Major rally started December as new economic news proved that the economic recovery was gaining strength. The Dow Jones closed up 2.3%, Nasdaq up 2% and S&P up 1.6%.
The private sector added 93,000 jobs in November after an expectation of 58,000 jobs, polled by economists. Also there was an upward revised October's job creation from 43,000 to 82,000. The Chinese also posted a positive manufacturing number which gave signs of stability in China.
It didn't stop there, the Fed released numbers from the Beige Book which showed improving economic climate around the country, this included a very positive consumer spending numbers. Later, Goldman Sachs increased the GDP outlook for the US in 2011 from 2% to 2.7%.
Ford Motor Corp said they saw a 24% raise in car sales for November, GM saw 12% increase.
A major thought on the minds of traders today was whether or not the S&P would close above the 1200 mark, which in theory, gives a great chance of a "Santa Claus Rally" to close out the year. The S&P closed up 1206 today passing that mark. After the huge news today, I think that a Santa Claus rally could be possible with only one obstacle on the horizon...Europe. Europe has been a major issue for traders lately and it isn't going to go away until decisions are made and steps are taken to resolve, or at least temporally capped.
Jobs Reality (Downer Debby alert!!): Yes, jobs are being created and less people are filing for unemployment benefits. That is great news but there are under-the-surface reasons behind those facts. Employers tend to hire more staff around the holidays to cope with demand of the season. Most of these jobs that are being created now will be lost in January. I guarantee January's job report is not going to be showing that employers added more jobs because of the fact that we are still in a downturn and we are not in that point of the recovery yet where sustainable job growth is a reality. The huge optimism behind jobs right now is great but remember that unemployment is still at 9.6%.
Look, I'm not trying to ruin the party and kill the fun but it is better to be a smart trader than a trader who doesn't step back and look at the full picture because those traders always get burned in the end. Its about positioning yourself to outperform and make money rather than falling for the false hope that is jobs.
For example, 93,000 jobs were created in private sector, sweet. What you may not know is that today, State Street Corp announced that it will be cutting 5% of its workforce to cut costs. This is just one more example that yes, jobs are getting temporally better for the holidays but the underlying facts are that a recovery is not coming soon.
Showing posts with label Market Outlook. Show all posts
Showing posts with label Market Outlook. Show all posts
Wednesday, December 1, 2010
Friday, November 26, 2010
Rough Start to Black Friday and Update on European Debt Crisis
Before we begin, a few announcements:
The main focus today should be retail, its Black Friday. Earlier this week a surprising consumer report came out that showed us that consumers are starting to spend their income again. A surprising lower number of people are applying for unemployment benefits went along with the consumer report earlier this week. Retailers are also cutting prices a record rates to make it even more affordable for consumers to splurge on holiday gifts. This could point towards a good holiday retail numbers. Now to be clear, we are in no way out of the woods. Yes, the consumer is showing signs of recover, as is employment, very slightly. However, keep in mind we still have an unemployment number around 10%. That being said, the economy is, no doubt, much stronger than is has been in the last few years. Please refer back to my "Playing The Cautious Consumer This Holiday Season" article from Monday to see how to play retail this holiday season.
Back to the European debt crisis. Ireland was recently bailed out by the EU and they have issued a 4 year plan to get their economy back on target and stabilized. However, many people are skeptical that Ireland will be able to hit that target because of its insistence not to raise the corporate tax rate, which the EU has been pressing Ireland to raise.
The problems don't stop there. I was reading the Wall Street Journal on Wednesday and an article entitled "Fears of Domino Effect Pervade Europe" caught my eye. Essentially, the article says that because of Ireland's bailout and unstable economy, other EU nations such as Spain and Portugal, and Greece. Spain's economy is on the brink, as is Portugal. Greece's debt securities are at risk to default. Lots of unrest is occurring in Europe right now which could prove to have worse outcomes than earlier this year when these problems were last in the spotlight. A safe trade to be in right now is Powershares Bullish Dollar Index (UUP). The Euro is not safe right now due to all the uncertainty in Europe. The Pound fell against the Dollar based on risk adversion. Lastly, the Dollar rallies against the Yen based on a higher inflation number in October. We are in an uncertain time right now with Europe's economic woes, potential second Korean war, TSA full body scans at airports. A safe place to be is UUP.
