Picking a Fund

  Picking the best fund in what’s offered in a 401K or similar work provided retirement account is left to those of us that don’t have an understanding of how stocks and bonds work, and how they make our investment grow.

  Some schools are starting to teach this information to our kids, in an economics class, but for those of us that didn’t have the opportunity or interest to learn, there are ways to pick the best fund of what is offered to us.

  The first category to look at is the “High Risk” investments in the retirement account. This is where the most growth potential of the retirement account will take place. (“Low Risk” would be the same as stuffing money in your mattress), No growth.

  High risk means that the fund you’re investing in will be global. This means your money will be invested in Brazil, China, India, Italy, Russia, and other places including the United States.

  The value of the fund could change because of events that happen in the country in which the business you’re invested in operates.  Another change to the value of the fund would be the currency exchange rate. Because of these “Risks” is why you have the potential to make money in these funds.

  If you don’t have a great interest to put in a lot of time selecting the best fund in your 401K or similar retirement account I have an answer for you, the MONEY MANAGER.

  The Money Manager or Management, is the person that has a plan for the fund (called a prospectus).

  The Money Manager will either be very good at what he does (able to make money for investors in the worst of times), or he can be doing a poor job, causing investors to lose money.

  Start by getting the symbol for the fund you want to consider. This will be found in the information your work provided, to pick your investment from. An example would be Fidelity ContraFund, symbol “FCNTX”.

  Now on to a site that does the best job of providing fund information; http://www.MorningStar.com , here we will have all the information about the fund you could possibly ask for.

  When looking for the fund’s management, look for a name of an individual, not “Team” or “Members", you want a name. No name, move on to the next fund.  Also, look  for tenure of  the manager of five years or more, then what you see about the funds performance at MorningStar.com is his performance not someone else.

  Now at the top of the page there is a window that says “quote”, and in this window type in the fund symbol… in this example; FCNTX.

  Everything about the fund can be found here. Now go down the page looking on the right half till you find “management”. The Money Manager for our sample fund is William Danoff.

  Now go to http://www.Google.com and type in the managers name into the search window. The result will be everything you need to know about William Danoff. What we learn is that FCNTX is a very good fund to put our money into because of William Danoff, plus we have lots of information at MorningStar.com to back up his management performance.

  I hope this is helpful, and if you have questions please contact me.

  Good investing,

     Bruce Cortez

  Follow me at http://www.Twitter.com/StockMktTeacher

Fiscal Cliff

   Don’t expect a deal on the “Fiscal Cliff” issue until at least December 20^th. The amount of work needed and the amount of legislative days that exist makes it conceivable that nothing will come out till December 20^th.   This is the schedule going forward.

  Nov. 13 – Year end, Lame Duck period for Congress begins...Nov. 19 – 23^rd, Thanksgiving break…Nov. 26^th, Fiscal Cliff debate likely to begin…Then Jan 1^st, Fiscal Cliff IMPACT!!!! ….JAN. 2^nd, Spending cuts triggered ($78 billion)…Jan 3^rd, 133rd Congress takes office…And finally Jan 20^th, the Inauguration.

  The Fiscal Cliff tax increase equals 1.3% to 1.5% of the Gross Domestic Product, and the last tax increase of this size caused a 35% market drop in one year.

  Today stocks surge on Fiscal Cliff optimism, and stocks have biggest gains since September 13^th. The S&P 500 for example erases last week’s losses. Again, the markets are moving on news. Positive news we go up, Negative news, down.

  Looking at Europe, expect Spain to have more problems in the next couple of weeks, and in another part of the world has Israel stepping up targeted attacks on heavily populated Gaza.

  World events will continue to move the markets.

 Bruce Cortez

 Follow me at Twitter.com/StockMktTeacher

The Markets today and the Direction of our Economy

   If you look at what the markets have been doing since the election, I think it’s a clear indication that investors are worried about what’s not going to happen.

  If you look at what the stock market did, it immediately dropped, because investors don’t know what is going to happen…more of the same, or something different.

  Investors need some kind of solution about the ‘Fiscal Cliff’, or some kind of indication that we’re getting a solution. If not, the markets will get uglier.

