China is bunk. The US is on the edge of a third world country. I know this all sounds like garbage, but if you think that, then you fail to see the big picture. We have a very distinct problem and the problem is the current administration. Not to say that they are the cause, but they are the ones throwing gasoline and the bonfire. Yes, I know I've heard it all before about how I am doom and gloom, but stick to your investing. I think that domestic stocks are overpriced. Gold is completely over priced at this time. Be weary of Chinese stocks. China is still smoke an mirrors as I declared over a year ago. The best stocks for the long term are natural gas companies. I loaded up on TNH, despite the removal of their dividend. This company is completely out of favor and is a no brainer to buy for the long term. Also, TNH has zero debt, which could be sign they are trying to expand. To be honest, things are not going to get better. You can listen to Obama blab (note I do not have party affiliation), but things are not going to change. The Fed will raise interest rates later this year and we will continue to print money. Regardless of what takes place, things will remain the same. Just remember, the nex time you complain about your job, just think how grateful you should be about having one to complain about.
The bottom line is that our country is messed up and it has nothing to do with the "conflict" in the middle east. 10 Billion a month is what is costs to fund the military overseas. We are fighting the war on terror. So, how do we win that war? This is an incredible drain on the economy.
The bottom line is to get safe by switching over to large caps or money markets that pay above 4%. These are strange times.
Saturday, March 20, 2010
Saturday, March 6, 2010
Did Capitalism Fail?
Back by popular demand (thanks A.D.), I have returned to spew some knowledge and conspiracy theories. This one addresses one question: "Has capitalism failed?". Don't get me wrong, my favorite color is not red and I do not support Marx. However, is the goal to satisfy shareholders and maximize profit the key to the greater good? We've proven in theory and in reality that socialism and communism are doomed to fail, but is the stance we have taken on capitalism the correct path? Let's break it down in the simplest way possible. In order to maximize profit, you need to maximize revenue and minimize expense. If an American commands a salary of $50K per year and you can outsource that job to China for $5K per year, the logical solution would be to outsource the position. If you look at the big picture, everything is limited; there is only so much money in the world and only so many jobs. If you give a job away to another country, you eliminate a job at home. On a small scale, this is not a big deal, but on a larger scale, this not productive.
We can look at this in an extreme view. What if all jobs were outsourced? There would be no jobs in the US and everything would go to hell. We are the richest country in the world (for now), but we are giving away the house to other countries without even knowing what the hell we are doing. By outsourcing jobs, you are sending American money out of the country and limiting the purchasing power of Americans. There are very few American companies who have more than 50% of their sales take place outside of the US. So, if you are employing people outside of the country and leaving Americans unemployed, how can they purchase your products without any money? Once you employ someone abroad, they money you pay them will most likely never make its way back into the US. Again, if outsourcing were on a small scale, it wouldn't be a big deal, but because every company is trying to accomodate the shareholders, everyone else is expendable. The problem is these companies are hurting themeselves by minimizing expenses at the cost of revenue.
So, this situation begs the question, "Did Captialism fail?". In its current form,.....yes. Capitalism can succeed, if executed properly. The trickle down effect of what has been occurring over the past 50 years is being felt now. We are looking at an unemployment rate of 10%+ for at least the next decade. The next time you feel like complaining about your job, take a step back and be thankful that you have one and that it hasn't been outsourced.....yet.
So, what is the point of this discussion? Stockpile your money, because you never know when the rug will be pulled out from under you. You need to save and pay down your debt. If you owe someone money, they own you. Unfortunatley, you have to make your own way in today's world. No matter what your education is and who you know doesn't make a bit of difference. You have to prepare for the worst, because that is where we are headed. Create multiple streams of income and get your ducks in a row, because at the current rate, the mountain is going to be crashing down on us.
P.S.- As to not leave the stock market completely out of this, natural gas is out of favor in the market. I've been hyping TNH when it goes below $100 per share, however, it is sitting at $87.50 as of this time, but their typical 6%-7% dividend yield has been eliminated. If you are long on TNH, then now is the time buy big.
We can look at this in an extreme view. What if all jobs were outsourced? There would be no jobs in the US and everything would go to hell. We are the richest country in the world (for now), but we are giving away the house to other countries without even knowing what the hell we are doing. By outsourcing jobs, you are sending American money out of the country and limiting the purchasing power of Americans. There are very few American companies who have more than 50% of their sales take place outside of the US. So, if you are employing people outside of the country and leaving Americans unemployed, how can they purchase your products without any money? Once you employ someone abroad, they money you pay them will most likely never make its way back into the US. Again, if outsourcing were on a small scale, it wouldn't be a big deal, but because every company is trying to accomodate the shareholders, everyone else is expendable. The problem is these companies are hurting themeselves by minimizing expenses at the cost of revenue.