***Please take the time to look at Getting Started in Currency Trading by Michael D. Archer, which can be purchased via the link to the left. I have read it myself and it is the best book I have read about currency trading (FOREX).
Disclosure: No positions
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. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.
- I hope every had a very nice, safe Thanksgiving.
- A new feature has been added to Invest Chief. At the bottom of each post there are options to: email, blog, Twitter, Facebook, and Google buzz to share with your friends posts from Invest Chief.
The main focus today should be retail, its Black Friday. Earlier this week a surprising consumer report came out that showed us that consumers are starting to spend their income again. A surprising lower number of people are applying for unemployment benefits went along with the consumer report earlier this week. Retailers are also cutting prices a record rates to make it even more affordable for consumers to splurge on holiday gifts. This could point towards a good holiday retail numbers. Now to be clear, we are in no way out of the woods. Yes, the consumer is showing signs of recover, as is employment, very slightly. However, keep in mind we still have an unemployment number around 10%. That being said, the economy is, no doubt, much stronger than is has been in the last few years. Please refer back to my "Playing The Cautious Consumer This Holiday Season" article from Monday to see how to play retail this holiday season.
Back to the European debt crisis. Ireland was recently bailed out by the EU and they have issued a 4 year plan to get their economy back on target and stabilized. However, many people are skeptical that Ireland will be able to hit that target because of its insistence not to raise the corporate tax rate, which the EU has been pressing Ireland to raise.
The problems don't stop there. I was reading the Wall Street Journal on Wednesday and an article entitled "Fears of Domino Effect Pervade Europe" caught my eye. Essentially, the article says that because of Ireland's bailout and unstable economy, other EU nations such as Spain and Portugal, and Greece. Spain's economy is on the brink, as is Portugal. Greece's debt securities are at risk to default. Lots of unrest is occurring in Europe right now which could prove to have worse outcomes than earlier this year when these problems were last in the spotlight. A safe trade to be in right now is Powershares Bullish Dollar Index (UUP). The Euro is not safe right now due to all the uncertainty in Europe. The Pound fell against the Dollar based on risk adversion. Lastly, the Dollar rallies against the Yen based on a higher inflation number in October. We are in an uncertain time right now with Europe's economic woes, potential second Korean war, TSA full body scans at airports. A safe place to be is UUP.
***Please take the time to look at Getting Started in Currency Trading by Michael D. Archer, which can be purchased via the link to the left. I have read it myself and it is the best book I have read about currency trading (FOREX).
Disclosure: No positions
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. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.
Tuesday, November 23, 2010
Preparing for Crashing Markets
I was surfing around seekingalpha.com the other day and I happen to stubble upon a very interesting article by Tim Ayles entitled "Preparing for Crashing Markets". Mr. Ayles addresses the facts and the reality of a huge bubble that is to come because of the Fed and federal government's involvement in the markets. Most importantly he addresses how you could position yourself favorable to with stand a bubble burst.
I thought this article needed to be heard more widely, as it is a serious problem. It is the kind generosity of Mr. Ayles that I was given the privilege to republish his article on Invest Chief. Please visit the "about the author" section at the bottom of this post.
Preparing for Crashing Markets (by: Tim Ayles)
If the Fed and government continue to meddle in the free markets in an attempt to prop up asset prices at levels that are "higher than they otherwise should be", you can be certain more bubbles and asset price crashes are ahead. I would say chances are about as good as the sun rising tomorrow.
