tag:blogger.com,1999:blog-53741502034631069132024-03-12T21:35:55.392-04:00The Investor AdvocateChrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.comBlogger122125tag:blogger.com,1999:blog-5374150203463106913.post-89882889830128003172012-05-30T10:12:00.003-04:002012-05-30T10:20:50.358-04:00Facebook (FB) a bad investment? Really?There is a lot of hate about Facebook's stock, and I just don't get it.<br /><br />Personally, I am not a fan of using Facebook, but that is not FB's fault. I don't like how many people seem to refuse to communicate using any other method. It formed another layer of peer pressure that makes each of us decide whether to conform or confront it--no room for anything in-between.<br /><br />That's a mark of something that has developed market share, which is precisely the business model that developed from FB.<br /><br />I keep hearing that FB isn't worth anything, but technology stocks aren't "value" stocks--They're "growth" stocks, and I don't know anything with more growth potential than a communication device used by almost 1 billion people.<br /><br />FB just got a lot of money, and they have intelligent enough management to know how to use that money--like buying their competition and partners to enhance what they offer.<br /><br />Their business model is stronger than Google's since they have actual user data. Google (G) has to think like an insurance actuary--just guessing which "types of people" are "likely to type" in certain keywords.<br /><br />Facebook has actual data. I realize that people "Like" things for all sorts of reasons--discount or peer pressure--that do not relate to buying tendencies. However, they know what gender you are, in which location you're based, and in which location that you're sitting as you're using your computer.<br /><br />Google+ might be better on a technical level, but Facebook already has grandparents engaged. They aren't jumping to that "new" social media platform.<br /><br />Facebook is here for a while. Many people tend to be socially motivated to stay on there. They're not going anywhere. So targeted advertising there is the perfect model.<br /><br />Plus, they have SO much money. Do you think that they're going to go bankrupt anytime soon?<br /><br />No matter what price you buy this stock today, this stock is going to do nothing but show earnings for years to come.<br /><br />If you were impressed with Google's rise, just imagine how amazed at how quickly Facebook will rise....and I don't even like Facebook!Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-33270238248127944572011-09-05T09:00:00.003-04:002011-09-05T09:48:54.173-04:00How to Help the Housing Market RecoverHow hard is this?<br /><br />Would anyone like a recipe for restoring home prices or any other form of real estate?<br /><br /><span style="font-weight: bold;">Which people need government help?</span><br /><br />It seems like our government keeps trying to bail out the helpless. In some cases, this is okay. On an individual level, we all need a lift now and then. I am pretty sure that most government aid programs INITIALLY intended to target those people with mostly good habits who happen to crash into a big pile of bad luck.<br /><br />Okay...Let's give them a hand so that they get on their feet and return to being productive.<br /><br />However, there are many other people who see these other people benefiting, and they suddenly feel entitled to "their share."<br /><br />Politically, I get that there are some people beyond help who will behave better for the entire population if we "give" them enough to survive. Otherwise, many of these people will turn to more aggressive types of activity that will likely cost us more than we're paying them.<br /><br />Here you go! Here is your "free" handout. Essentially, this is a bribe for these people to mostly behave themselves.<br /><br />Both of these groups are worth helping for different reasons, and they are not part of my "recipe" for real estate recovery. The recipe does not involve throwing good money after bad.<br /><a name='more'></a><br /><span style="font-weight: bold;">Throwing Good Money after Bad</span><br /><br />What do I mean?<br /><br />Notice that most of today's real estate recovery programs focus on people's mortgages. Some of these proposed solutions allow people to modify their loans to better reflect today's market. Others focus on facilitating the foreclosure process more easily. Other programs help encourage short sales.<br /><br />None of them seem to address the REAL problem.<br /><br />They all seem to focus on helping people who--after they are rescued--still are pretty likely to fail.<br /><br />I am not only talking about deadbeats here.<br /><br />What is the REAL issue? People do not have money to pay for their homes. If they do, they often cannot move from their home, because they cannot sell their home in today's market and get enough money for it to repay their loan on it. So they are stuck there.<br /><br />Why do people suddenly not have enough money?<br /><br />You might want to blame poor saving habits, but frankly, we've been pretty poor with that for several generations now. In fact, this is what made the mortgage industry boom so much. People have pretty much always stunk with their own finances.<br /><br />There are exceptions, but saving habits do not explain today's issue.<br /><br />Today's issue is that we do not have enough JOBS!<br /><br />If people had good paying jobs, banks would give loans more frequently.<br /><br />What do jobs have to do with real estate prices?<br /><br /><span style="font-weight: bold;">Housing Prices: It's Simple Supply and Demand</span><br /><br />What makes people pay a higher price for anything?<br /><br />Because they HAVE to pay a higher price. Most people do not purposely pay a higher price.<br /><br />The DEMAND is there. Paying the higher price is the only way they can get what they suddenly want.<br /><br />Real estate housing prices are no different. People pay higher prices when they HAVE TO PAY higher prices.<br /><br />When does this happen?<br /><br />Where there is a demand for these houses.<br /><br />When is there a demand for these houses?<br /><br />People WANT to live there!<br /><br />Why do people want to live in certain places?<br /><br />One reason is that the area is visually stimulating, but there are only so many of these.<br /><br />The most common reason is that people want to be close to GOOD PAYING JOBS!<br /><br />People are willing to pay to be near places that will allow them to get more money.<br /><br />People cannot spend money if they cannot make money.<br /><br /><span style="font-weight: bold;">How to Help the Real Estate Housing Market Rebound</span><br /><br />We need to focus on solving the real problem. We have a lack of jobs.<br /><br />When do jobs expand?<br /><br />Jobs stop expanding when one of two things happen.<br /><br />One of these things is when businesses perceive that there the money to be made by expanding is no longer available. So the people that they hired to help them expand into this new profitable slice more quickly are no longer needed. Fewer people are needed to maintain an operation than to expand it. (At least, that SHOULD be the case...but that is a different topic...and a different problem.)<br /><br />The other explanation is that businesses do not have the money they need to expand, even when they see the opportunity.<br /><br /><span style="font-weight: bold; color: rgb(255, 0, 0);">RIGHT HERE!!!! THIS is where the government NEEDS to help!!!</span><br /><br />We do not need programs that help us modify or eliminate our mortgages. That is simply shifting the problem--not solving it. Instead of a person losing a home, we will just have the bank lose profits and weaken its ability to hire workers.<br /><br />We need the government's help providing money into businesses that will use that money to hire people to help them expand.<br /><br />The businesses will profit and grow more rapidly, and they will HAVE TO HIRE more people.<br /><br />If more people are hired, banks will be more willing to make loans on homes in these areas.<br /><br />If banks give more loans, more people will be able to buy these homes.<br /><br />Guess what that will do to the price of these homes?<br /><br />Am I overlooking something here?<br /><br />I am not saying that we should throw good money after bad businesses, either.<br /><br />We are no longer a manufacturing country today. We should manufacture our own weapons regardless of economics. Other than that, we should only manufacture things that allow our country to get them more cheaply than if we paid someone else to do it.<br /><br />Otherwise, we need to shift our focus on becoming an information leader or shift toward whatever industries allow our country to grow.<br /><br />THAT will create jobs, which is pretty much the only thing that will help the housing market prices rebound in areas other than the worldwide vacationing hotspots.<br /><br />Washington! We need your help, but we need the RIGHT help from you.<br /><br />Save us before we finish our economic suicide mission. Save our housing prices. Please!!!Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-5016726545876438292011-08-14T12:52:00.006-04:002011-09-05T09:00:40.200-04:00Buy Low, Sell High, Old Saying, Old ResultsHi, everyone.<br /><br />I know that it's been a while, but this past week or so was pretty newsworthy. So I finally have something to say.<br /><br />Nearly everyone has heard the saying, "Buy Low and Sell High."<br /><br />That seems obvious, doesn't it? I mean, do we really have to tell people this?<br /><br />YES! We really do!!!<br /><br />Why?<br /><br />Most people SAY it, but they do not DO it.<br /><br />Want an example?<br /><a name='more'></a><br />The stocks just dropped a TON over the past week-plus. Yes, there were days with really wild UPSWINGS, but overall the market is way lower than it was two weeks ago.<br /><br />Now that the prices are low, how many of you are BUYING?<br /><br />I know...I can hear it now...I just want to wait and see how this all washes. The US just lost its top AAA rating from S&P. The dollar is getting weaker. The job situation seems to be getting worse. The country's budget is doomed to failure since they barely made any spending cuts, but they did not raise anyone's taxes.<br /><br />I know...It's all doom and gloom.<br /><br />THAT is why the prices are low! Prices are low.<br /><br />What are we SUPPOSED to do when prices are low?<br /><br />Buy! We BUY LOW so that we can SELL HIGH.<br /><br />Hardly anybody I know is buying now, even though the prices are low.<br /><br />Now is a time to position yourself to get rich.<br /><br />Warren Buffet reminds us that we need to be greedy when others are fearful.<br /><br />Others are fearful. It's time to buy low.<br /><br />If you want to be average, wait until you find--for sure--what is happening.<br /><br />If you want to get rich, do what the rich do. Buy low!<br /><br />Everyone "knows" to do it, but very few do. It's time to be one of those few.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-31427960524109989882011-07-01T12:17:00.003-04:002011-07-01T12:25:06.574-04:00Why do companies buy back stock shares?<h1>Why do companies buy back stock shares?</h1>First, let me explain why they <u>sell</u> shares in the first place.<br /><br />Companies usually need to find ways to get cash to begin their business or take it to the next level. (Although, they sometimes simply need to get enough money to pay their bills.)<br /><br />A company can get money one of a few different ways:<br />1. Loans (usually from banks)<br />2. Bonds (these are really loans...but from investors)<br />3. Stock--selling portions (equity) of their company in exchange for money<br /><br />So when a company SELLS shares of stock, they get money, but they also <u>give up a portion of their company</u>.<br /><br /><span style="font-weight: bold; font-style: italic;">Why does a company buy back shares of stock?</span><br /><a name='more'></a><br />They can regain control of a larger portion of their company.<br /><br /><span style="font-weight: bold; font-style: italic;">When does it make sense to do this?</span><br /><br />It makes sense to do this when the company shares are trading for a LOW price. Like you and I, a company prefers to sell their shares high and re-buy them at a lower price. The company, however, is doing this to shares of its own company.<br /><br />(Conversely, they will sell their shares when they suspect that the price is higher than it should be...People are excited about the company, and they pay a premium price to get a piece of the "action.")<br /><br /><span style="font-weight: bold; font-style: italic;">What does this mean for you, the investor?</span><br /><br />When a company buys back its shares, it usually means that they think their stock price is too low. Since they are close to the company, they usually have a pretty good idea if the company is doing the right things that will lead to better news tomorrow. If they are right, then the stock price should increase later. (At that point, they might sell shares of stock, but they'll do it at the higher price. They'll get <u>more cash</u> while giving up the <u>same portion</u> of their company.)<br /><br />Likely, you will benefit from this. The fewer shares they have outstanding (shares that they sold to the public WITHOUT re-buying back those shares...sort of like an outstanding loan balance), their higher their Earnings per Share become, even if they have the <u>same amount</u> of profit.<br /><br />Example: $10 million earnings<br />10 million shares<br />= $1 Earnings per Share (EPS)<br /><br />vs<br /><br />$10 million divided<br />5 million shares<br />= $2 EPS<br /><br />They're TWICE as profitable now, right? (Of course, not, but many investors only look at the summary...not the story leading to that summary.) The company looks a lot better because of it, and the stock price often goes higher from this "good news."<br /><br />Usually, the company has MORE profits, and they have FEWER shares. So this almost makes them look even better. More often than not, good things happen when they can buy back their shares. (Thinking: If you don't have cash, you can't buy them. If they are not a good deal/price, you probably won't buy them.)Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-69009078758431551582011-07-01T12:12:00.003-04:002011-07-01T12:17:14.256-04:00Explanation: TTM - Trailing Twelve (12) Months (to Today's Date)Someone asked me a question about this. So here is my answer...<br /><h1>What does TTM mean?</h1><h2>TTM - Trailing Twelve (12) Months (to Today's Date)</h2>Usually, it is most often used to refer to the <u>earnings</u> (per share) during the last 12 months to date, opposed to a specific Calendar Year, Fiscal Year, or Quarter. <strong><i>TTM is usually the <u>most recently reported</u> 4 Quarters.</i></strong><i></i><br /><br />In addition to Earnings (Net Profit), it could also refer to Revenue TTM, Sales TTM, or other types of Profit.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-81027086578819331792011-05-22T09:52:00.003-04:002011-05-22T10:31:25.658-04:00Reverse Stock Splits Explained<h1>Reverse Stock Splits Explained</h1><br />Sometimes, you hear or read terms that you know that you should understand, but you don't really take time to learn it well until circumstance forces you.<br /><br />One of the stocks I own will be issuing a reverse stock split in about a month.<br /><br />I understand the math behind this, but I really didn't know what this means. So I took a closer look.<br /><br />For those of you who prefer to watch a video, here is Jason Frankl of FTI Consulting was interviewed on Bloomburg to help explain (a) what it is and (b) why it might be issued.<br /><br /><p align="center"><iframe src="http://www.youtube.com/embed/-FzqTeUbF3s" allowfullscreen="" width="425" frameborder="0" height="349"></iframe></p><br /><a name='more'></a><br /><h2>First, what IS a reverse stock split?</h2>According to Investopedia.com, a <span style="font-weight: bold;">reverse stock split</span> is a reduction in the number of a corporation's shares outstanding that increases the par value of its stock or its earnings per share. The market value of the total number of shares (market capitalization) remains the same.<br /><br /><span style="font-weight: bold;">For Example...</span><br />1:3 Reverse Stock Split<br /><br /><u>Original Price/Share</u>: $2.00<br /><u>Original # of Shares</u>: 60 Shares<br /><br /><u>Revised Price/Share</u>: $6.00 ($2.00 x 3)<br /><u>Original # of Shares</u>: 20 Shares (60 / 3)<br /><br />The value of each is the same, so...<br /><br /><h2>Why do companies issue reverse stock splits?</h2>Companies might issue reverse stock splits for a couple of reasons:<br />1. Remain listed on a stock exchange<br />2. Become more attractive to investing institutions<br /><br /><span style="font-weight: bold;">1. Remain Listed on a Stock Exchange</span><br /><br />How does a reverse stock split help a stock remain listed on a stock exchange?<br /><br />The NYSE and the NASDAQ stock exchanges are the most widely used and consulted stock exchanges in the United States, possibly the entire world.<br /><br />Both of these exchanges require that companies that they list have share prices over $1.00.<br /><br />Why?<br /><br />Amongst other possible reasons, stocks with small share prices are very easy to manipulate. It is easy to buy a lot of shares at a certain high price or short a lot of shares at a low price. Either of these can too easily influence market (buying and selling) behavior.<br /><br />Plus, there is a certain level of company each stock exchange wants to represent.<br /><br />If a company's stock price falls below $1.00/share, they generally have between 7 to 9 months to find a way for its share price to recover. If it does not recover on its own, then the stock exchange might require a company to issue a reverse stock split. This would help push its price per share above the minimum level.<br /><br /><span style="font-weight: bold;">2. Become More Attractive to Investing Institutions</span><br /><br />Each investing institutions has its own requirements. However, many--if not most--institutions will only invest in companies with stock prices at a certain share price level or above. For the majority of these institutions, this is $5.00/share.<br /><br />Once investment institutions are willing to buy shares, the demand increases. Often, so does the company's stock price.<br /><br /><h2>Is there a downside to reverse stock splits?</h2><br />There can be a downside to reverse stock splits.<br /><br />Often, many investors in the market assume that a reverse stock split implies that the company is in financial trouble. They also might assume that the company is trying to "trick" them into something.<br /><br /><h2>Keys to Consider with Reverse Stock Splits</h2><br />Reverse stock splits can be bad or good.<br /><br />It is important that a company makes it clear (communicates) to investors WHY they are doing this.<br /><br />Are they making an effort to make investors to understand, or is there a lot of double speak? Are they trying to "sneak" it through?<br /><br />Does the company seem to have a plan? Does this plan seem to be realistic?<br /><br />So a reverse stock split might be great, or it might be rotten. It is important that you understand what it is. It is also crucial that you understand WHY they are doing it.<br /><br /><span style="font-weight: bold;">Reverse and Research!</span>Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-84213315440591359482011-05-17T06:37:00.004-04:002011-05-22T09:56:07.785-04:00That Profit Is His--Not Yours!The more I'm "playing" the stock market, the more frustrating things I notice.<br /><br />The latest one involves a company that I've been eying for some time...over a year now. In fact, I even owned it for a short while...but not recently.<br /><br />Lately, the stock price was falling, and it was getting near a price that would make me want to pull the trigger and buy it...a lot of it.<br /><br /><span style="font-weight: bold;">The good news?</span><br /><br />Fortunately, the company released a statement that they are really profitable.<br /><br /><span style="font-weight: bold;">The bad news?</span><br /><a name='more'></a><br />They announced this RIGHT AFTER the market closed yesterday.<br /><br />Logically, it seems like you would release good news at the beginning of the day and bad news toward the end of the day. People tend to overreact to the news. Releasing good news at the beginning of the day allows people to buy based on their new-found excitement. (Bad news, on the other hand, tends to be released LATER in the day to REDUCE the time for people to respond emotionally.)<br /><br /><span style="font-weight: bold;">The Question</span><br /><br />So why would a company deliver GREAT news AFTER the market closes?<br /><br />I can only put together two possible answers.<br /><br />1. They really are stupid, and they are making an awesome profit only by a tremendous stroke of luck.<br /><br />2. They are positioning a few people, who have the power to invest before and after the market closes to the public, to make a killing.<br /><br />Given that the economy is not doing all that great right now, chances are not very good that a company "lucks out." (That does happen during the high points of economic cycles, by the way.)<br /><br />Where does that leave us?<br /><br />I can't think of any other reasons. Can you?<br /><br />After market announcements tend to be manipulative, anyway. This just seems to be legally fraudulent.<br /><br />Get your hands off that opportunity! That profit is for HIM to take (before the market reopens)--not for YOU!<br /><br />Can anyone think of other possible reasons? I'm entirely open, and I'm really hoping that I'm overlooking something, because THIS is really frustrating to me!Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-16915478039550524822011-05-13T23:52:00.004-04:002011-05-22T09:55:44.076-04:00Stock Advice: Startup Companies: Look at Management PayHere is a pretty quick tip.<br /><br />I've bantered about the importance of bad management vs. good management.<br /><br />In good times, this might only be partially important.<br /><br />In rougher times, only places with good management survive downturns--usually. I'm not looking to discuss exceptions here. I'm only setting up my point.<br /><br />Without sitting beside a company's management every day, you can only speculate whether the management of a particular company is good or bad.<br /><br />However, what is, at least, one major flag?<br /><a name='more'></a><br /><span style="font-weight: bold;">Management of Startup Companies Should not get rich before YOU do!</span><br /><br />If you truly believe in your company, you do not pay yourself until the business can pay you.<br /><br />This seems silly. Of course, I can't pay myself until there is money to pay me.<br /><br />If you're using your own cash, this IS true.<br /><br />If you borrowed (raised) money to start your company, now there is a decision to make.<br /><br />Good management does not expect to get paid when it is not running a profitable company.<br /><br /><span style="font-weight: bold;">Where is the fire? What made me think of this?</span><br /><br />I violated several of my own rules of investing with a pharmaceutical company, and I paid the price.<br /><br />Take a look at the things I overlooked/ignored:<br /><ul><li>The management of this particular company kept raising funds.</li><li>There are fewer than 10 employees total.</li><li>There are five (or so) members on the board.</li><li>Top board members made over $300K compensation this past year.</li><li>Total sales for past year was barely over $100K--not profit, sales.</li></ul>Does this seem like a group that would likely be motivated to make sure the company gets sales soon?<br /><br />I lost about half of my investment, but it could have been worse. I kept ignoring this warning sign (and others). This past week, this company defaulted on its loan repayment terms. Luckily, I sold this about a 1-1/2 months ago. It's dropped another 25% since, and it will likely fall further.<br /><br />I don't blame them for my loss. I blame myself. I didn't check management's compensation compared to company sales.<br /><br /><span style="font-weight: bold;">Bad management</span> (often) equals a <span style="font-weight: bold;">bad investment</span>.<br /><br />Moral: It's tough for management to be good when it doesn't NEED to be good. Check its compensation, especially if it just a startup company.<br /><br />(More lessons to follow...from this same company.)Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com1tag:blogger.com,1999:blog-5374150203463106913.post-28240916965398318362011-05-10T23:38:00.008-04:002011-05-22T09:56:59.132-04:00Auto Industry Taking HUGE First Step to RecoveryI am responding to this <a href="http://finance.yahoo.com/news/GM-to-add-or-keep-4000-jobs-apf-2614696244.html?x=0&sec=topStories&pos=4&asset=&ccode=">article: GM to add or keep 4,000 jobs in US</a>.<span style="display: block;" id="formatbar_Buttons"><span onmouseover="ButtonHoverOn(this);" onmouseout="ButtonHoverOff(this);" onmouseup="" onmousedown="CheckFormatting(event);FormatbarButton('richeditorframe', this, 8);ButtonMouseDown(this);" class=" down" style="display: block;" id="formatbar_CreateLink" title="Link"><img src="http://www.blogger.com/img/blank.gif" alt="Link" class="gl_link" border="0" /></span></span><br />The article's title pretty much shapes this conversation. GM will be adding (or simply keeping) a lot of jobs here in the US.<br /><br />That news sounds GREAT. Is this because the company is doing better? I want to take a closer look at this.<br /><a name='more'></a><br />GM certainly has a less-than-stellar reputation for knowing when to add or subtract jobs. GM has historically put a lot of outward energy into celebrating tiny achievements, making them seem bigger than they are.<br /><br />For example, the CEO Bob Akerson said, "Our cars are selling well," he said. "We seem to have hit a sweet spot."<br /><br />He does not explain WHICH cars are selling. With gas prices at the $4.00-plus range, I doubt it is the highly profitable trucks that are selling well.<br /><br />In fact, it is probably more likely that the small, not-so-profitable cars are selling really well right now. Unless GM suddenly found a way to make these more profitable for the company, this might not be the time to celebrate, yet.<br /><br />In response to GM adding jobs said, "Those jobs impact and reverberate in our economy."<br /><br />While this might be a true statement, I doubt that it explains the reason they are hiring. There is only one sensible reason for a company to pay someone money. That person MAKES the business money. It is true that it helps the economy, and it is nice, too. However, don't be fooled into thinking that GM is trying to be charitable about this. They should not be charitable right now, and they are not.<br /><br />The way I see it, his statement was political without there being any meat to it.<br /><br /><span style="font-weight: bold;">What is this HUGE step toward recovery?</span><br /><br />As much as I still see a lot of the "Old GM" within statements made by key players, there really is something to celebrate.<br /><br />Joe Ashton, UAW Vice President said, "We're willing to discuss anything that creates jobs." This surrounded a statement that the union is slowly warming to the idea of hiring more people for a smaller wage.<br /><br /><span style="font-weight: bold;">Why is this good news?</span><br /><br />The Detroit Area and other manufacturing areas supported largely by the auto industry will continue to suffer until enough people see that there is NOT very many companies making excuses to come to these beat-up areas (manufacturing does not do good things to surrounding environments) so that they can pay MORE for the same labor.<br /><br />Detroit--and many other places--are full of people who feel entitled to make a certain wage.<br /><br />I am not in favor of abusing people, and I feel that people should get paid a fair wage. A fair wage is MARKET VALUE--not an inflated value. Wages in the auto industry kept jumping upward, because of the closed negotiations.<br /><br />The threat of worker strikes were valuable when it meant the owner would LOSE money without their labor. However, the plants began to lose money, even when it was operating. The threat of work refusal no longer carried weight.<br /><br />Their wages were inflated through unintelligent negotiations--on both sides--union and management.<br /><br />Both sides ignored the facts from the open market. The open market was paying people 50% or less than they were making. If you are getting paid just a little more, then the cost to move the plant is too high. It is cheaper to pay a little extra to keep the workers happy and have them make money for the business.<br /><br />Eventually, it became cheaper to move the plants.<br /><br />Many workers still demanded more money, even though the demand for them dropped.<br /><br /><span style="font-weight: bold;">So...You gave me background, but why is this good news?</span><br /><br />Because the statement, "We're willing to discuss anything that creates jobs," indicates that people are willing to work for less. This came from the UAW. That is HUGE!<br /><br />Expecting people to work for less than market value is not a good idea.<br /><br />However, most people will make more from this lower wage than they will without any job.<br /><br />This lower wage allows the plants to stay open or re-open. The businesses win, because they do not have to move to another plant or build a new one. The workers win, because they can return to being productive and earn money for a business that is more likely to remain open.<br /><br />We still have big problems in manufacturing. Our wages are a lot more expensive than China's or many other nations.<br /><br />However, there are a few things going for us. Shipping is getting really expensive, especially with oil prices going through the roof. The biggest thing, though, is that the world suffers when the US economy suffers. Most other nations know that they will enjoy a better economy for themselves if the US economy does alright. I get the feeling that other countries want to compete against the US, but they do not want to compete too hard.<br /><br />The Detroit Area, in particular, will rebound ONLY when enough workers are willing to work for a wage that is closer to the open market.<br /><br />It seems like we're getting closer to that than many of us ever thought possible.<br /><br />As a group, this is GREAT news, because a recovery will NEVER happen without this step. The quicker we learn it, the quicker our recovery will be.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-17284171813972412011-05-09T06:47:00.006-04:002011-05-22T09:57:59.030-04:00Stock Analysis Just Like SportsWelcome back! Actually, that was a message for me.<br /><br />Truthfully, I didn't think anyone was reading this...so I stopped spending my time writing posts to this blog. (Plus, I've been working on other projects.)<br /><br />A thought occurred to me last night.<br /><br />As I read or listen to sports predictions, it amazes me how often things replay themselves--including people's analysis of sports events as they unfold.<br /><br />For basketball and hockey, it's playoff season. So there is all sorts of analysis. A lot of this analysis tends to be extreme.<br /><br />Every year, teams will play best-of-seven series. The format (usually) is that the higher ranked seed gets to play their first two (2) games at home. The next two games are played at the other team's (lower seeded team's) home arena.<br /><br />At some point during the playoffs, the home team wins the first two games.<br /><br />To me, that seems pretty logical. They were ranked to be the "better" team, and they had the more favorable conditions of playing at their home stadium in front of friendly fans.<br /><br />However, every year, you see sportswriters doom the lower seeded team, even though they have not played a home game, yet. A lot of the fans follow in the jubilation or panic--depending which team they want to win.<br /><br />There are plenty of times when a team loses the first two away (non-home) games, but they eventually win the playoff series. You'd never guess that by the headlines that people write.<br /><br /><span style="font-weight: bold;">What do sports playoffs have to do with the stock market?</span><br /><a name='more'></a><br />I notice the same type of wishy-washy panic or celebration with stocks in the market.<br /><br />If a company has a bad quarter, often people--in mass--will start to dump (sell) the stock. The stock price takes a dip.<br /><br />Sometimes, a bad quarter is a sign of bad things to come. However, people often forget to look more closely. They read the headlines or decide to panic without being "told."<br /><br />It could be a good company that is in a struggling industry like Ford (F) in 2008 when the American auto industry was hurting. It could be a company that had a one-time bad situation like British Petroleum (BP) and their oil spill. It might just be a traditionally bad time of year for all companies within a particular industry like Wal-mart (WMT) following the Christmas season.<br /><br />By the way, this works the other way, too.<br /><br />Don't get ready to pay top dollar just because the headlines are good. For a while, people were paying top dollar for Baidu (BIDU), the Chinese version of Google (GOOG). It is a great situation, but it is already priced that way. In fact, its stock price keeps going up a lot more quickly than the company's actual growth--by a lot.<br /><br />People are buying the hype. The company is good. That is not my point. The company's stock is a rip-off right now, but people keep buying it because of its fanfare. China is heading for a similar problem that we had here in the US with real estate a few years ago.<br /><br />The prices keep rising because the demand keeps getting crazier. Once people can no longer afford to keep paying higher prices, the demand will weaken. That means there will be fewer people buying--fewer people will be able to afford it. Then the price will drop--dramatically.<br /><br />My overall point is that don't buy into the extreme doom or celebration just because of extremely bad or good news.<br /><br />Ask yourself, can this current outcome be explained? Did the team lose the first two games that it was designed to lose, anyway?<br /><br />Don't buy a stock just because it won its first two home games.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-3188665787424434772011-02-11T06:50:00.003-05:002011-02-11T06:59:13.986-05:00Article: The Bull Market is Here to StayHere is an article from Yahoo that seemed interesting.<br /><br />The link to the article is titled, "<a href="http://finance.yahoo.com/banking-budgeting/article/112092/the-bull-market-is-here-to-stay?mod=bb-budgeting">The Bull Market is Here to Stay</a>."<br /><br />I don't know how good of a predictor this article really is, but it seems to bring some points that are worth digesting:<br /><ol><li>Improving Earnings</li><li>Shipping Stocks Surge</li><li>America is Using Plastic (Credit Cards) Again</li><li>Inflation is Rising a Little</li><li>Manufacturing is Mending (Somewhat)</li><li>Improving Job Market</li><li>Rising Stock Prices</li><li>Strong 4th Quarter GDP</li><li>Improving 2011 GDP Outlook</li></ol>Even the article admits that you should do your own research, but it seems to provide good footing for someone trying to understand our upcoming economy.<br /><br />Let's hope that the article is closer to being right than wrong!Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com4tag:blogger.com,1999:blog-5374150203463106913.post-21717483200029701702011-02-02T12:04:00.008-05:002011-05-22T09:54:46.024-04:00Borders (BGN): Nearing the End of an EraUnfortunately, it looks like the bad news that has been threatening itself for a while is really coming.<br /><br />In the late 1980's and throughout the 1990's, it seemed like Borders (BGP) would ALWAYS be a thriving industry.<br /><a name='more'></a><br />Borders and Barnes and Noble bookstores used the same concept, and I never knew which one was better. (I still don't!) When I went into a Borders, I never thought about the temperature, which means it was always the right temperature. There seemed to be books on anything and everything I could ever want...and much more.<br /><br />There was a huge selection of magazines. They had nice chairs, where you could sit comfortably and read parts of books that you might buy...or might not. There was never any sales pressure; just customer service to help you find a book or suggest one to you, and they were always friendly and happy to help.<br /><br />Plus, they had a really cool cafe, where you could buy specialty coffee drinks or pastries. Their sitting area provided another place to sit and read.<br /><br />Recently, they have wireless internet access. So you can meet people at a nice place and meet while doing some research, too.<br /><br />This is why it's such sad news that Borders is very likely to file bankruptcy sometime next week.<br /><br />It's never good to hear companies having to file bankruptcy, but it's really rotten when great places can no longer run profitably.<br /><br />Sometimes, bankruptcy protection offers an opportunity for a business to rebound, like General Motors and Chrysler. They reduce their payments by wiping out a lot of their debt, making it much easier to return to profitability.<br /><br /><span style="font-weight: bold;">Can Borders return to profitability?</span><br /><br />One never knows--for sure--however, my thought is absolutely not.<br /><br />GM and Chrysler could, and they're doing really well right now. Why not Borders, too?<br /><br />What we have in Borders, ladies and gentlemen, is a flawed model.<br /><br />It wasn't flawed when they came onto the scene. They had a novel concept by catering to true bookworms who wanted an experience to accommodate them. Most bookstores were really drab, and they just carried books. Borders (and Barnes and Noble, also) provided an experience.<br /><br /><span style="font-weight: bold;">Doesn't Borders provide a good experience today?</span><br /><br />By most accounts, they still do. Whenever I go into a Borders bookstore, I usually enjoy myself. It's pretty much the same thing as when they started.<br /><br />...and THAT is the problem.<br /><br />THEY stayed the same, but the market changed.<br /><br /><span style="font-weight: bold;">What about the market changed so much that Borders will die?</span><br /><br />Most of you reading this already know the answer....The Internet!<br /><br />The Internet is an awesome tool. From home (or work or wherever else) you can find a new or used book at the best possible price, and the book will be delivered to your home.<br /><br />Simply put, technology made buying books cheaper and more convenient than Borders ever will, and the Internet is NOT leaving us anytime soon.<br /><br />When your business model depends upon successfully competing against other drab and uncomfortable bookstores, you can make an impression.<br /><br />When your business model later depends upon upstaging the Internet's convenience and its low cost of buying the same things you sell, you are not going to be able to retain your market share.<br /><br />You might see individual stores do really well in places that make a point to support local and good businesses, but most people will not spend MORE money for LESS convenience.<br /><br />Borders, the chain, will die soon, and that's really bad news.<br /><br />We are NOT better for Borders filing bankruptcy and eventually closing its stores.<br /><br />It will be a sad day, and it's coming sooner rather than later.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-52741401975371234042011-01-30T11:04:00.006-05:002011-01-30T11:32:53.777-05:00Video: Money Mindset or Consumer Mindset?Who are YOU making wealthy?<br /><br />As long as you decide to live in a civilized world, THAT is the best question you can ask yourself, because you make that decision every day.<br /><br />I was looking for something else, but as I often do, I found a video that makes a great point and makes that point really well.<br /><br />It's a 2+ minute video, but it hammers home one of the most basic points of investing. You need to adjust your mindset to a money mindset--not a consumer mindset.<br /><br />The video from Community Dollars addresses the spending habits of many black women. (Disclaimer: I am a white male.) However, the lessons transfers to all of us, regardless of color, gender, or ethnicity.<br /><br />Making money really is not that hard, unless we don't try that hard to make it a priority.<br /><br />Here is the video:<a name='more'></a><br /><br /><div align="center"><br /><iframe title="YouTube video player" class="youtube-player" type="text/html" width="480" height="293" src="http://www.youtube.com/embed/mI2_qWZUi8M" frameborder="0" allowFullScreen></iframe><br /></div><br /><br />I cannot catch the name of the person who is talking, which is too bad, because she makes a lot of sense--and money.<br /><br />She cites that some people spend on hair products, which makes the hair care companies wealthy.<br /><br />Some people spend on a Gucci purse, which makes Gucci wealthy.<br /><br />She cites that if you have money to spend on these things, you have money to spend on investments, which will position YOU to be wealthy.<br /><br />She makes a great point that you can never get wealthy if you never buy things that you can pass to the next generation.<br /><br />Essentially, make your money work FOR you--not the big companies.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-38544113727726222882011-01-29T10:25:00.010-05:002011-01-29T12:06:56.522-05:00Call Options and Put Options: A Quick ExplanationI hear a lot of people talk about stocks, and they ask about options.<br /><br />Options can be really cool, but many people do not even really know what they are. Some sort of know.<br /><br />Let's try taking care of that here.<br /><a name='more'></a><br />With anything--not just stocks--options are simply an opportunity to buy or sell something. They usually have added constraints:<br /><ul><br /><li>buy OR sell something (not both)</li><li>specify the buy/sell price</li><li>offer is available only for a certain pre-determined time period (1 day, 1 month, 3 years, etc.)</li></ul><span style="font-weight: bold;">What is the downside to buying options?</span><br /><br />They cost money.<br /><br /><span style="font-weight: bold;">What is the upside to buying options?</span><br /><br />They give you control of the investment (stock, property, car, etc.) without putting up only a fraction of the amount to POSITION yourself to buy or sell that investment.<br /><br />You are not required to buy or sell; you just bought the RIGHT to buy or the right to sell that investment, and you defined the terms.<br /><br />This means that you LEVERAGE your money to buy the same amount of investment. (If you are a risk taker, this also means that you can leverage the same amount of money to buy more of an investment. Be extremely careful here!)<br /><br /><span style="font-weight: bold;">Is there another downside to buying options?</span><br /><br />Yes. Sometimes, you buy an option, and it expires and becomes worthless. That means that you spent money for something you did not use--a little like buying insurance on a car that you never crashed.<br /><br />In stocks, there are two (2) types of options: Call Options and Put Options.<br /><br /><span style="font-weight: bold;">Call Options</span><br /><br />Call options give you the RIGHT to BUY stock<br /><ol><li>at a certain price</li><li>for a certain period of time (before it expires).</li></ol>It costs a certain amount of money to do this, and you are NOT obligated to buy this stock at the price.<br /><br /><b><i>Example</i></b>:<br /><br /><u>Today's Price</u>: $35/share<br /><u>Option Price</u>: $2/share<br /><u>Strike Price (right to buy stock at this price)</u>: $40/share<br /><u>Expiration</u>: 1 month<br /><br /><i>Situation A</i>: Price 1 Month Later: $45/share<br /><br />Since you bought the option, you can buy a share of this stock for $40/share today, even though today's price is $40/share.<br /><br /><u>Your Cost</u>: $2/share + $40/share = $42/share<br /><u>Your Profit</u>: $45/share - $42/share = $3/share<br /><u>Return</u>: 150% ($3 Profit / $2 Cost = 1.50 or 150% Return)<br /><br />So you made a big profit by only investing a small amount.<br /><br /><i>Situation B</i>: Price 1 Month Later: $35/share<br /><br />Since you bought the option, you can buy a share of this stock for $40/share today, even though today's price is $35/share.<br /><br />Are you going to spend $40/share if you can get the same thing for $35/share today? Probably not. The option expired worthless.<br /><br /><u>Your Cost</u>: $2/share<br /><u>Your Profit</u>: NONE. You lost $2/share.<br /><u>Return</u>: 0%; but you didn't lose that much (compared to<br /><br />It's important to realize that you don't always "win" when you invest in options. Since you can lose your entire investment, it CAN be a risky investment.<br /><br />Generally, you want to buy call options in an UPWARD moving market.<br /><br /><span style="font-weight: bold;">Put Options</span><br /><br />Put options give you the RIGHT to SELL stock<br /><ol><li>at a certain price</li><li>for a certain period of time (before it expires).</li></ol>It costs a certain amount of money to do this, and you are NOT obligated to sell this stock at the price.<br /><br /><b><i>Example</i></b>:<br /><br /><u>Today's Price</u>: $35/share<br /><u>Option Price</u>: $2/share<br /><u>Strike Price (right to buy stock at this price)</u>: $30/share<br /><u>Expiration</u>: 1 month<br /><br /><i>Situation A</i>: Price 1 Month Later: $25/share<br /><br />Since you bought the option, you can sell a share of this stock for $30/share today, even though today's price is $25/share.<br /><br /><u>Your Cost</u>: $2/share<br /><u>Your Profit</u>: $30/share (Your Price) - $25/share (Today's Price) - $2/share (Option Price) = $3/share<br /><u>Return</u>: 150% ($3 Profit / $2 Cost = 1.50 or 150% Return)<br /><br />So you made a big profit by only investing a small amount, and you took advantage of the marketing moving DOWNWARD.<br /><br /><i>Situation B</i>: Price 1 Month Later: $40/share<br /><br />Since you bought the option, you can sell a share of this stock for $30/share today, even though today's price is $40/share.<br /><br />Are you going to sell your stock for $30/share if you are able to sell it for $40/share today? Probably not. This option expired worthless.<br /><br /><u>Your Cost</u>: $2/share<br /><u>Your Profit</u>: NONE. You lost $2/share.<br /><u>Return</u>: 0%; but you didn't lose that much (compared to the original $35/share for the actual stock)<br /><br />Again, it's important to realize that you do not always "win" when you invest in options. Since you can lose your entire investment, it CAN be a risky investment.<br /><br />Generally, you want to buy put options in a DOWNWARD moving market.<br /><br />Options can be a great way to invest without risking a lot of your investment. Your returns on your investment tend to be very high--WHEN they work. When they do not work, you can lose everything.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-70215380966759975622011-01-26T10:27:00.006-05:002011-01-26T11:34:07.170-05:00Explanation: Resistance and SupportHave you ever watched a stock price chart, and it seemed like it was stuck near a certain price?<br /><br />Of course, it really isn't, but when you watch the prices, it feels that way.<br /><br />Pure <span style="font-weight: bold;">fundamental investors</span> HATE any discussion that involves buying and selling stock based on the price patterns. It's illogical, and they're right--to a point.<br /><br />True <span style="font-weight: bold;">technical traders</span>, on the other hand, vehemently insist that the markets are ruled entirely by the price charts. Most of them say that history repeats itself. Of course, even some of the best technical traders admit that's not always true.<br /><br />Fundamental investors believe that a stock's price SHOULD be based upon the company's fundamental finances and industry position. They're probably right. Prices SHOULD reflect these.<br /><br />However, <a name='more'></a>the market is a response by other human beings, an emotional lot. Think people's PERCEPTIONS of the company affect the stock's price? Want to bet against that one? I sure don't!<br /><br />So I will acknowledge that fundamental investing is intelligent but not complete.<br /><br />So let's explore a couple of simple concepts of technical trading.<br /><br /><span style="font-weight: bold;">Resistance</span><br />You know when you see a price level of a stock start to rise and rise, and suddenly, it seems like it hits a wall? It just won't go any higher?<br /><br />The stock drops a bit, but it rebounds--only to be interrupted by that same price. It might even tip a little above it, but it won't be for long. The price drops...again!<br /><br /><span style="font-weight: bold; font-style: italic;">THAT price level is called resistance.</span><br /><br /><div style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjD5KrMrNhHX92RCXjCZPiIO8tiDCQLtI5OFjr2Jq_hVut527IWjLX4MDep2OzN0NjpeQ9qHvmvHI7chc4TtYmjZS7JM8Zgzx8X9AC5YBYL_v57TWWj6aGxGSsYh57MQACiLMmqXUtrKtw/s1600/Image-Resistance+Level+20110126.png"><img style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 320px; height: 202px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjD5KrMrNhHX92RCXjCZPiIO8tiDCQLtI5OFjr2Jq_hVut527IWjLX4MDep2OzN0NjpeQ9qHvmvHI7chc4TtYmjZS7JM8Zgzx8X9AC5YBYL_v57TWWj6aGxGSsYh57MQACiLMmqXUtrKtw/s320/Image-Resistance+Level+20110126.png" alt="" id="BLOGGER_PHOTO_ID_5566531278604270770" border="0" /></a></div>Notice the the price level--for this particular stock--never fully blasts past the $5 mark.<br /><br />So for this stock, $5 is the resistance level. One day, it might pass it, but for now, it seems like too many people have a hard time buying this stock above THAT level. (They RESIST buying it above that price.)<br /><br /><span style="font-weight: bold;">Support</span><br /><br />Support works the same way, but in the opposite direction.<br /><br />Instead of being called resistance (or resistance level), it is called support (or support level).<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhOdaCN-PKDq5JbVm_E_033q2IBWm8uKjmsdPEBxNtsuYXlV9mIr7AKBmYTLZ919w_kZcEsgw6IzaXCR_20jz-vravJwpfq5YBfZ9DGMqxRfnSjg0MrhPzIVFAtUkhfpP74rAQHuzwI9ds/s1600/Image-Support+Level+20110126.png"><img style="display: block; margin: 0px auto 10px; text-align: center; cursor: pointer; width: 320px; height: 180px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhOdaCN-PKDq5JbVm_E_033q2IBWm8uKjmsdPEBxNtsuYXlV9mIr7AKBmYTLZ919w_kZcEsgw6IzaXCR_20jz-vravJwpfq5YBfZ9DGMqxRfnSjg0MrhPzIVFAtUkhfpP74rAQHuzwI9ds/s320/Image-Support+Level+20110126.png" alt="" id="BLOGGER_PHOTO_ID_5566531936320918066" border="0" /></a><br />Notice the the price level--for this particular stock--never fully drops below the $26 mark.<br /><br />So for this stock, $26 is the support level. One day, it might pass it, but for now, it seems like too many people have a hard time selling this stock below THAT level. (The stock price is SUPPORTED by this price--for now.)<br /><br /><span style="font-weight: bold;">Important Note</span><br /><br />Resistance and Support Levels are important to notice; however, they are NOT guarantees. People's feelings change often, and you cannot ever know, for sure, how the majority of people will respond to news, what their friends say, or their overall impressions of the company or industry.<br /><br />This author suggests that this should GUIDE you. You should NOT RIDE IT. You still need to think for yourself.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-5007626128826908742011-01-25T08:45:00.006-05:002011-01-26T10:27:50.945-05:00Advice: Understanding Risk vs. Reward is a Key to Successful InvestingAny investment carries risk. This is a true statement.<br /><br />Then again, so does NOT investing, but most of you on here knew that, already. That's why you're reading something like this.<br /><br />So let's take a look at risk.<br /><br /><span style="font-weight: bold;">When is an investment a "good" risk?</span><br /><br />The simple answer is, "When it works!"<br /><br />There is a better, more practical answer, though.<br /><a name='more'></a><br />First, it is important to realize that, if you invest enough, you will almost certainly lose sometimes. If you cannot live with this, you have NO business investing, in my opinion.<br /><br /><span style="font-weight: bold;">Next Biggest Investing Mistaken Belief</span><br /><br />Most people think that it is important to have more winning investments than you do losing investments.<br /><br />This CAN be true, but it is not necessarily true.<br /><br />It is possible to have more losing investments than winning ones and still be profitable.<br /><br /><span style="font-weight: bold;">Being profitable by having more </span><span style="font-weight: bold;">losing investments </span><span style="font-weight: bold;">than winning ones? How?</span><br /><br />Most people lose their focus on the main goal: making money--not winning trades.<br /><br /><span style="font-weight: bold;">A Wrong Assumption of the Important Risk vs. Reward Factor</span><br /><br />Most people, if you ask them, truly believe that you have to risk more to gain more.<br /><br />I agree that you need to take SOME risk, but I don't think that you greater risk guarantees greater chance of making greater returns.<br /><br /><span style="font-weight: bold;">You need to be bold, though!</span><br /><br />I've heard some people mention the excellent advice that you should invest where there is more upside than downside. In fact, this realization is a great first step.<br /><br />What I see from many of these same people, however, is something like the following:<br /><br /><b>Example #1: XYZ Stock, Today's Price $75/share</b><br /><br /><u>Projections</u>: Downside = $74/share, Upside = $77/share<br /><br /><u>Prognosis</u>: The investor/trader sees that there is a $1 downside and a $2 upside, which is true. However, that person sees a 2:1 upside in his or her investment.<br /><br />At first, this seems to be great, and I agree that this IS better than a 1:2 upside to downside ratio.<br /><br />Let's look at this in terms of applied numbers, though, outlining a purchasing scenario.<br /><br /><u>Investment</u>: 100 shares @ $75/share = $7500 initial investment cost (not including commission)<br /><br /><u>Worst Case Scenario</u>: $74/share --> $7400 = $100 Loss (1.3% loss)<u><br />Best Case Scenario</u>: $77/share --> $7700 = $200 Gain (2.6% gain)<br /><br />Yup! Your upside really is double your downside, but are you really excited about positioning yourself to lose ANYTHING for a 2.6% gain? I can get something similar to that in a bank CD without risking ANY loss.<br /><br />To be fair, you can probably do a trade like this several times during the year, drastically improving your annual return just through simple multiplication (OK investment 3-5 times during the year = much higher return).<br /><br />Again, this 2.6% is the TOP of the potential range, though. Are you really excited with a 1.3% gain? Are you willing to risk a loss for it?<br /><br /><b>Example #2: ZYX Stock Option Play</b><br /><br /><u>Situation</u>: This person bought a call option that will not expire for about a year. (For those of you who do not know what a call option is, do not worry. This explanation will remain non-technical. The point is more important than the details here.)<br /><br />The person put $2500 into the initial investment. The downside is that he can lose everything. The upside is unlimited, technically. However, a lot of things would need to go right for it to be worth $10,000 when this option expires.<br /><br /><u>Recap</u>: Initial Investment = $2500; Downside = $0 Ending Value; Upside = $10,000 Ending Value<br /><br /><u>Prognosis</u>: The investor/trader sees that there is a $2500 downside and a $7500 upside, which is true. That person sees a 3:1 upside in his or her investment.<br /><br />At first, this seems to be a really good investment. A 300% increase seems really promising.<br /><br />However, there is one really big problem with this. There is less than a 1 in 10 chance of the maximum upside happening, but there is a better than 1 in 4 chance that he loses everything.<br /><br />To me, it seems like he is risking everything without having a good enough of avoiding it. He appears to be overlooking the LIKELINESS of an event happening--either event.<br /><br />Let's look at this in terms of applied numbers, though, outlining multiple purchasing scenarios.<br /><br />Investment #1: Start = $2500; Finish = $10,000<br />Investment #2: Start = $2500; Finish = $0<br />Investment #3: Start = $2500; Finish = $0<br />Investment #4: Start = $2500; Finish = $0<br />Investment #5: Start = $2500; Finish = $0<br />Investment #6: Start = $2500; Finish = $2500<br />Investment #7: Start = $2500; Finish = $1500<br />Investment #8: Start = $2500; Finish = $3500<br />Investment #9: Start = $2500; Finish = $3500<br />Investment #10: Start = $2500; Finish = $5000<br /><br />Total: Start = $25,000; Finish = $26,000<br /><br />This is strictly an estimated scenario, but this represents a statistically likely sequence with investments similar to this. You're essentially breaking even.<br /><br />Does it seem like a great idea to risk everything for an investment that is statistically likely to draw even? To me, that's a bet--not an investment.<br /><br /><span style="font-weight: bold;">Likeliness of Reward is Key to Assessing Risk vs. Reward</span><br /><br />I prefer to find something like the following scenario:<br /><br /><b>Example #3: ABC Stock, Today's Price $3/share</b><br /><br /><u>Projections</u>: Downside = $2.50/share, Upside = $8/share<br /><br /><u>Prognosis</u>: There is a 10:1 upside, but that is not what I see. I look in terms of (a) potential gain/loss percentages and (b) likeliness of occurrence.<br /><br />The real downside is 17%, and the real upside is 167%. In this case, the likelihood of this reaching the biggest downside is okay, but there is nearly no chance of it staying there long term. It happens to be in an industry that has been beaten, already. However, industry insiders know that it will rebound in a few years. So, at the worst, the likelihood of the price improve "only" halfway at 83% is more likely to happen than losing 17%.<br /><br />Is there some risk? Yes, but I think it is intelligently calculated.<br /><br />The bottom line is that you need to take SOME risk, but you need to consider your reward AND the chances collecting that reward. It's also a good idea to estimate the chances of the worst-case scenario happening.<br /><br />At first, this seems to be great, and I agree that this IS better than a 1:2 upside to downside ratio.<br /><br />Let's look at this in terms of applied numbers, though, outlining a purchasing scenario.<br /><br /><u>Investment</u>: 100 shares @ $75/share = $7500 initial investment cost (not including commission)<br /><br /><u>Worst Case Scenario</u>: $74/share --> $7400 = $100 Loss (1.3% loss)<u><br />Best Case Scenario</u>: $77/share --> $7700 = $200 Gain (2.6% gain)<br /><br />Yup! Your upside really is double your downside, but are you really excited about positioning yourself to lose ANYTHING for a 2.6% gain? I can get something similar to that in a bank CD without risking ANY loss.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-58611486933557565802011-01-24T12:34:00.007-05:002011-01-24T13:01:08.958-05:00Video: Price to Cash FlowI am always looking for new ways to evaluate potential investment possibilities.<br /><br />I think I ran across one that I will check in more detail. At my first glace, it looks like it might be pretty good.<br /><br />A lot of people rely on the Price/Earnings ratio, but this video shows an approach that relies on the <b>Price per Cash Flow (Price/Cash Flow)</b> metric instead.<br /><br /><u>Price/Cash Flow</u> compares the stock price/share (market value/share) to the amount of cash flow/share.<br /><br />We know that cash is VITAL for a company to maintain its operations. Plus, the price/cash flow is more difficult to manipulate "for the books" than the more popular price/earnings and many other measurements are.<br /><br />Here is a video with Kevin Matras and Terry Ruffolo from Zacks.com that explains the scanning technique a little better:<br /><a name='more'></a><br /><div align="center"><br /><iframe title="YouTube video player" class="youtube-player" type="text/html" src="http://www.youtube.com/embed/Fx9vIagIEkU" allowfullscreen="" frameborder="0" height="293" width="480"></iframe><br /></div><br /><br /><b>Suggested Guidelines (according to the video)</b><br /><br />Price/Cash Flow <> 40 yield (on average) -7% annually (That's NEGATIVE, folks!)<br /><br />However, this video is careful to note that "good" Price/Cash Flow figures vary by industry. Make sure that you compare the figure from "your" company to others within its specific industry.<br /><br /><b>Screening Criteria: Price/Cash Flow</b><br /><ol><li>Zack's Rank = 1<br />(This makes sure that only "Strong Buys" get through the filter.)</li><li>1-Year Projected Growth Rate >= S&P Average<br />(This seeks above-market growth rates.)</li><li>Current Cash Flow >= 5-Year Cash Flow<br />(This ensures that the company's cash flow position is GROWING.)</li><li>Price/Cash Flow <= Industry Median<br />(Make sure that it's a bargain within the industry, and the median avoids data figure skewing.)</li></ol>Like I mentioned earlier, I have not tested this model, but it seems like it makes sense. Like I suggest with EVERY new idea you have (hear or read), I suggest that you test it with play money before using your REAL money. At least, that's what I will do!Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-19893263990248999992011-01-23T19:20:00.002-05:002011-01-23T19:26:16.727-05:00Quick Analysis: Texas Instruments (TXN)TXN: Texas Instruments<br /><br />The company sells and designs semiconductors, serving communications, computing, industrial, consumer electronics, automotive, and education sectors. It also designs, manufactures, and sells wireless application processors and connectivity products. Plus, its name is on several handheld retail graphing and scientific calculators.<br /><br /><u>Recent Range</u>: $15/share – $38/share (Current Price: 33.91, as of close of 1/19/11)<br />Price/Sales (P/S) = 2.96 (2.70, Industry)<br />Price/Book (P/B) = 4.00 (3.08)<br />Price/Earnings (P/E) = 14.3 (15.6)<br />Gross Profit Margin = 53.6% (58.7%)<br />Pre-Tax Profit Margin = 31.1% (29.0%)<br />Net Profit Margin = 21.9% (20.9%)<br />Debt/Equity Ratio = 0.00 (0.17)<br />Current Ratio = 3.5 (3.4)<br />Return on Equity = 30.0% (24.8%)<br />Return on Assets = 24.0% (17.4%)<br /><br /><b>Analysis</b>: This company is really well known, and people that I know who work within this field indicate that this company is doing some really good things. However, while the stock price might rise, it is not an obvious buy to me.<br /><a name='more'></a><br />I know that in my personal circles, Texas Instruments represents an industry standard, if not higher, quality. So the perception is there, at the very least. That never hurts a company. In fact, potentially, it gives it room to charge a little more for the same thing, potentially providing a profit cushion that their competitors cannot use.<br /><br />They have always been known to spend on research and development (R&D), but this is probably a given within their technology industry.<br /><br />A company that size carrying no debt is impressive. However, they seem to use it only as an equalizer since their pre-tax margin seems to be about the same as the industry average. Their current ratio is basically the same as their competition.<br /><br />They seem to provide a higher return on their investments for their investors.<br /><br />The economy seems to be headed for a nationwide turnaround (some regions notwithstanding), and more people are likely to have discretionary income to spend on retail technology products. Many manufacturers are spending more, already.