The idea of keeping stock that you buy today for use in your retirement days, was in the past the way to go (till the great depression), when all those stocks were worth a small fraction of the original value. More recently March 2008, with the housing loans defaulting, banks in financial streights, jobs slowing, U.S. and global economy ready to fail, was when the stock market dropped.
Recently the investor because of fear, sold stock quickly. Investing instutitions needed to raise capital to settle with customers pulling out of funds, causing the selling of many good stocks to create capital to settle with out-going customers, when buying these good stocks, would be preferred by money managers.
Institutions have been selling good stocks because of customer fear, of what may happen if the Fed takes some unknown action. What effect will the new government financial rules on the banks have on the economy? Will Health Care Reform harm the economy, or companies and employees. What will be the costs to companies or the nation to pay for health care. What may happen following the November 2010 mid-term election. The economy in Europe was said to be failing less than a month ago, but for now Europe's economy appears to have improved, and the euro is maintaing its value. Worried investors today read and hear these things and panic sets in. Questions are asked with what seems like only partial answers, or answers where two sources don't agree. Not knowing, causes people to try to protect what money they have and start buying bonds, gold, and Reits for protection of their money.
Gold, bonds, and REITS have had a good run, and to rebalance an investor's portfolio today, would require the selling of these and put the money back into stocks (some prices are at or near 52 week lows). This would be the way to profit from todays equities markets that have been having very low volume (more investors needed), and sell-offs almost day after day of perfectly good companies with strong balance sheets paying dividends (like getting interest).
We as investors need to remember that things change quickly today. The quarterly statements that your work place retirement account sends home is not the way to keep an eye on your money. The correct way to do this, is to go online daily, and see where you are, then make changes as needed to protect your principal (the money your depositing). The frequency of changes you make won't be often, and is limited by your account rules. If you max out the account changes in the time period that your account allows, some accounts will allow you to request changes by snail-mail to slow you down (this is to stabalize the money in the account's investments).
The value of stocks (companies) is always changing. The reason for buying the stock may have changed. The economy can be good or bad, having an effect on a companies ability to grow. Maybe a new company producing the same product or service as the stock you own, can do the samething cheaper, better or faster hurting your company's stock. Consumers may decide that the product of the stock you own is no longer wanted or needed. To this end, the iPad is being seen more often in the business enviroment, replacing the lap top. The iPad is easier to transport, and powerful (great for meetings).There are many more reasons for a stock to lower in price, including changes in federal or state laws, that can effect the ability of your stock to grow.
Bear Stearns was at $159.00 dollars a share, and in one year, was worth only $2.00 (March 17 2008). Today Bear Stearns is gone, and so would have been the entire amount of money you had invested in this stock. The Lehman Brothers Holdings collapse caused the loss of investments in the stock owned by employees, and the public. The price of Lehman shares declined 94% in the space of a year. Lehman filed for Chapter 11 bankruptcy, which grants protection while it works out a plan to pay back creditors. Share holders lost their stock investment in Lehman.
Old names like General Motors who became government owned, was removed from the stock market listing. Stock holders in GM lost all the money they used to buy GM stock when the company filed bankruptcy. The government feared many people that had anything to do with producing cars (GM employees, its suppliers, and their suppliers) would lead to huge levels of unemployment. To prevent this the government stepped in financially.
General Mills (GIS) makes products that are known all over the world and you would expect that sales would be steady and growing. The recession, a year ago had consumers eating out less, buying branded label products, and commodity prices fell. Today the recession is nearing an end (debatable), consumers are dining out again, and the commodity prices have stopped falling. In addition General Mills now faces the problem of higher raw materials costs and consumer resistance to price increases and, as a result, narrower profit margins. Fourth quarter profit for (GIS) has fallen 41 percent, causing the stock price to drop.
Pharmaceutical demand can be expected to always continue in companies like Rite Aid (RAD), CVS Caremark (CVS), and Walgreens (WAG). These companies all do the samething, over the counter medicines, prescriptions, flowers, cosmetics and cards. Again things change over time. Wal-Mart, recently began selling over 360 generic drugs for only $4 per subscription. This is significantly less than prices at pharmacies and may put pressure on a company's drug margins.