Black Swan type events of bubbles crashing are beginning to happen closer in time than they ever have before. It creates the sense that things are quickly spinning out of control, leaving investors ever more skeptical and afraid of the future. These investors may forever pull their money from the stock market they increasingly feel is manipulated, and are more concerned with the return of their principal than a return on their principal. They do so risking their long term ability to not run out of money before they die.
Pragcap.com has done a good job in covering the aftermath of bubbles in the past. In this article, I want to present the case that the typical investor is not mentally prepared for a market rout, and then provide solutions for the way one invests as a means to overcome the panic that is sure to set in for most human investors during market crashes.
This chart is the anatomy of a typical bubble. You can see the different responses of different investor types as the bubbles take off and then crash. After the initial drop in prices following the mania phase, most investors think that they are faced with a great buying opportunity. As the market goes up from that dip, the idea of them being right is reinforced and they are left complacent in their regards for the risk they are taking. When the market turns back down and begins to crash, most investors are frozen expecting a bounce back to get them back to break even, where they promise God in their prayers that they will get out. As the market continues to plunge, they get to a point where they think the world is falling apart, and that they want to just save some of what they had, vowing to keep that money safe and promising to never return to the market. Right when they throw in the towel, the low is reached, and the market begins the next cycle of parting investors with their money.
I propose the reason that most people throw in the towel at the lows is that they view their investments completely wrong. The stock market to them is no different than a casino. They do not view the stock market as an easy way to own pieces of actual businesses that pay them actual profits from selling actual products. Price gains are all they focus on. The problem with price gains is that it IS gambling. Let me show you.
You can do all the research in the world on a stock. You can know the company's products, balance sheets, income statements, customers, management teams, etc. You do the due diligence and figure you are ready to buy at a certain price you feel is a great value. The moment you buy, you are now at the mercy of the market. You no longer have any control. The only control over your investment that you have is how much you are willing to risk, and when you decide to get out. As far as the direction of the price of the stock, you have zero control. Gains will be decided by the market as a whole. If those around you are scared, you will lose money. If they are euphoric, you stand to gain. Your wealth is not at the mercy of your friends and neighbors emotional state. The original buy price that you paid is basically your line in the sand. The company can grow is revenues and income, but if others aren't willing to pay a higher price than your "line in the sand" price, you don't make a dime. For those of you who think that a business who is increasing in value from higher earnings will have an ever rising stock price, you must have been asleep the past 11 years. Many companies have doubled and tripled their earnings the past decade, yet they have not seen their share prices go higher.
This is also a problem with the majority of mutual funds out there. Most mutual funds track the prices of stocks, and therefore have their own line in the sand number if you buy them. If you are retired and have been relying on these mutual fund share prices going up the past decade, you are running out of money.
This share price "line in the sand" mentality is what creates fear and panic at market lows and the eventual throwing in of the towel. If you buy a mutual fund at $30 per share, and hold it all the way down to $15 per share for a 50% loss, you probably lose heart. During those types of crashes, the news flow about the market and economy are terrible, thus reinforcing your fear. Based on what you hear, you are certain the stock market will languish for decades. You realize it will take years for your mutual fund to gain 100% from $15 per share just to get back to break even. You begin to rationalize being safe and selling at $15 per share because 50% of something is better than 100% of nothing. You don't want to see this thing go down to $5 per share, so you cash out.
If you are reading this and never felt this way or have never done something like this, your name is Warren Buffett. Everyone else reading this probably has a story that is similar.
Now for the solution. How can an investor retrain the way they think and invest so that when the next bubble does explode, they will not sell at or near the lows, only to watch the investment go higher without them?
Simple. Buy stocks of companies that sell products that people have to buy, creating large free cash flows, and have managements in place that want to pay the investors an income. By buying stocks that sell products people have to buy, you will create a first line of defense mentally in that you know the companies you own will probably not be out of business. If you buy Kraft Foods (KFT) for example and the stock drops 50%, you probably won't sell it out of fear they are going out of business. People will still eat food if the S&P 500 drops to 600.