So, this situation begs the question, "Did Captialism fail?". In its current form,.....yes. Capitalism can succeed, if executed properly. The trickle down effect of what has been occurring over the past 50 years is being felt now. We are looking at an unemployment rate of 10%+ for at least the next decade. The next time you feel like complaining about your job, take a step back and be thankful that you have one and that it hasn't been outsourced.....yet.
So, what is the point of this discussion? Stockpile your money, because you never know when the rug will be pulled out from under you. You need to save and pay down your debt. If you owe someone money, they own you. Unfortunatley, you have to make your own way in today's world. No matter what your education is and who you know doesn't make a bit of difference. You have to prepare for the worst, because that is where we are headed. Create multiple streams of income and get your ducks in a row, because at the current rate, the mountain is going to be crashing down on us.
P.S.- As to not leave the stock market completely out of this, natural gas is out of favor in the market. I've been hyping TNH when it goes below $100 per share, however, it is sitting at $87.50 as of this time, but their typical 6%-7% dividend yield has been eliminated. If you are long on TNH, then now is the time buy big.
Tuesday, November 3, 2009
Well, I'm Finally Wrong!
So, hell has apparently frozen over and I am finally wrong about how the market was going to perform during the month of October. I assumed the run up of the market was a perfect situation for October's options Friday to cause a large drop and send the DOW tumbling towards 8500. However, the volatility was very subdued and as it turns out the DOW is sitting at about 9700. So, my bearish outlook has betrayed me and caused a pretty large miss by my prediction.
When confronted with a big miss, you can do one of two things; dwell on the mistake or find out why the market behaved the way it did and take something away from that to aid you in the future.
I chose the latter and this is what I came up with. The market is completely F'd. The US dollar is surging when Bam Bam is going buck wild printing money. The value of gold is off the charts at the same time. Consumer confidence is at an all-time low, yet stocks have surged despite the most recent pull back of a few hundred points off the DOW, which by the way was triggered by the DOW breaking the 10,000 point barrier. We finally get one quarter with an expansion rather than a contraction of the economy and now all the analysts are stating the recession is over. The recession may be over according to the definition, but in reality, the recession is simply taking a break before it lets loose again, once the market's euphoria has abated. We are not out of the woods by a long shot. Still with the threat of major inflation lurking for the next decade, stocks are still the best way to hedge against inflation.
For now, the best bet is still to utilize dollar cost averaging and refrain from the indefinite buy and hold strategy of the old days. You can still buy and hold, but you still need to keep an eye on all of your holdings, even if you have big boys like JNJ, XOM, PG, etc. No company is safe from going belly up. For now, keep and eye on things and see where the future takes us.
When confronted with a big miss, you can do one of two things; dwell on the mistake or find out why the market behaved the way it did and take something away from that to aid you in the future.
I chose the latter and this is what I came up with. The market is completely F'd. The US dollar is surging when Bam Bam is going buck wild printing money. The value of gold is off the charts at the same time. Consumer confidence is at an all-time low, yet stocks have surged despite the most recent pull back of a few hundred points off the DOW, which by the way was triggered by the DOW breaking the 10,000 point barrier. We finally get one quarter with an expansion rather than a contraction of the economy and now all the analysts are stating the recession is over. The recession may be over according to the definition, but in reality, the recession is simply taking a break before it lets loose again, once the market's euphoria has abated. We are not out of the woods by a long shot. Still with the threat of major inflation lurking for the next decade, stocks are still the best way to hedge against inflation.
For now, the best bet is still to utilize dollar cost averaging and refrain from the indefinite buy and hold strategy of the old days. You can still buy and hold, but you still need to keep an eye on all of your holdings, even if you have big boys like JNJ, XOM, PG, etc. No company is safe from going belly up. For now, keep and eye on things and see where the future takes us.