Another great company I like is Toyota Motor (TM), the price of the stock in 2008 had been about $121 per share, today the price is $67.84. If you had owned this stock and didn't pay attention to it, today your loss would be $66.63 per share which I think you'll agree is not acceptable. Boeing (BA) in the same time frame was priced at about $84, and today the stock sells for $61.13.
By knowing something about the business that your stock is involved in, you will be able to see things that could effect the price that are outside the control of the company, to prevent huge losses. Remember, if the reason that caused you to see your stock growing changes, that's the time to consider selling to reduce your loss.
At http://www.youcontrolinvesting.com/ you will learn how to use charts (called Technical Analysis) as an aid to guide you in the correct time to buy and sell your stock. The professionals use Technical Analysis, and you should to. Visit our site, learn about us, and feel free to ask questions. We offer your first lesson free of charge to learn how easy stock investing is, and to get you started. Visit our site to get instructions on receiving your first lesson free. We look forward to hearing from you.
Bruce Cortez, Instructor
www.Twitter.com/StockmktTeacher for important daily information.
Tuesday, August 31, 2010
Thursday, August 26, 2010
What Influences the Price of Stocks? Lesson 113
Paying attention to the news and world events is part of investing. What kind of weather conditions are there in 'Tornado Alley?' Is it hurricane season on the atlantic coast? These weather conditions are the reason to expect Home Depot (HD), or Lowe's (LOW) to increase sales in extra wood and nails to protect property. After the storm, property owners will return to home repair and supply stores to buy all the materials needed to repair the damage done by severe weather. Ahead of these events would be the time to look at home supply stores and their suppliers of the things they sell.
We can buy stock in the companies that produce paint, roofing, insulation, lumber, adhesives, and the many other items property owners need to protect property, then later to repair property damage. Look for companies that cover several products that a home owner would need. This would increase sales of the company your considering to buy.
Weather has an effect on how consumers spend money. Natural gas recently had its price plunge (Aug 25 2010). A very active hurricane season was forcast, but it turned out to be very quiet. In addition to this the summer was hot, and an anemic industrial demand was likely to continue, together these two would cut down on the expected demand of gas.
If you had bought any of these 'Shale players', Chesapeake Energy (CHK), SW Energy (SWN), Range Resources (RRC), or Petrohawk Energy (HK), it was very likely your stock price would lower (not what you want). The effect on price was to lower these stocks 20-30%. The reason for this is that the cost to produce the gas exceedes futures prices of gas, causing a lose for the producer. Another way to say this is, the cost to produce natural gas is more than what it's selling for.
To buy a 'Shale player' we need to consider the economy. Are factories working (gas usage), and what are the effects of weather on the stock I'm considering? Will it be a hot summer (air conditioners), or a cooler summer (heat homes at night).
Technology is another example of trying to get the whole picture. Perhaps you're looking at a company that makes chips for computers. Start by looking at the companies that produce the entire finished product for home and business computers, like Dell, Gateway, Hewlett-Packard. Does the news talk about computer sales slumping, and an inventory glut in computers? Now if computer sales are down, and their are deep discount sales to lower inventory, but nobody is buying, that's a problem. We would expect the chip maker to have an inventory that is excessive, and the price of chips to fall due to an excessive inventory. If the computer maker isn't building computers, he isn't buying chips. If the chip maker has no one buying his chips, then the inventory will grow, and stock price will begin to fall, or continue falling. This would cause your chip maker stock to lower in price (not good for the investor).
This lesson is to allow you to see that when investing, we need to see the whole picture to decide if the stock we wish to own will be profitable. To be profitable the stock must have growth, if no growth exists then the stock will fail as an investment. More about this can be learned at http://www.youcontrolinvesting.com/. You will learn important lessons in fundamentals, and technical analysis, to allow you to have confidence in your choice of investments.
Good Investing,
Bruce Cortez, Instructor
Email: Bruce@YouControlinvesting.com
www.Twitter.com/StockmktTeacher
We can buy stock in the companies that produce paint, roofing, insulation, lumber, adhesives, and the many other items property owners need to protect property, then later to repair property damage. Look for companies that cover several products that a home owner would need. This would increase sales of the company your considering to buy.