More importantly, make sure any company you buy is paying a dividend that is more than covered by a healthy Free Cash Flow. Let's take a look at an example.
Verizon Communications (VZ) currently has a $92 billion market cap selling products that even homeless people at food shelters can somehow afford. Sporting a current yield that stands at 6%, the stock is more appealing than most bonds that I could buy today. Last year VZ paid out $5.2 billion in income to its shareholders through dividends, while bringing in $14 billion in free cash flow, meaning they had almost $9 billion more they could have paid out for dividends! In 2008 they made about $9 billion in free cash flow, almost double the $5 billion they paid out. As you can see, Verizon has plenty of money to pay out. Through the September quarter 2010, they have made $13 billion in free cash flow, having paid out about $4 billion in dividends.
So how will a company like Verizon help you not sell near the bottom? Well, I would argue that when you own a company like Verizon who pays a current 6% yield, and has no problem affording that kind of yield, it will be very hard to sell it if it drops 50% from here. If you invest $10,000 in VZ now and get a $600 per year for income, if the stock price drops to where your investment is worth only $5,000, although sad, you will be less likely to liquidate that $5000 and turn it into cash when the $5000 is currently paying you a 12% return ($600 on $5000 is 12%). Even with your line in the sand price 100% higher after the 50% drop, the solid dividend begins to force you to not do something stupid, like sell at the lows. At that point - you really can't get a much better deal than 12% on the money if you were to sell. Are you going to get rid of the $600 cash flow and put it in the bank to earn $12.50 a year? If your investment languished at a $5000 value for years, you at least get to earn $600 per year which you can go and spend on life's essentials you need. If you had $10,000 in a mutual fund that turned into $5000, you don't have the same luxury. To get the same same $600 for life essentials, you would have to sell $600 worth of your shares that are worth 50% less. If the market doesn't rally quick, you run out of money in 8 years. As we like to say at the office: "That's no bueno."
Some of you might be thinking, if the market dropped 50%, then the economy is doing badly and VZ is probably losing sales and seeing their earnings drop. To which I would reply, what if half the people in America got rid of their cell phone? Verizon's free cash flow could drop 50% from here, and they would still have enough cash to almost double the current payout.
And Verizon is not unique in this characteristic.
Another example would be Bristol-Myers Squibb (BMY). With a current market cap of $44.5 billion, BMY has kicked off $3.75 billion in free cash flow the previous 4 quarters. They could pay all of that cash out and give a solid 8.4% income at the moment. Currently, they pay out a healthy 4.9%, meaning that in the event of a 50% market crash, you would have to decide to sell them at yield of 9.8% and go to cash yielding .25%. Chances are in stressful economic times, the products they sell would be in higher demand. But even if their free cash flow dropped by 50%, they could still offer out a 4.2% yield in the worst of times. The risk to a BMY is eventual drug patent expiration, but the truth is, these types of companies have the franchises and cash flow to partner with most generics if not buy them out in order to maintain their cash flows.
In summary, if you want to mentally survive the next crash and not sell at the bottom, retrain yourself to think about income yields from individual stocks. Consider getting rid of mutual funds or story stocks who sell luxury products and don't pay out profits. Retrain your brain to think like a business owner and not a gambler. Litter your portfolio with companies like Verizon, Kraft Foods, and Bristol-Merys. Our portfolios have nearly 100 of these types of companies in them, so there are plenty to choose from. These moves alone will go a long way in helping you survive 30 years of retirement which should see many more bubbles and crashes if the Fed has any say.
Disclosure: Long KFT, VZ, BMY
About the Author: Timothy L. Ayles is the Chief Investment Officer of Napa Wealth Management, Inc. NWM has hand picked Tim both for his highly disciplined investment management techniques in building sensible client portfolios; and for his ground breaking developments in international mathematical investment models. Tim’s expertise is in the rarified atmosphere of commodity trading. He was the founder of Creative Investment Research Group that trained commodity traders all across the United States. Tim was born and raised in Napa and attended Biola University in Southern California.