Friday, September 25, 2009
A Look Back: 5 Stocks For The Long Term
Hello again! The DOW is pushing towards 10K and October is less than a week away. The volatility seems to have been under control as of late, especially when compared to a year ago; when 2%-4% swings in a day were the norm and investors were bailing out left and right. Anyway, don't be surprised if the DOW does top 10K that you will see the institutions trim their positions in anticipation of October's options Friday (October 16th). If the market is still high by then, you'll see a spike in trade volume as call options will be exercised and a lot of shares will be trading hands. For example, if a investor purchases a contract (100 shares) for Exxon (XOM) at $65 per share and by the middle of the month of October, XOM is at $75 per share, the investor can exercise that option and take control of the 100 shares of XOM at a cost of $65 per share and can either hold the stock or sell it into the open market for $75 (or whatever the market price is at the time of sale) and have a taxable gain of $1,000. If prices are high across the board, you could see a flood of stock being sold into the open market and when that happens prices can nosedive (supply & demand). If the market is high, the pros simply increase their cash hoard and wait for the herd to act and then can scoop up relatively cheap priced stocks in the aftermath.
Ok, enough of that. Earlier this year, I authored a five part series describing what I felt were five stocks for the long-term and why (Feb. 27th-Mar. 26th). Since it has been six months since I finished the series, I thought it is a good time to check back in to see how those five beauties are performing. Let's have a look......
Stock #1: Cherokee (CHKE)
Feb. 27 Close Price: $13.94
Sep. 24 Close Price: $22.39
Percent Change: +60.62%
Looking at the numbers, it looks like the pick was a great one. However, remember that CHKE is a small company with a market cap of just shy of $200M. Also, this is short-term and things can change very quickly with a company this small. The good thing is that during the turmoil of this past winter, CHKE avoided taking on debt (current debt is $0) and has not missed a dividend payment. I still feel this stock is being ignored and still has a way to go, before it is fairly priced. With the current dividend yield of 8.8%, it is worth the wait.
Stock #2: Ticket Master (TKTM)
Mar. 2 Close Price: $4.30
Sep. 24 Close Price: $11.56
Percent Change: + 168.84%
Again, as will CHKE, TKTM is a small company with a market cap of about $650M. I'll be the first to admit this company was priced extremely low (about 50% of book value), when I wrote about this company back on March 2nd. I'll admit that I felt this company could not go any higher than $9 in the first 12 months and I subsequently sold my entire holding of it in August at just shy of $8, because I felt the company's financials and the price of the market made the company outside of my risk tolerance. It was a mistake to sell the whole position. I should have reduced my position by anywhere by 50% to 75% of my original position. Even though I picked up a 60% gain over a five month period (129% annualized gain), I missed out on the unusual spike in the price. My intention was that I felt the price was going to drop along with the rest of the market and then I would be able to pick it up again when it came back to $6. Anyway, you can't be 100% right 100% of the time. I'll take partially right any day of the week.
Stock #3 Terra-Nitrogen (TNH)
Mar. 9 Close Price: $119.49
Sep. 24 Close Price: $104.15
Percent Change: (12.84%)
The percent change is very deceiving with this company. The stock is extremely volatile. In the six months since writing about this stock, it has ranged from about $95-$140. In my portfolio, I've been reducing and increasing my position as the stock tops $130 and then goes below $100. Again, this company is relatively small, with it being on the boarder between a small and mid-cap company ($1.95B market cap). The current dividend yield of 8.88% makes it stock worth holding onto and with a P/E ratio of just under 10, it is very cheap considering it is an alternative energy company that will see its stock go much higher when the prices of natural gas recover. Keep an eye on this company and don't be too hasty to sell. This is definitely a company that you should definitely buy in slowly and exit slowly.
Stock #4 Exxon Mobile (XOM)
Mar. 20 Close Price: $66.09
Sep. 24 Close Price: $68.93
Percent Change: +4.30%
We've now are going from small companies to the largest (market cap) company on the planet. Despite the increase in alternative energy research, oil will still rule for the next quarter century and XOM will lead the way. As with extremely large companies, it is harder to grow more than a few percentage points per year, however, with oil still priced very cheap, it is a good time to get in. You can easily afford to get in slowly on this company and with the current dividend yield of 2.40%, you get a little bang for your buck. XOM has plenty of money to invest in new oil drilling and also has the ability to not only pay the dividend consistently, but also to increase it in order to attrack more investors. This is a company that is as solid as they come.