Weather has an effect on how consumers spend money. Natural gas recently had its price plunge (Aug 25 2010). A very active hurricane season was forcast, but it turned out to be very quiet. In addition to this the summer was hot, and an anemic industrial demand was likely to continue, together these two would cut down on the expected demand of gas.
If you had bought any of these 'Shale players', Chesapeake Energy (CHK), SW Energy (SWN), Range Resources (RRC), or Petrohawk Energy (HK), it was very likely your stock price would lower (not what you want). The effect on price was to lower these stocks 20-30%. The reason for this is that the cost to produce the gas exceedes futures prices of gas, causing a lose for the producer. Another way to say this is, the cost to produce natural gas is more than what it's selling for.
To buy a 'Shale player' we need to consider the economy. Are factories working (gas usage), and what are the effects of weather on the stock I'm considering? Will it be a hot summer (air conditioners), or a cooler summer (heat homes at night).
Technology is another example of trying to get the whole picture. Perhaps you're looking at a company that makes chips for computers. Start by looking at the companies that produce the entire finished product for home and business computers, like Dell, Gateway, Hewlett-Packard. Does the news talk about computer sales slumping, and an inventory glut in computers? Now if computer sales are down, and their are deep discount sales to lower inventory, but nobody is buying, that's a problem. We would expect the chip maker to have an inventory that is excessive, and the price of chips to fall due to an excessive inventory. If the computer maker isn't building computers, he isn't buying chips. If the chip maker has no one buying his chips, then the inventory will grow, and stock price will begin to fall, or continue falling. This would cause your chip maker stock to lower in price (not good for the investor).
This lesson is to allow you to see that when investing, we need to see the whole picture to decide if the stock we wish to own will be profitable. To be profitable the stock must have growth, if no growth exists then the stock will fail as an investment. More about this can be learned at http://www.youcontrolinvesting.com/. You will learn important lessons in fundamentals, and technical analysis, to allow you to have confidence in your choice of investments.
Good Investing,
Bruce Cortez, Instructor
Email: Bruce@YouControlinvesting.com
www.Twitter.com/StockmktTeacher
Monday, August 23, 2010
Your Reason To Buy Lesson 112
There are many companies, stores, or businesses familer to us that we spend money to fill our needs.
We grow familar with things that have been around for a long time, and feel confident in the business
continuing to survive for many years and we expect it will profit and grow.
Some investors buy stocks on "familarity," and are comfortable with time in existance being the reason the
company will make them profits. Normally I'm asked the question, why did my new stock go down in price,
now I'm negative $300. Another says, my stock keeps going down "should I sell?"
Sometimes the comment to me is, I thought that the stock would do well because I was promised this was up
and coming and my money would grow. "I have a pamflet here that explains everything."
It's unfortunate that like everything else that needs to be learned, buying stock looks easy, and this causes
the new person investing online to lose money. How hard can it be? Open an account, click your mouse on
the stock you like and presto, your making money. Now you expect your stock to zoom upward, but
surprise, your stock is sinking faster than a rock in the water.
First thing we need to do is learn the basics, that need to be done, to prevent the loss of principal (the money
you bought stock with). We teach this and more at http://www.youcontrolinvesting.com/, and it's easy. There is nothing "hard to understand," or "too complicated" about buying stocks that can make you money. Many
people do it everyday, from professionals, to the person at home on the computer trading on line building a
retirement account.
In the beginning of this lesson I mentioned "familarity" as being a reason people use to invest in a company's
stock. Questions need to be asked. Even though the company has been around for many years, how well
financially are they doing today. As we know the economy has slowed, people are not working, and are
buying less. By looking at a companies "financials" we can learn if the company is growing financially, and will
stay solvent, or has already filed bankruptcy. Look at General Motors (GM) for an example of this. If you
had invested here, you would have lost your money. Just by looking at GM's financials you would not have
invested money here, and would have prevented the loss of your money.
The second item at the beginning of this lesson was "price." Why did the price drop lower? Was it because
I bought it (stock always goes lower because I buy), or is there some other reason. Know that you cannot
influence the planets and the stars, and what you do in the market (buying), is not the reason your stock price
fell. Knowing this is great, because now you know, you can make money in the market.