He runs MA Capital, LP which is a long/short equity, private equity, and fixed income hedge fund. He is a Registered Investment ...More Advisor.
I thought this article needed to be heard more widely, as it is a serious problem. It is the kind generosity of Mr. Ayles that I was given the privilege to republish his article on Invest Chief. Please visit the "about the author" section at the bottom of this post.
Preparing for Crashing Markets (by: Tim Ayles)
If the Fed and government continue to meddle in the free markets in an attempt to prop up asset prices at levels that are "higher than they otherwise should be", you can be certain more bubbles and asset price crashes are ahead. I would say chances are about as good as the sun rising tomorrow.
Black Swan type events of bubbles crashing are beginning to happen closer in time than they ever have before. It creates the sense that things are quickly spinning out of control, leaving investors ever more skeptical and afraid of the future. These investors may forever pull their money from the stock market they increasingly feel is manipulated, and are more concerned with the return of their principal than a return on their principal. They do so risking their long term ability to not run out of money before they die.
Pragcap.com has done a good job in covering the aftermath of bubbles in the past. In this article, I want to present the case that the typical investor is not mentally prepared for a market rout, and then provide solutions for the way one invests as a means to overcome the panic that is sure to set in for most human investors during market crashes.
I propose the reason that most people throw in the towel at the lows is that they view their investments completely wrong. The stock market to them is no different than a casino. They do not view the stock market as an easy way to own pieces of actual businesses that pay them actual profits from selling actual products. Price gains are all they focus on. The problem with price gains is that it IS gambling. Let me show you.
You can do all the research in the world on a stock. You can know the company's products, balance sheets, income statements, customers, management teams, etc. You do the due diligence and figure you are ready to buy at a certain price you feel is a great value. The moment you buy, you are now at the mercy of the market. You no longer have any control. The only control over your investment that you have is how much you are willing to risk, and when you decide to get out. As far as the direction of the price of the stock, you have zero control. Gains will be decided by the market as a whole. If those around you are scared, you will lose money. If they are euphoric, you stand to gain. Your wealth is not at the mercy of your friends and neighbors emotional state. The original buy price that you paid is basically your line in the sand. The company can grow is revenues and income, but if others aren't willing to pay a higher price than your "line in the sand" price, you don't make a dime. For those of you who think that a business who is increasing in value from higher earnings will have an ever rising stock price, you must have been asleep the past 11 years. Many companies have doubled and tripled their earnings the past decade, yet they have not seen their share prices go higher.
This is also a problem with the majority of mutual funds out there. Most mutual funds track the prices of stocks, and therefore have their own line in the sand number if you buy them. If you are retired and have been relying on these mutual fund share prices going up the past decade, you are running out of money.
This share price "line in the sand" mentality is what creates fear and panic at market lows and the eventual throwing in of the towel. If you buy a mutual fund at $30 per share, and hold it all the way down to $15 per share for a 50% loss, you probably lose heart. During those types of crashes, the news flow about the market and economy are terrible, thus reinforcing your fear. Based on what you hear, you are certain the stock market will languish for decades. You realize it will take years for your mutual fund to gain 100% from $15 per share just to get back to break even. You begin to rationalize being safe and selling at $15 per share because 50% of something is better than 100% of nothing. You don't want to see this thing go down to $5 per share, so you cash out.
If you are reading this and never felt this way or have never done something like this, your name is Warren Buffett. Everyone else reading this probably has a story that is similar.
Now for the solution. How can an investor retrain the way they think and invest so that when the next bubble does explode, they will not sell at or near the lows, only to watch the investment go higher without them?
