged to a 11 year low of 27.2%.  The Dow was off about 1.3%, Nasdaq 1.6%, S&P 500 1.5%. The news was that existing home sales were adjusted to a annual rate of 3.83 million from 5.26 million the month before.  You can catch the specific little details at this weblink: http://www.marketwatch.com/story/existing-home-sales-plunge-272-in-july-2010-08-24-101400

Enough of the news headlines that you have already read about... The market is bad, it doesn't take a genius to realize this.  The dreaded "double dip" is a regularly addressed event, not to mention the latest "Great Bond Bubble".  Investors are freaked out of their minds and are running to bonds or cash. 

These are normal everyday topics for Wall Street these days.  I encourage you to listen but take it will a grain of salt.  Is all of this "double dip", "bond bubble" nonsense overblown?  Probably, but it is always to position your portfolio for the worst and accepting the best.  This is a huge key!! I would not be investing in bonds right now because of the uncertainty.  There are just a bundle of great stocks that are better yielding and "safer" than bonds (I put "safer" in quotes because there is hardly such a thing these days).  The stocks that are very attractive in this environment are safe, high yielding, conservative plays, such as what I have listed below:

  • Johnson & Johnson (JNJ) - This stock is yielding over 3% in dividends, which I believe is safe and will not be cut for any reason.  Not to mention this is a good bet for rising interest rates, which will we occuring sooner or later
  • Exxon Mobil (XOM)- XOM has been absolutely destroyed, down 14% YTD, as were all the other oil & gas plays due to the BP oil spill.  I think Exxon is a good company, nice 3% dividend yield, and should rebound to pre-spill levels within a year
  • Coca Cola (KO)- Coke is one of the most recognizable names in the world.  KO operates in 200 countries with more than 400 brands.  Coke's huge international exposure should offset problems in the US.  Coke reported rebounding sales in Asia and Europe in 2Q.  Not to mention a rise in sales in emerging markets.  Coke is well positioned to survive the down economy and emerge stronger.  Ko currently yields over 3%.
Recommended reading:
Secrets of a Successful Trader: http://efbcefae8z307u8cl356zn1-eb.hop.clickbank.net/?tid=BLOGAUG24
Dow Jones Never Loss Trade: http://a87c3lbn9w5z3t27kj83pgtd0a.hop.clickbank.net/?tid=BLOGAUG243

Have any stocks you think are good for this economic environment?  Comment your suggestions!!

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended.  It is always important to do your own research of the stock before you invest.  Invest Chief receives absolutely no compensation from companies that are recommended.  We are a private organization, dedicated to promoting financial well being and prosperity. 

Sunday, August 22, 2010

A Crazy 2010...Worst Yet to Come?

It has been a very tough, volatile summer of 2010.  Since the near collapse of Europe in the spring, markets have been very jittery and hard to understand.  However, most stocks beat their 2Q earnings, some companies such as Intel (INTC) set record quarter.  Not to mention M&A and IPO markets look to be getting stronger. 

So what is the big issue? Why are the markets acting this way?

 Europe has been stabilized, 2Q was great for stocks, and M&A/IPO markets are strong, but we still have a few major problems that need to be corrected and fast.  Unemployment, housing market, banks lending, and debt are the biggest economic issues that not only face the United States, but the rest of the world as well.

Unemployment, is one of the more important issues on the list because if people have jobs and an income, they will buy housing, banks will lend and they will make an effort to reduce debt.  Not to mention consumer confidence and reports will recover.  The national unemployment rate is 9.5% (as of this writing).  This is extremely bad and must be fixed.  Although, to keep ourselves in check with a little optimism, the unemployment rate during the Great Depression was around 25%.  I believe by the end of the 2011, beginning of 2012 unemployment will be a lot better and almost recovered.  If Congress gets on board and down to business with jobs we may be saved.  Last month, the private  sector added 71,000 jobs.  We can build on this but we need everyone to get together and be committed to job creation.

Housing market has been terrible since second half of 2007.  We need housing to recover to show that economy is stable and healthy.  However, it is hard to expect the housing market to recover when there is 9.5% unemployment.  If unemployment is curred around beginning of 2012, as I predict, I suspect the housing market to recover in 2013-2014 depending whether the government adds incentives to attract home buyers.  However, I believe real estate stocks have been beaten down to the ground and could start looking attractive.  REITs (real estate investment trusts) have been outperforming indexes and other assets in 2010.  REITs are a great alternative investment and could continue to rise with the recovery of the real estate market.  However, proper research is always important before you invest.

Banks are not lending, plain and simple.  We need banks to lend again to show that the economy is healthy.  Banks will not lend out money to people who do not have a job because that is an extremely risky investment for the bank.  This is again why we need job creation and to be focused on lowering unemployment.  It is essential that banks start lending for a real economic recovery. 

Debt, a growing problem and worry for the world.  As we have seen in Greece, Spain and Portugal, debt can and will put you on the brink.  Many believe a similar situation will happen to the US.  This is true if we continue to pile more and more debt on.  The US national debt is over $13 trillion, thanks to the US wars in Afghanistan and Iraq, useless bailouts of failed financial

institutions, and other domestic issues. It seems that many politicians have no interest in the debt because all they do it pile more on and make excuses to take care of it later. For example, the President's budget for 2010 was to be a "record" and now the CBO (Congress' nonpartisan budget analysis) estimates the 2010 budget deficit to be $1.1 trillion.  This is absolutely ridiculous that he would pile on another trillion when the rest of the world is going through a debt crisis.  President Obama's plan is to "take care of it in 2012 or 2013".  We can not wait that long or we will turn into Greece.

Although the basics of the market have improved, the "steam engine" of the economy (unemployment, housing, lending, debt) is lagging and could be the source of some pain in the short term until we correct these problems.  We can not continue to ignore the fact that the debt is going to be a huge problem.  We can not ignore the unemployment.  We need to be proactive and get down to business to save our economy.

Invest Chief outlook: I see the rest of 2010 as it is now, volatile and bumpy.  The 3Q and 4Q will not be as spectacular as the 2Q but stocks

will overall beat their estimates.   I suspect the 1Q and 2Q of 2011 to be showing signs of economic stability with continued success in earnings, IPOs, M&A, and perhaps some signs of a recovering "steam engine".  I recommend conservative US bets and moving out to European stocks and emerging markets.

Below are some books that I recommend for the topic in this article: