So dummies, present company excluded of course, what do we do with the second half of 2012? Well, in the irrational market that we currently deal with today, it seems like guesswork. However, the guesswork is left to the day traders and as for intelligent investors as ourselves, you should look at the big issues in the world economy. The three biggest issues are the debt situation in Europe, coal and natural gas.
The debt issue in Europe will not correct itself for at least a decade. The European Union may have to bite the bullet and disband. You have a group of countries, that are broke, lending money to each other. Something will have to give, since you cannot get blood from a stone. Eventually, one of the countries will default, which will create a cascading effect that will trickle down to every other developed country, since we are all owning and are owed money from every other developed country.
So, what do we do with the available information we have? The hippies are campaigning for the end of coal and trying to stop hydro-fracking, despite the fact is has been proven that hydro-fracking has been developed with safe guards to protect our drinking water. So, coal and natural gas prices are in the gutter. Luckily, there are slew of developing countries that are craving cheap energy. The main importer of coal is China and FYI, coal is still the largest export of the United States. Natural gas has been undervalued for about a decade. Natural gas will pop in about five to ten years as coal's lifespan is about twenty years, before it is replaced by solar power and natural gas.
Coal has had some developments in the past week. Patriot declared bankruptcy and Peabody just recently finalized a purchase that makes them the largest utility in the United States, servicing over seven million people in six states. Peabody is the long play as the stock has been killed over the past year. I have the company valued in the $80-$90 range and it is currenlty trading at around $22 a share. Again, the irrational market will most likely not price the stock correctly, but as with every stock today, they are not priced correctly. This creates tremendous opportunities for saavy investor as every stock is priced incorrectly. In the long term the stock will eventually be in the range of proper pricing. The trick is being able to double up when the stock is beaten down and when to realize the stock is overvalued and to reduce or eliminate your position.
Tickers for the future:
BTU
BAC
DUK
CHKE
WM
JNJ
Good luck!
Sunday, July 15, 2012
The Great Recession: Part II
Sorry for the prolonged hiatus. I had some business dealings that needed to be addressed. So, how has everyone enjoyed the market lately? Well, Europe changes its story, pretty much on a daily basis. You have to love the media, by reporting that Europe "Feels confident that it might have an answer to the debt issue." And, the market goes up. It is true about any good or bad news that is announced by the oh so smart media.
The problem with today's market is that it is too easily influenced by the media. The reason for that is today's market has everyone in it; educated, uneducated and ignorant. Fifty years ago, you had much fewer investors in the market and mutual funds did not exist or were extremely new. The only people invested in the market are the ones who had money and had a pretty good idea of the value of companies, because they were priced in the market much closer to the real value as opposed to the pseudo value they are assigned today. It is more confusing today, however, there is greater opportunity to be taken advantage of, if you can anticipate the market.
Ah, anticipating the market is basically impossible, because it is so random and is affected by investors who have no idea what they are doing. This causes all stock prices to be incorrectly priced at all times. The saavy investor will see this and take advantage. I must quantify this as the investor must be long on this investment. If you try to trade in this market, just like a casino, the longer you are in and the more trades you make, you'll eventually lose.
The problem with today's market is that it is too easily influenced by the media. The reason for that is today's market has everyone in it; educated, uneducated and ignorant. Fifty years ago, you had much fewer investors in the market and mutual funds did not exist or were extremely new. The only people invested in the market are the ones who had money and had a pretty good idea of the value of companies, because they were priced in the market much closer to the real value as opposed to the pseudo value they are assigned today. It is more confusing today, however, there is greater opportunity to be taken advantage of, if you can anticipate the market.
Ah, anticipating the market is basically impossible, because it is so random and is affected by investors who have no idea what they are doing. This causes all stock prices to be incorrectly priced at all times. The saavy investor will see this and take advantage. I must quantify this as the investor must be long on this investment. If you try to trade in this market, just like a casino, the longer you are in and the more trades you make, you'll eventually lose.
Saturday, May 5, 2012
Stock Tips
Ah, the ever entrancing stock tip. So, what do you do when someone gives you a stock tip? First, run as far away as you can or, in my experience, question why they feel this stock is going to "Pop". I'm sure your reaction to what I have just written is, "Well, don't you give us stock tips periodically?". To the amateur, that would be the assumption, but you have to understand what it means to be given a stock tip as opposed to investing advice.