Simple. Buy stocks of companies that sell products that people have to buy, creating large free cash flows, and have managements in place that want to pay the investors an income. By buying stocks that sell products people have to buy, you will create a first line of defense mentally in that you know the companies you own will probably not be out of business. If you buy Kraft Foods (KFT) for example and the stock drops 50%, you probably won't sell it out of fear they are going out of business. People will still eat food if the S&P 500 drops to 600.
More importantly, make sure any company you buy is paying a dividend that is more than covered by a healthy Free Cash Flow. Let's take a look at an example.
Verizon Communications (VZ) currently has a $92 billion market cap selling products that even homeless people at food shelters can somehow afford. Sporting a current yield that stands at 6%, the stock is more appealing than most bonds that I could buy today. Last year VZ paid out $5.2 billion in income to its shareholders through dividends, while bringing in $14 billion in free cash flow, meaning they had almost $9 billion more they could have paid out for dividends! In 2008 they made about $9 billion in free cash flow, almost double the $5 billion they paid out. As you can see, Verizon has plenty of money to pay out. Through the September quarter 2010, they have made $13 billion in free cash flow, having paid out about $4 billion in dividends.
So how will a company like Verizon help you not sell near the bottom? Well, I would argue that when you own a company like Verizon who pays a current 6% yield, and has no problem affording that kind of yield, it will be very hard to sell it if it drops 50% from here. If you invest $10,000 in VZ now and get a $600 per year for income, if the stock price drops to where your investment is worth only $5,000, although sad, you will be less likely to liquidate that $5000 and turn it into cash when the $5000 is currently paying you a 12% return ($600 on $5000 is 12%). Even with your line in the sand price 100% higher after the 50% drop, the solid dividend begins to force you to not do something stupid, like sell at the lows. At that point - you really can't get a much better deal than 12% on the money if you were to sell. Are you going to get rid of the $600 cash flow and put it in the bank to earn $12.50 a year? If your investment languished at a $5000 value for years, you at least get to earn $600 per year which you can go and spend on life's essentials you need. If you had $10,000 in a mutual fund that turned into $5000, you don't have the same luxury. To get the same same $600 for life essentials, you would have to sell $600 worth of your shares that are worth 50% less. If the market doesn't rally quick, you run out of money in 8 years. As we like to say at the office: "That's no bueno."
Some of you might be thinking, if the market dropped 50%, then the economy is doing badly and VZ is probably losing sales and seeing their earnings drop. To which I would reply, what if half the people in America got rid of their cell phone? Verizon's free cash flow could drop 50% from here, and they would still have enough cash to almost double the current payout.
And Verizon is not unique in this characteristic.
Another example would be Bristol-Myers Squibb (BMY). With a current market cap of $44.5 billion, BMY has kicked off $3.75 billion in free cash flow the previous 4 quarters. They could pay all of that cash out and give a solid 8.4% income at the moment. Currently, they pay out a healthy 4.9%, meaning that in the event of a 50% market crash, you would have to decide to sell them at yield of 9.8% and go to cash yielding .25%. Chances are in stressful economic times, the products they sell would be in higher demand. But even if their free cash flow dropped by 50%, they could still offer out a 4.2% yield in the worst of times. The risk to a BMY is eventual drug patent expiration, but the truth is, these types of companies have the franchises and cash flow to partner with most generics if not buy them out in order to maintain their cash flows.
In summary, if you want to mentally survive the next crash and not sell at the bottom, retrain yourself to think about income yields from individual stocks. Consider getting rid of mutual funds or story stocks who sell luxury products and don't pay out profits. Retrain your brain to think like a business owner and not a gambler. Litter your portfolio with companies like Verizon, Kraft Foods, and Bristol-Merys. Our portfolios have nearly 100 of these types of companies in them, so there are plenty to choose from. These moves alone will go a long way in helping you survive 30 years of retirement which should see many more bubbles and crashes if the Fed has any say.