<br /><br />The company is expected to release an earnings report on Monday (1/24/11), and they are expected to post a nice profit.<br /><br />I am not very good at guessing short-term stock prices, but there could be some potential to make money by trading in the morning and selling shortly after the earnings announcement.<br /><br />However, this is not a sure bet to me. It seems like the price could rise, but today’s price seems to be about what I would expect to pay for stock in this company. It’s not a total ripoff, but it does not seem to be a bargain to me, either.<br /><br />Anyone buying this stock is either responding to the company name, the upcoming earnings report, or it sees this as a growth stock. It definitely is not a value stock.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-55519758841804397152011-01-21T13:51:00.005-05:002011-01-21T14:07:17.212-05:00Buying or Selling Stock: Another Downside of Market OrderWhen you buy or sell stock online, you can do this as a market order or as a limit order. (Yes, there are even more sophisticated ways, but for now this will do.)<br /><br /><span style="font-weight: bold;">Market Order</span>: Buy or Sell at the price that the market allows at that moment the order is placed.<br /><br /><span style="font-weight: bold;">Limit Order</span>: Do not buy or sell UNLESS the stock reaches this limit price. Do not pay more or sell for less than this limit.<br /><br />Honestly, I've bought and sold both ways.<br /><a name='more'></a><br />A limit order is supposed to be less stressful. It allows you to control when you buy or sell something. It allows you to place an order and walk from your computer, and things can happen without you having to monitor it.<br /><br />A market order makes sense (to me) when you know that the price is SO good, that you do not want to run the risk of failing to execute over a few pennies. You recognize that you already have something good, and by placing a market (immediate) order, you know that you already have an acceptable profit in hand. You do not have to worry weather the market will move just a little bit more in the direction that you want for the buy or sell order to trigger.<br /><br />However, there is another downside to placing a market order.<br /><br />Actually, this downside is most noticeable if you place an order with a lot of shares.<br /><br />I've noticed, for instance, if you place an order for 2,000 shares of something, the first 300 shares, or so, will be near the price that made you want to buy or sell. Then you see that you either bought or sold the remainder of your order at worse and worse prices.<br /><br />Truthfully, I do not know whether this happens all of the time.<br /><br />If it does, then I'm thinking that it could be a way for the brokerage to make a few extra bucks. It might also be that your buying or selling is momentarily driving the market in the wrong direction for you.<br /><br />Maybe other people have different experiences with this, but I can only tell you mine.<br /><br /><span style="font-weight: bold;">Final Advice</span>: If you have an order with a lot of shares, either<br /><ul><li>place a limit order for the entire lot, or</li><li>place individual smaller market orders.<br /></li></ul>Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-55758379729784318722011-01-20T12:14:00.005-05:002011-01-20T12:23:01.944-05:00Don't Fear Taxes - Fear Your Fear<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTUU1RDC21Xs87lunAGXEJ_gopd5wAq3fvVV7vGcxV8hXaT5HoSoQK4gOcmDoT5DU7yQBJtBMmjPvHwM4acwvujWrDhqSJFlURctkJyicnKeYy1n1UHAtPz_7zMDuU3iVUv41ZIIAiy18/s1600/Image-Tax+Dump+20110120.jpg"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 161px; height: 200px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjTUU1RDC21Xs87lunAGXEJ_gopd5wAq3fvVV7vGcxV8hXaT5HoSoQK4gOcmDoT5DU7yQBJtBMmjPvHwM4acwvujWrDhqSJFlURctkJyicnKeYy1n1UHAtPz_7zMDuU3iVUv41ZIIAiy18/s320/Image-Tax+Dump+20110120.jpg" alt="" id="BLOGGER_PHOTO_ID_5564319467701329682" border="0" /></a><br />One of my biggest weaknesses as an investor is not following one of my own rules.<br /><br /><span style="font-weight: bold; font-style: italic;">Don't let the fear of taxes wrongly affect your investment decisions.</span><br /><br />Of course, you want to be aware of taxes. However, I've caught myself SEVERAL times not grabbing the profits from an abnormally quick run upward, because I didn't want to have to pay taxes during that year.<br /><br />Every time I do that, my fears get answered, even though I don't pay taxes. I just lose on the ability to buy even MORE shares of the stock later. If you know that the price is too high for the moment, it will probably drop in another moment. Grab what you can.<br /><br />You can always buy more later.<br /><br />Also, if you have to pay taxes, that means that you have enough profit to PAY for those taxes.<br /><br />Pay the $25 or so if you have a chance to pick up $100 or so. That STILL means that you have an extra $75 or so that you didn't have earlier. Take that money and run, even if you have to share if with Uncle Sam.<br /><br />Common sense, right? Not for me or many other investors.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-36477397196599090852011-01-19T11:54:00.003-05:002011-01-19T12:17:35.536-05:00Advice: Reduce Angst Buying or Selling StocksSomeone that I know invests in stocks, and he does really well.<br /><br />However, he says that the stock market tends to drive him nuts.<br /><br />He told me about a time that he heard something about a sudden event on the radio, and the first thing he thought to himself was, "I wonder how this will affect the price of XYZ stock."<br /><br />The second thing he thought to himself is that he's going absolutely NUTS. The event had NOTHING to do with his stock. He was just THAT consumed with his stock.<br /><br />He asked for some advice on how to avoid that emotionally fueled angst he gets every time he's in the stock market.<br /><br />Here is what I wrote to him...........<a name='more'></a><br /><br />I can provide as much or as little advice on investing as you want, but to me it seems pretty simple.<br /><br />You mentioned that you feel anxious every time you look to buy or sell stock.<br /><br />I can't promise that you'll never feel any angst, but here are a few guidelines that I follow:<br /><br />1. Don't buy an investment UNLESS you are passionate about it. (I called off work for a half-day once. I turned $2500 into around $7500 because of it.)<br /><br />2. If you own stock, and the stock is making you nuts, ask yourself the following questions.<br /><br /><span style="text-decoration: underline;">Stock Price is Falling</span><br />a. Did you buy it for the right reasons?<br />b. Do those reasons still apply? If not, what changed?<br /><br />Summary: If you bought it at the right price for the right reason--AND THOSE reasons still apply--sit tight. Buy more if you can. (It will lower your break-even price and bring you closer to breaking even.)<br /><br />If you realize that your reasons are faulty, get out!<br />If your previous good reasons no longer apply, get out!<br /><br /><span style="text-decoration: underline;">Stock Price Suddenly Rises</span><br />a. Can you make sense of why it rose as much as it did?<br />b. Would you buy the stock at today's price?<br /><br />Summary: If your stock price suddenly rises, does it make sense? If so, enjoy the ride. If not, get out!<br /><br />"Would you buy the stock at today's price?" is the best litmus test that I know. It also helps calm my nerves when the price becomes suddenly volatile.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-47838058951565524132011-01-18T07:06:00.007-05:002011-01-18T07:41:57.263-05:00Is apartment investing changing? Will it affect the economy?Lately, I've been hearing that more people (within the real estate investment world) are interested in transitioning from investing in single family homes to investing in apartments.<br /><br />There are, at least, a few reasons for this.<br /><ul><li>Apartments generate passive income.</li><li>You only need to worry about the maintenance of one building while still collecting many rent payments.</li><li>It's getting more difficult to find great investment deals with single family homes--since so many investors are looking for them now. Fewer people are looking for apartments; so theoretically more deals can be found with less searching effort.</li></ul>However, I just read an article about apartments that might shape--not only apartment investing but also--companies in certain neighborhoods.<br /><br />Here is the link to the article "No McMansions for Millennials"<br /><a href="http://realestate.yahoo.com/promo/no-mcmansions-for-millennials.html">http://realestate.yahoo.com/promo/no-mcmansions-for-millennials.html</a><br /><br />It does not address investing; however, I think there are investing-oriented takeaways from this article.<br /><a name='more'></a><br />It points out the fact that, while Gen X is a lot smaller than the Baby Boomers, Gen Y is about the same size as the Baby Boomers.<br /><br />The articles reminds us that it was the Baby Boomers who spawned suburban sprawl, for better or worse. (There ARE good things. I'm not looking to attack the Baby Boomers here.) It was the Baby Boomers who lived most of their lives during a prolonged economic boom, save for a few short time periods in the 70's (oil crisis), another one during the mid-to-late 80's (Savings and Loan crisis), and another one during the early 90's (oil layoffs). Since they "knew" they'd always make more money, many of them wanted bigger and bigger houses.<br /><br />The cities could not hold this. So to build these larger homes with larger yards, they had to go where land was available and houses were not already built. At that time, it was the suburbs.<br /><br />People started moving that way, especially more affluent people. Most of these people were the ultra consumers.<br /><br />The construction boom was born, and it grew to be a HUGE player to influence our economy.<br /><br />So guess who else moved that way?<br /><br />If you answered "businesses," you're absolutely correct. Amongst many other businesses, shopping malls sprouted all over the suburbs--all over the country.<br /><br /><span style="font-weight: bold;">What does all of this have to do with investing?</span><br /><br />Perhaps, nothing.<br /><br />However, this article points out the fact that many of today's up and coming people have different spending patterns AND different living patterns.<br /><br /><span style="font-weight: bold; font-style: italic;">Remember: Where there are people with money, there are businesses to try getting that money.