Caterpillar (CAT)
Mar. 26 Close Price: $30.78
Sep. 24 Close Price: $51.85
Percent Change: +68.45%
CAT is another large cap company ($32.5B market cap). Despite only about 10% of their revenues that can be tied to the housing market, the company took a beating when the housing bubble burst. What has really affected the company in terms of revenue is the credit crunch. The main function of this company is to sell and lease construction equipment. When the credit crunch started, companies and municipalities stopped expanding and starting or suspending projects. This caused the reveue of CAT to dry up quickly. By that time, the stock had taken a huge nose dive, because of the average investors misunderstanding of the companies main source of earnings. The company is still undervalued and that should reflect in the stock price when the housing market recovers, since the same folks that sold under the misconception, will buy back in under the same misconception. Regarless, the credit market will begin to loosen when the housing market starts to recover and the banks can unload some of those REO properties and get that expense off the books. Right now, I think CAT could go past 80 in the next 24 months. We'll have to wait and see.
Here is the overall results
Starting Stock Prices: $234.60
Sep. 24 Stock Prices: $258.88
Percent Change: +10.35%
Annualized Return: +20.70%
Overal Grade: B+
I give myself a B+ so far. The major blemish was on TKTM by selling my entire position rather than reducing my position. Some of this was offset by playing on the voltatility of TNH and treating it as a trade rather than an investment. You can still be long on this stock, but taking advantage of the spikes and dips in a stock such as this can pad your gains. If I went back to research my trades on this stock, my returns would be significantly higher, however, playing this game with stocks you aren't completely familiar with is a plan that will eventually fail. I do not recommend trying to trade a stock on dips and spikes over the long term. If you do decide to try this for a short period of time, be aware of the ex-dividend date in order to take full advantage of the dividend payout. Until next time.........
Ok, enough of that. Earlier this year, I authored a five part series describing what I felt were five stocks for the long-term and why (Feb. 27th-Mar. 26th). Since it has been six months since I finished the series, I thought it is a good time to check back in to see how those five beauties are performing. Let's have a look......
Stock #1: Cherokee (CHKE)
Feb. 27 Close Price: $13.94
Sep. 24 Close Price: $22.39
Percent Change: +60.62%
Looking at the numbers, it looks like the pick was a great one. However, remember that CHKE is a small company with a market cap of just shy of $200M. Also, this is short-term and things can change very quickly with a company this small. The good thing is that during the turmoil of this past winter, CHKE avoided taking on debt (current debt is $0) and has not missed a dividend payment. I still feel this stock is being ignored and still has a way to go, before it is fairly priced. With the current dividend yield of 8.8%, it is worth the wait.
Stock #2: Ticket Master (TKTM)
Mar. 2 Close Price: $4.30
Sep. 24 Close Price: $11.56
Percent Change: + 168.84%
Again, as will CHKE, TKTM is a small company with a market cap of about $650M. I'll be the first to admit this company was priced extremely low (about 50% of book value), when I wrote about this company back on March 2nd. I'll admit that I felt this company could not go any higher than $9 in the first 12 months and I subsequently sold my entire holding of it in August at just shy of $8, because I felt the company's financials and the price of the market made the company outside of my risk tolerance. It was a mistake to sell the whole position. I should have reduced my position by anywhere by 50% to 75% of my original position. Even though I picked up a 60% gain over a five month period (129% annualized gain), I missed out on the unusual spike in the price. My intention was that I felt the price was going to drop along with the rest of the market and then I would be able to pick it up again when it came back to $6. Anyway, you can't be 100% right 100% of the time. I'll take partially right any day of the week.
Stock #3 Terra-Nitrogen (TNH)
Mar. 9 Close Price: $119.49
Sep. 24 Close Price: $104.15
Percent Change: (12.84%)
The percent change is very deceiving with this company. The stock is extremely volatile. In the six months since writing about this stock, it has ranged from about $95-$140. In my portfolio, I've been reducing and increasing my position as the stock tops $130 and then goes below $100. Again, this company is relatively small, with it being on the boarder between a small and mid-cap company ($1.95B market cap). The current dividend yield of 8.88% makes it stock worth holding onto and with a P/E ratio of just under 10, it is very cheap considering it is an alternative energy company that will see its stock go much higher when the prices of natural gas recover. Keep an eye on this company and don't be too hasty to sell. This is definitely a company that you should definitely buy in slowly and exit slowly.