On price we need to find out what the stock is worth, not the price you see on the computer screen (that's
the price the last person was willing to pay). What it's worth is dependent on growth rate in the past, and
future expected growth rate. The other thing to look at is "financials," are they good or bad. Not all
companies doing the same, are worth the same. Example Rite Aid Pharmacy; filed bankruptcy, and
Walgreens Pharmacy, doing great, which as I write, I own. This is another item covered in our course at
http://www.youcontrolinvesting.com/ .
People will try to sell using promises and printed material like a "pamflet." It is your money, and research is
required at all times before giving it to someone, or in this case buying a stock. Remember that investors
were asked to invest in an oil well years ago, and lots of money would be made when oil was hit (the
promise). If your stock never hits oil...You lose.
To learn more about the proper way to invest in stocks, and also understand how to better manage your
workplace retirement account, (help it grow), visit us at http://www.youcontrolinvesting.com/. We also post
important information that changes quickly at www.Twitter.com/StockMktTeacher
We welcome your questions and suggestions.
Good Investing,
Bruce Cortez, Instructor
Bruce@YouControlinvesting.com
http://www.youcontrolinvesting.com/
We grow familar with things that have been around for a long time, and feel confident in the business
continuing to survive for many years and we expect it will profit and grow.
Some investors buy stocks on "familarity," and are comfortable with time in existance being the reason the
company will make them profits. Normally I'm asked the question, why did my new stock go down in price,
now I'm negative $300. Another says, my stock keeps going down "should I sell?"
Sometimes the comment to me is, I thought that the stock would do well because I was promised this was up
and coming and my money would grow. "I have a pamflet here that explains everything."
It's unfortunate that like everything else that needs to be learned, buying stock looks easy, and this causes
the new person investing online to lose money. How hard can it be? Open an account, click your mouse on
the stock you like and presto, your making money. Now you expect your stock to zoom upward, but
surprise, your stock is sinking faster than a rock in the water.
First thing we need to do is learn the basics, that need to be done, to prevent the loss of principal (the money
you bought stock with). We teach this and more at http://www.youcontrolinvesting.com/, and it's easy. There is nothing "hard to understand," or "too complicated" about buying stocks that can make you money. Many
people do it everyday, from professionals, to the person at home on the computer trading on line building a
retirement account.
In the beginning of this lesson I mentioned "familarity" as being a reason people use to invest in a company's
stock. Questions need to be asked. Even though the company has been around for many years, how well
financially are they doing today. As we know the economy has slowed, people are not working, and are
buying less. By looking at a companies "financials" we can learn if the company is growing financially, and will
stay solvent, or has already filed bankruptcy. Look at General Motors (GM) for an example of this. If you
had invested here, you would have lost your money. Just by looking at GM's financials you would not have
invested money here, and would have prevented the loss of your money.
The second item at the beginning of this lesson was "price." Why did the price drop lower? Was it because
I bought it (stock always goes lower because I buy), or is there some other reason. Know that you cannot
influence the planets and the stars, and what you do in the market (buying), is not the reason your stock price
fell. Knowing this is great, because now you know, you can make money in the market.
On price we need to find out what the stock is worth, not the price you see on the computer screen (that's
the price the last person was willing to pay). What it's worth is dependent on growth rate in the past, and
future expected growth rate. The other thing to look at is "financials," are they good or bad. Not all
companies doing the same, are worth the same. Example Rite Aid Pharmacy; filed bankruptcy, and
Walgreens Pharmacy, doing great, which as I write, I own. This is another item covered in our course at
http://www.youcontrolinvesting.com/ .
People will try to sell using promises and printed material like a "pamflet." It is your money, and research is
required at all times before giving it to someone, or in this case buying a stock. Remember that investors
were asked to invest in an oil well years ago, and lots of money would be made when oil was hit (the
promise). If your stock never hits oil...You lose.
To learn more about the proper way to invest in stocks, and also understand how to better manage your
workplace retirement account, (help it grow), visit us at http://www.youcontrolinvesting.com/. We also post
important information that changes quickly at www.Twitter.com/StockMktTeacher
We welcome your questions and suggestions.
Good Investing,
Bruce Cortez, Instructor
Bruce@YouControlinvesting.com
http://www.youcontrolinvesting.com/
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