  Fortunately for the U.S. it looks like we’ve gotten away from the European issues (problems of just spinning their wheels with no improvement), because it looks like the U.S. economy, can gain some traction. But if we don’t see something by our government soon, all will grind to a halt.

Bruce Cortez

Follow me at http://www.Twitter.com/StockMktTeacher

Today's Investing Fear

Today’s fear of the average investor with a 401K, 457 or other work place retirement account has money sitting on the sidelines.

  At today’s interest rates leaving money in a savings account or the savings part of the retirement account will not create enough interest to allow money to be made for a financially good retirement.

   The individual needs an understanding of how the stock market works and what you can do to create profits and limit loses. I suggest reading books.

   An easy read book with lots of good information is “The Truth about Money” The 4^th edition by Ric Edelman. You can get the book as a paperback or download to your reader.

  One of the reasons that people fear putting risk into the market, is because of the pull-backs the market has from time to time (corrections which are normal).

  Without risk, your portfolio will not grow, and that is what savings is. Savings is a place to keep your money, but a place where the value of your money will not increase. Similar to putting your money into your mattress.

  Currently there is a little too much uncertainty in the market. What will Greece and Europe do? Who will be our President, and how will that person run the country, and a big issue, what will happen to health care (ObamaCare).

    Talk about a “risk on trade” or a “risk off trade” by those on the radio, TV, and internet makes people fearful about the future. The fear comes from a lack of understanding about the market.  In the short term (days, months) things can look good and bad depending on the news we get. But investing is about the long term (years).

  Over years, the little bumps along the way have very little effect or no effect on our investment. Quality stocks continue to rise creating greater wealth for investors. Buying stocks that pay dividends…(dividends is like getting paid interest) while you wait for the stock value to rise is how to create wealth in today’s choppy market.

  Stay invested in quality stocks or Funds that have stocks paying dividends within the fund to create wealth.

  I’ll blog more about where to get the information you need, but in the meantime stay invested.

  Bruce Cortez

Twitter.com/StockMktTeacher

Apple Today

Apple (AAPL 627.49) is in correction territory. Yesterday’s close was $638.17, and as I write this the price is at $627.49.

  Today there is consolidation in the name. The stock has been vertical and you’re seeing some profit taking here. There are also some negative headlines out there with Foxconn Technology Group… Headline: Apple iPhone 5 delay: Foxconn denies worker unrest slows smartphone assembly…and some minor complaints about camera scratches, causing concerns to investors in the company.

 

  This stock tends to fade slightly following a product launch, but today’s correction goes beyond a “fade” or slight pullback.

 

  The broader concerns with the economy are also not helping Apple, and arguably this stock had dropped in the past on concerns of the iPhone5, on timing and other issues.

 

  The concern right now may be tied to the iPad Mini, and investors are waiting for Apple to send out the invite. When the invite is sent out, the stock should rally. The components are being sourced in Asia, and an announcement could be next week.

 

  Production is already occurring, so the launch of the product should be with a few weeks. A big delay is not expected in terms if the iPad Mini launch.

 

 Apple will report earnings later than usual at about October 25^th. This could be to set aside time for a special announcement.

 

 

  Apple specific fundamentals are still strong, so another cause of today’s price drop may be the stock is a leader in portfolios, and profits are being taking ahead of the election.

 

 With a ten percent drop in Apple’s price this would be a good time to get in… Remember buy on weakness and sell on strength.

 

  Daily stock market updates. Follow me at http://www.Twitter.com/StockMktTeacher

Should You be Investing in Today’s Market?

 Today’s market is in the wake of no QE-3 promise from the Fed’s, no sign from the Central Banks that there will be mass injections, so oil continues to deflate. With that, Energy leads us lower. Crude oil now is down more than a dollar to $78.79, Brent Crude $90.58.

  Should you be investing in today’s market, the answer is YES. You need to be invested because of the lower prices for quality stocks and the stock market is the best way to create wealth for the individual investor.  If you buy stocks paying dividends, that’s like being paid an interest for your investment. Another way to look at dividends, the company is paying you to wait for the price of the stock to rise. Either way, you’re making money with your investment.