Disclosure: Long KFT, VZ, BMY
About the Author: Timothy L. Ayles is the Chief Investment Officer of Napa Wealth Management, Inc. NWM has hand picked Tim both for his highly disciplined investment management techniques in building sensible client portfolios; and for his ground breaking developments in international mathematical investment models. Tim’s expertise is in the rarified atmosphere of commodity trading. He was the founder of Creative Investment Research Group that trained commodity traders all across the United States. Tim was born and raised in Napa and attended Biola University in Southern California.
He runs MA Capital, LP which is a long/short equity, private equity, and fixed income hedge fund. He is a Registered Investment ...More Advisor.
Wednesday, October 6, 2010
70% of S&P 500 Companies are Overbought
I recently discovered a graph that shows the overbought and oversold percentages of the S&P 500. It is interesting to see that 70% of these companies are overbought, which is very concerning. It is also concerning that it looks as if the rally is turning. Some analysts and financial forecasters such as Mike Turner from Street Authority (streetauthority.com) that predict that the recent rally's gain will be erased. His reasoning is mostly the fact that the rally wasn't based on any good economic news or positive event.
Now that its October (historically one of the worst months for stocks), 70% S&P components are overbought and the recent rally was based on no significant factor, we could be facing some problems. It is important to be cautious and if you made money last month, sell it and lock in those gains.
The Fed is expected to make a few moves by early November. Whether they will continue quantitative easing, buyback bonds, or change rates is yet to be determined.
Trade: A good play for this environment would be Proshares Ultra Short S&P 500 ETF (SDS). This will be a great addition to provide security for your portfolio. SDS moves at twice the rate in the opposite direction of the S&P 500. SDS is currently trading at $28.56.
Disclosure: No position as of this writing, intent to open a position in near future.
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. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.
The Fed is expected to make a few moves by early November. Whether they will continue quantitative easing, buyback bonds, or change rates is yet to be determined.
Trade: A good play for this environment would be Proshares Ultra Short S&P 500 ETF (SDS). This will be a great addition to provide security for your portfolio. SDS moves at twice the rate in the opposite direction of the S&P 500. SDS is currently trading at $28.56.
Disclosure: No position as of this writing, intent to open a position in near future.
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. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.
Monday, September 20, 2010
The Recession Is Over!!...But not really
Today a board of economists that decide recessionary cycles, have determined that the recession is over after 18 months! WHAHOO! Dance in the streets, the recession is over!!!!
Wait just a minute....I don't mean to be a Negative Nancy or a Downer Dave but we still have a bunch of problems:
1. Jobs? There are none with 9.7% unemployment
2. Housing- showing signs of a recover but definitely, in no way, recovered.
3. Banks lending- Ya right, nice try.
4. Debt- We as a nation and as a consumer have wayy too much debt, which will cause problems eventually
5. Consumer Confidence- Beginning to show signs of a recovery with the great numbers from Best Buy but still not recovered.
Look should we be happy that the "recession is over", sure. However, when you get down to the issues, I am not seeing the recovery and the end of a recession. I am skeptical of this announcement and would be cautious while everyone is partying. I will say however, that things are a lot better than they were even a month ago and that does deserve some recognition. All I am saying is, be smart and make educated decisions.
Wait just a minute....I don't mean to be a Negative Nancy or a Downer Dave but we still have a bunch of problems:
1. Jobs? There are none with 9.7% unemployment
2. Housing- showing signs of a recover but definitely, in no way, recovered.
3. Banks lending- Ya right, nice try.
4. Debt- We as a nation and as a consumer have wayy too much debt, which will cause problems eventually
5. Consumer Confidence- Beginning to show signs of a recovery with the great numbers from Best Buy but still not recovered.
Look should we be happy that the "recession is over", sure. However, when you get down to the issues, I am not seeing the recovery and the end of a recession. I am skeptical of this announcement and would be cautious while everyone is partying. I will say however, that things are a lot better than they were even a month ago and that does deserve some recognition. All I am saying is, be smart and make educated decisions.
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.
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 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:
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:
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