A stock tip is given when someone tells you, "I heard on TV..." or "A friend of mine said...". Those are indicators of stock tips. Since I am not on TV and I am not your friend, my suggestions are supported with information to back up the suggestion.
What are you to do with my suggestions? You must do your homework to see if what I am spewing out is correct. Most people are not willing to put in the research required to be an informed investor. Is putting in the time and research guaranteed to bring in optimal results? Prior to 1974, that would be the case, because 1974 is the year that IRA's were approved and mutual funds took off. The market went from a pool of sophisticated investors to everyone and their mother jumping and throwing the market off kilter. The issue with this is that stocks are inadvertently manipulated by investors who have no idea what they are doing. Good companies get beat up and bad companies get held up by the uninformed investor.
The bottom line of all of this is to be your own man and do your own homework. Do not rely on stock tips and stock trends that have no back up for their reasoning. The market overall is illogical and therefore should be ignored. If you invest in individual stocks, there is no reason to pay attention to the DOW, S&P or any other index. Companies stand on their own and if they are a good company, they will prevail in the long run.
A stock tip is given when someone tells you, "I heard on TV..." or "A friend of mine said...". Those are indicators of stock tips. Since I am not on TV and I am not your friend, my suggestions are supported with information to back up the suggestion.
What are you to do with my suggestions? You must do your homework to see if what I am spewing out is correct. Most people are not willing to put in the research required to be an informed investor. Is putting in the time and research guaranteed to bring in optimal results? Prior to 1974, that would be the case, because 1974 is the year that IRA's were approved and mutual funds took off. The market went from a pool of sophisticated investors to everyone and their mother jumping and throwing the market off kilter. The issue with this is that stocks are inadvertently manipulated by investors who have no idea what they are doing. Good companies get beat up and bad companies get held up by the uninformed investor.
The bottom line of all of this is to be your own man and do your own homework. Do not rely on stock tips and stock trends that have no back up for their reasoning. The market overall is illogical and therefore should be ignored. If you invest in individual stocks, there is no reason to pay attention to the DOW, S&P or any other index. Companies stand on their own and if they are a good company, they will prevail in the long run.
Sunday, April 29, 2012
Predictions for the Next 24 Months.
So, what do the next two years hold in store for us? Well, we can never be certain, but I anticipate that the broader market will have a pull back of about 10%-15% starting in the late 3rd quarter or early 4th quarter this year. The main reason is that companies will start reporting poor numbers for 2nd and 3rd quarter. This will of course trigger a sell off, but the sell off will be magnified due to investment firms taking profits as I assume they know the broader market is overvalued currently.
Energy will be relatively flat, with the exception of coal. Coal has been beated to death, but will start to make a comeback due to foreign markets, especially developing countries. The reason why coal has been beat up is that it is out of favor with US investors due to new regulations coal's effect on the environment. The problem with US investors is that their foresight doesn't extend beyond what is going on in the US.
Oil will remain around $95-$115 and gasoline should stay about the same or possibly tick down a dime or two per gallon. Natural gas will continue to be very low due to the lack of consumption. That will change in about 5-10 years, but nothing material will change in the next two years.
The situation in Europe is only going to get worse, before it gets better. At least one of the countries in the European Union will drop the euro and go back to their old currency. I'm better that Spain or Italy will be the first to do so. The conditions in Europe will aide in the pull back of the broader market.
Interest rates will increase in 2014. That is an easy one, since the Fed announced that rates will remain low until 2014, unless something changes. That means that bonds and bond funds will continue to be overvalued and anyone who has investments in bonds, should probably get out completely or reduce their exposure, since bonds have no where to go but down.
Unemployment will continue to around 8% even if the US economy does grow at a faster rate than it currently does. Eight percent is the new four percent for unemployment. Small and start up companies, which create about 75% of new jobs will not be able to grow due to the lack of funding available to them. People are working longer, so the job turnover will be extremely slow. Companies have adjusted to the 2008 crisis when they down-sized. They have learned to do more with less, so most of those jobs that were cut four years ago are not coming back.
Home prices will increase marginally as we are a good five years away from any significant increase in home prices. The main reason is that many people are choosing to rent rather than buy. Also, new college grads are entering a terrible job market and also are trying to manage their student loans, so most will be renting or living with their parents since they won't be able to afford to buy.