Stock #4 Exxon Mobile (XOM)
Mar. 20 Close Price: $66.09
Sep. 24 Close Price: $68.93
Percent Change: +4.30%
We've now are going from small companies to the largest (market cap) company on the planet. Despite the increase in alternative energy research, oil will still rule for the next quarter century and XOM will lead the way. As with extremely large companies, it is harder to grow more than a few percentage points per year, however, with oil still priced very cheap, it is a good time to get in. You can easily afford to get in slowly on this company and with the current dividend yield of 2.40%, you get a little bang for your buck. XOM has plenty of money to invest in new oil drilling and also has the ability to not only pay the dividend consistently, but also to increase it in order to attrack more investors. This is a company that is as solid as they come.
Caterpillar (CAT)
Mar. 26 Close Price: $30.78
Sep. 24 Close Price: $51.85
Percent Change: +68.45%
CAT is another large cap company ($32.5B market cap). Despite only about 10% of their revenues that can be tied to the housing market, the company took a beating when the housing bubble burst. What has really affected the company in terms of revenue is the credit crunch. The main function of this company is to sell and lease construction equipment. When the credit crunch started, companies and municipalities stopped expanding and starting or suspending projects. This caused the reveue of CAT to dry up quickly. By that time, the stock had taken a huge nose dive, because of the average investors misunderstanding of the companies main source of earnings. The company is still undervalued and that should reflect in the stock price when the housing market recovers, since the same folks that sold under the misconception, will buy back in under the same misconception. Regarless, the credit market will begin to loosen when the housing market starts to recover and the banks can unload some of those REO properties and get that expense off the books. Right now, I think CAT could go past 80 in the next 24 months. We'll have to wait and see.
Here is the overall results
Starting Stock Prices: $234.60
Sep. 24 Stock Prices: $258.88
Percent Change: +10.35%
Annualized Return: +20.70%
Overal Grade: B+
I give myself a B+ so far. The major blemish was on TKTM by selling my entire position rather than reducing my position. Some of this was offset by playing on the voltatility of TNH and treating it as a trade rather than an investment. You can still be long on this stock, but taking advantage of the spikes and dips in a stock such as this can pad your gains. If I went back to research my trades on this stock, my returns would be significantly higher, however, playing this game with stocks you aren't completely familiar with is a plan that will eventually fail. I do not recommend trying to trade a stock on dips and spikes over the long term. If you do decide to try this for a short period of time, be aware of the ex-dividend date in order to take full advantage of the dividend payout. Until next time.........
Sunday, September 13, 2009
October's Coming....Hold On To Your Hats!
Ah, my favorite month is approaching. October might be the craziest month of the twelve in terms of investing. I should probably do a study to see if the suicide rate is highest in October. Why is it that October is so nutty for the market? No idea, it could be Halloween or it could be the start of the holiday shopping season. Last October, we saw the Dow drop about 1500 points, although it was just after Lehman went belly up. I'm not saying the market will have a huge pull back during October, but we typically see the biggest swings on a daily basis during that month. I'm going to throw a date out there for you.....October 16th. Why that day? It is the third Friday of the month, so that means that option contracts come due on that day, so the volatility tends to be large, particularly if the market has performed well, because if the market has done well, then people tend to exercise their call contracts and you see a bunch of stock dumped into the market and then picked up at reduced prices.
Anyway, what does this mean for the us? Me in particular feels the Dow is about 800-1000 points overvalued. And what do we do when we feel the market is overvalued? That's right, reduce your positions, sell your losers and stock up the cash so you are ready for the pull back. I have three sample portfolios that I started between Feb. 2008 and Nov. 2008. Each portfolio is valued at 1.5-1.8 million (each started at 1 million and dividends are not factored in). I'm currently carrying about 50-60 percent cash in each porfolio. That indicates how bearish I'm am currently. I'm very bullish, however, with alternative energy companies, oil and emerging country (mainly China and India) markets. Stay cool and devise a plan that eliminates the emotion of investing. Stick to the plan and you'll save yourself a lot of pain.
Anyway, what does this mean for the us? Me in particular feels the Dow is about 800-1000 points overvalued. And what do we do when we feel the market is overvalued? That's right, reduce your positions, sell your losers and stock up the cash so you are ready for the pull back. I have three sample portfolios that I started between Feb. 2008 and Nov. 2008. Each portfolio is valued at 1.5-1.8 million (each started at 1 million and dividends are not factored in). I'm currently carrying about 50-60 percent cash in each porfolio. That indicates how bearish I'm am currently. I'm very bullish, however, with alternative energy companies, oil and emerging country (mainly China and India) markets. Stay cool and devise a plan that eliminates the emotion of investing. Stick to the plan and you'll save yourself a lot of pain.
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