</span><br /><br />To me, this means that Gen X behaving differently than the Baby Boomers would barely have any effect on the economy since Gen X is so much smaller. They really couldn't influence spending patterns too much. Plus, Baby Boomers were making most of the money during the years that Gen X came into the workplace.<br /><br />Gen Y, however, is just as large as the Baby Boomers, and THEY have spending power.<br /><br />Think that might influence businesses now?<br /><br /><span style="font-weight: bold;">The real question is how will Gen Y's influence change businesses?</span><br /><br />Truthfully, nobody ever really knows the answer to this question. You can only make intelligent guesses based on history and logic.<br /><br />To me, I see many of the top anchor stores in shopping malls struggling. Some will become stronger as competition falls from their map, but I foresee several disbanding. (The Internet does not help any of these stores, either.)<br /><br />Fewer people want to take care of lawns? How might that affect companies who make lawn care equipment? How about lawn care services?<br /><br />What about restaurants that are mostly based in suburbia? If the "spenders" flee, can they adjust in time? Will it be too costly to adjust? Who will want their current buildings if everyone else is fleeing?<br /><br />I also see an opportunity for "fun" places within crowded cities that cater to many young people with no other place to spend their money.<br /><br />Transportation companies have a nice opportunity in these cities, as many of the people living there will not have cars.<br /><br />I predict that the cities with the best public transportation systems will lead the way to many of these types of changes. Places that have underdeveloped public transportation might not see these changes for a while.<br /><br />Neighborhoods that have cheap land might tear down building to rebuild apartments with more units, smaller rooms, and more amenities. Shops will begin sprouting in these neighborhoods, especially ones that cater to impulsive shopping habits.<br /><br />Depending how quickly this trend develops (which, I admit, is barely beginning), I see oil companies struggling. Fewer people really will be using cars. Of course, this means many people will need less gas.<br /><br />It also could affect apartment investing. It could affect the type of apartment buildings that will be valuable investments for you. It could also affect the neighborhood from which you select your investment apartment.<br /><br />To summarize, keep an eye on whether this trend actually develops. If it does, see which companies are willing to adjust and are able. Also see which investments make sense for you, beginning with the apartment buildings and people's living patterns.Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-82210126749475582282011-01-16T09:29:00.006-05:002011-01-16T10:42:14.636-05:00Video: Warren Buffett Rocks with Geico<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhO-awLc99Fuc_8YmiCXL9ZIrBcUBTBlI2brb3hynmSAY5kboN-QMMJdEXJUmmGQI9XIvDuWtsWTvWwqo6TgLMKMYNdvEqWyU7QBSx4w0l2JmB1aY79xYbmHR4m6faxJ10SpeefWYksCjc/s1600/Image-Number+100+20110115.png"><img style="float: left; margin: 0pt 10px 10px 0pt; cursor: pointer; width: 184px; height: 148px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhO-awLc99Fuc_8YmiCXL9ZIrBcUBTBlI2brb3hynmSAY5kboN-QMMJdEXJUmmGQI9XIvDuWtsWTvWwqo6TgLMKMYNdvEqWyU7QBSx4w0l2JmB1aY79xYbmHR4m6faxJ10SpeefWYksCjc/s320/Image-Number+100+20110115.png" alt="" id="BLOGGER_PHOTO_ID_5562791103234860754" border="0" /></a><br />For my 100th post, I was trying to figure how to have some fun with it.<br /><br />I came up with a few lame ideas, but none of them really hit me as "the one."<br /><br />Then I ran across this video. I think I found a pretty good way to celebrate...with Warren. (He just doesn't know that he's partying with ME. :)<br /><br />Anyone involved with investing certainly knows the name Warren Buffett and how good he has done with the stocks, but evidently he knows how to market himself and his companies, too.<br /><br />Here is a video of Geico, a company owned by Berkshire Hathaway. Any guesses who might own THAT big company?<br /><br /><a name='more'></a><br />Check out the video. It has sort of a cute song, and it has the ever-adorably cute Geico Gecco Lizard mascot playing the guitar.<br /><br />The best part, though, is Warren's appearance. See if you can figure out where he is in this video.<br /><br /><div align="center"><br /><object height="308" width="512"><param name="movie" value="http://www.youtube.com/v/itS9eyO9JLs?fs=1&hl=en_US"><param name="allowFullScreen" value="true"><param name="allowscriptaccess" value="always"><embed src="http://www.youtube.com/v/itS9eyO9JLs?fs=1&hl=en_US" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" height="308" width="512"></embed></object><br /></div><br /><br />For those of you who have been reading my blog for a while, I want to thank you.<br /><br />For those of you who are newcomers...Welcome!<br /><br />Here's hoping that I can help make myself and all of you wealthier.<br /><br />Rock on!Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-4826572731991575882011-01-15T06:38:00.003-05:002011-01-15T07:46:30.301-05:00Fear: Investor Enemy #1Fear plays a big role for many investors.<br /><br />An investor's experience can be terrific, but it can be really bad, too.<br /><br />For most people, the experience is average. Being honest, I'm guaranteed to be right about that, by definition.<br /><br />However, my goal is to help people be BETTER than average investors.<br /><br />One way to do this is for me to identify how many average investors think.<br /><a name='more'></a><br />Fear is one of the biggest reasons that people fail or never really do anything exceptional. This also applies to things beyond investing, by the way, but this piece is meant to discuss investing.<br /><br /><span style="font-weight: bold;">Many people are blinded by fear.</span><br /><br /><u>They have a fear of losing money.</u> They are so afraid that they miss great opportunities.<br /><br /><u>They fear having to pay taxes.</u> They don't sell when they should, because they don't want to pay taxes (which often cost less than their subsequent loss).<br /><br /><u>They fear that they will miss tomorrow's better deal (of either buying or selling).</u> They wait until tomorrow--they say--except that tomorrow is always tomorrow and never becomes today. They are afraid that today's great deal isn't really that great. What if it is even better tomorrow?<br /><br />Truthfully, I know these, because they go through my mind, too.<br /><br /><span style="font-weight: bold;">Let fear work for you.</span><br /><br />Sometimes, it is good to be fearful.<br /><br />Actually, fear can be a good thing. It forces you to think.<br /><br />There are times when fear causes you to ask yourself enough questions to avoid doing something foolish.<br /><br /><span style="font-weight: bold;">Do not let fear work against you.</span><br /><br />Fear can keep you from doing something inadvisable.<br /><br />However, once you've done your thinking, and your figures tell you to do something...DO NOT LET FEAR PARALYZE YOU.<br /><br />That's right! Fear can paralyze you!<br /><br />I can speak from my own experience about how I figured something. Later I would watch and see the entire thing unfold--just like I expected it.<br /><br />Did I get rich from it?<br /><br />NO!<br /><br />I let fear keep me from TAKING ACTION on it.<br /><br /><span style="font-weight: bold;">What separates me from many other investors?</span><br /><br />I do quite a bit better than a lot of other investors.<br /><br />To be honest with you and myself, I'm not really smarter than most of them. I seem to know fewer things about the stock market than most other people who are involved with this.<br /><br />How do I do better than most of them?<br /><br />Fear paralyzes me less often than them.<br /><br />When I do well, I see a situation, and I have the guts to act on it. Better put, I have the guts to trust myself and what I see.<br /><br />Don't take foolish risk, but don't be foolish and ignore opportunity that is clear and obvious to you. Let fear protect you. <span style="font-weight: bold; font-style: italic;">Don't let fear be YOUR enemy.</span>Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0tag:blogger.com,1999:blog-5374150203463106913.post-11161079703811172502011-01-13T06:44:00.008-05:002011-01-13T07:06:30.057-05:00Investment Advice: Keep Your Composure When Your Stock Price Goes DownThere is advice about stock investing that someone gave to me...<br /><br /><span style="font-weight: bold; font-style: italic;">If the company is doing the right things and you bought it at a price that made sense, the stock price will rebound, even if it drops. It just might take a while.</span><br /><br />I take a look at examples of what I've seen since I started investing in 2008.<a name='more'></a><br /><ul><li>One stock dropped almost 80% of where I bought it. It took about 8 months for that to recover.</li><li>Another stock dropped 20% of where I bought it--THE SAME DAY. Within a year, I sold it for nearly 3X what I paid for it.<br /></li><li>Another stock dropped 65% of where I bought it, within 45 days. A month later, I sold it for over a 50% profit.</li><li>Another stock dropped 13% of where I bought it, within a week. A year and a half later, the stock is almost 80% higher than my "buy" price.</li><li>Another stock dropped 85%. Two (2) years later, it returned to its value, and it is poised to jump significantly.<br /></li></ul>The person who told me this, though, mentioned when he bought an airline stock--JUST BEFORE 9/11 (in 2001 for those who aren't sure)--the price took a nosedive a couple days after he bought it.<br /><br />It took his stock a little over four (4) years to recover. Eventually, he sold it for a nice profit.<br /><br />The examples continue, but there is an important point.<br /><br /><span style="font-weight: bold;">Should I hold onto a stock when it loses its value?</span><br /><br />I am not trying to suggest that you should hold onto your stock when the price drops ALL of the time.<br /><br />If the company loses a key member, then you might need to consider selling, even at a loss.<br /><br />If the company suddenly has a fire in its key plant, it might be a good time to sell.<br /><br />However, if you bought stock...<br /><ul><li>in a company that has a good business and<br /></li><li>at a bargain of a price,</li></ul>then you are poised to make money. It just might not be as quickly as you'd like.<br /><br /><span style="font-weight: bold; font-style: italic;">Good deals are good deals, even if the deals get better tomorrow.</span>Chrishttp://www.blogger.com/profile/14891894808700124361noreply@blogger.com0