So, we are looking not too many positive things that are probably going happen in the next two years. Not to worry, since there are always solid investments in any market. Here are the tickers to look into over the next two years. These are long-term investments and I have positions in all of them except for Waste Management, but I plan on taking a position after the pull back later this year.
WM, DUK, BAC, CHKE, BTU and RSO.
Energy will be relatively flat, with the exception of coal. Coal has been beated to death, but will start to make a comeback due to foreign markets, especially developing countries. The reason why coal has been beat up is that it is out of favor with US investors due to new regulations coal's effect on the environment. The problem with US investors is that their foresight doesn't extend beyond what is going on in the US.
Oil will remain around $95-$115 and gasoline should stay about the same or possibly tick down a dime or two per gallon. Natural gas will continue to be very low due to the lack of consumption. That will change in about 5-10 years, but nothing material will change in the next two years.
The situation in Europe is only going to get worse, before it gets better. At least one of the countries in the European Union will drop the euro and go back to their old currency. I'm better that Spain or Italy will be the first to do so. The conditions in Europe will aide in the pull back of the broader market.
Interest rates will increase in 2014. That is an easy one, since the Fed announced that rates will remain low until 2014, unless something changes. That means that bonds and bond funds will continue to be overvalued and anyone who has investments in bonds, should probably get out completely or reduce their exposure, since bonds have no where to go but down.
Unemployment will continue to around 8% even if the US economy does grow at a faster rate than it currently does. Eight percent is the new four percent for unemployment. Small and start up companies, which create about 75% of new jobs will not be able to grow due to the lack of funding available to them. People are working longer, so the job turnover will be extremely slow. Companies have adjusted to the 2008 crisis when they down-sized. They have learned to do more with less, so most of those jobs that were cut four years ago are not coming back.
Home prices will increase marginally as we are a good five years away from any significant increase in home prices. The main reason is that many people are choosing to rent rather than buy. Also, new college grads are entering a terrible job market and also are trying to manage their student loans, so most will be renting or living with their parents since they won't be able to afford to buy.
So, we are looking not too many positive things that are probably going happen in the next two years. Not to worry, since there are always solid investments in any market. Here are the tickers to look into over the next two years. These are long-term investments and I have positions in all of them except for Waste Management, but I plan on taking a position after the pull back later this year.
WM, DUK, BAC, CHKE, BTU and RSO.
Saturday, April 28, 2012
Europe: Need I say More?
So, everyone is feeling pretty good that the market is still on the way up, however, in it has been a rollercoaster ride. The problem is that Europe is still in schambles. The latest is that Spain is screwed, even though it is the 4th largest economy in Europe. The issue is that they are talking about a bailout, but in the age of bailouts, there is going to come to a point when there won't be anyone to bail anyone else out. Spain's biggest issue is not the same as Greece in which the government workers had their retirement schedule and pension benefits restuctured. Spain's problem is with their banks, and the fact that they are insoluable.
The US survived the banking crisis, which in and of itself, was a joke compared to what would happen in Spain. The reason for that is that the US is far more diversified in terms of available banks and that helps stem the problems caused when the there is a systematic banking crisis.
So, the market has been increasing based on Apple and hysteria. In a market like this, it is time to buy when there is a sector or industry that has been beat up for no logical reason. We have to remember that the present day market is not the same market of the past. There are more people who have no idea what they are doing, which basically throws a wrench in the market logic. Since the market is illogical, you must take advantage of companies who have been oversold for no reason. Peabody (BTU) is one of those. Take a look and see if you can figure out why it is oversold. As per usual, I own this stock and plan on increasing my position. Good luck!
The US survived the banking crisis, which in and of itself, was a joke compared to what would happen in Spain. The reason for that is that the US is far more diversified in terms of available banks and that helps stem the problems caused when the there is a systematic banking crisis.
So, the market has been increasing based on Apple and hysteria. In a market like this, it is time to buy when there is a sector or industry that has been beat up for no logical reason. We have to remember that the present day market is not the same market of the past. There are more people who have no idea what they are doing, which basically throws a wrench in the market logic. Since the market is illogical, you must take advantage of companies who have been oversold for no reason. Peabody (BTU) is one of those. Take a look and see if you can figure out why it is oversold. As per usual, I own this stock and plan on increasing my position. Good luck!
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