  When investing in today’s market, stay focused on company fundamentals, which means take a look at the numbers. Start with Return of Invested Capital (ROIC). With this number you’re looking for a consistent growth rate of ten percent or greater for the most recent year and at least the previous five years. Remember your looking for a consistent growth rate of ten percent or greater.

 

I’ll walk you through finding this information.

Lets go to www.MSN.COM because its information is free and we all have access to it, even with a smartphone.

 When the page comes up, move your curser over money, then down one row and move left to investing and click.

  In the box that says “GET QUOTE” type in your stock ticker symbol (WAG) in this example, or just spell it out (Walgreens) and suggestions will appear, click on Walgreens. Note: On my computer I need to keep the curser in the "GET QUOTE" box for this to work.

Now go down to FUNDAMENTALS and click on ‘Key Ratios’.

 Under the price $29.20, see Growth, and to the right find ‘Inv Returns’ and click on that.

Now you’ve arrived.

 Look for ‘Return on Capital’ and the number is 13.1. That is the growth rate for the most recent year, which is 13.1 percent….Ten percent is our minimum.

 Now below that is Return on Capital (5-years Avg) of 13.6. This tells us that the average ROIC growth rate for the last five years has been growing at a 13.6 percent rate.

   If you know nothing else about the company, you know that the company is being run and managed very well. We also see consistency in how the company (CEO) manages everything about the company to allow the company to grow and survive.

  This is only the starting point for finding quality stocks. There is still more homework to do in determining the quality of the company, and then to arrive at a price to pay for the stock that will allow us to make a profit.

  An example of paying too much for a company’s stock was Facebook (FB 31.67). The stock was very overpriced when the company came out as a new IPO. No one cared about the price because it was ‘Facebook’, and many people got hurt, so take the time to buy stocks properly (looking at fundamentals and doing homework), and don’t get burned.

 Learn how to invest in stocks and ignore the ‘professionals’ telling us that they have the advantage and you and I have no chance in today’s market. ‘Bull!’

   Professionals, not all, are saying this because giving them our money to invest with makes them money (fees) whether or not they make a profit for us.

  The recent sell-offs provide us with quality companies at discounted prices allowing us to profit. You can invest with a better outcome than your current professional. Just look at your 401K or similar retirement account. You can do better.

See daily updates and comments at http://www.Twitter.com/StockMktTeacher

Safe Haven, is it Gold?

  The biggest head wind to gold right now is that stock prices have been under some pressure, the economy of the world is under pressure, and as stocks prices come under pressure, it’s not a matter of what you want to sell, but what you can sell…And gold is one of the things people are selling. We also have inflationary pressures out there..look at copper prices, crude oil prices, and that’s putting downward pressure on gold.

  Gold is considered to be a safe haven. Safe havens don’t one and two and 5 percent. Gold moves one and two and five percent. So the fact that people consider gold to be a safe-haven is wrong. Gold is the ‘Armageddon Trade’ in case the whole thing falls apart and if all else goes wrong.

  Parking money in gold is foolishness. The safer things are; buying Canadian Treasury Securities (Canadian T-bills), Australian Treasury Securities (Australian T-bills), or buying U.S Treasury Securities (U.S. T-bills) that have not moved much. ‘Safe’ means ‘Safe’. Safe doesn’t mean something that moves up fifty percent and down thirty percent…That’s hardly safe. Gold is not a safe-haven, Gold is something you trade.

  When it’s a bull market you buy gold, and in a bear market you sell it, and right now we’re in a bear market since October of last year, and gold is being sold.

  For a ‘Safe Haven’ look at (and I keep repeating with good reason) quality stocks paying dividends…Verizon (VZ 41.09), AT&T ( T  33.38), Altria Group (MO 31.96) or (MHY 6.22) a high-yield fund.

 Follow me at http://www.Twitter.com/StockMktTeacher

Stay Invested in U.S. Stocks to Profit

U.S. markets continue to defy the trend in April, historically the third best month on the year for stocks. The Dow just managed to end positive for April, eking out a small tiny gain just above 0.01%. This extended the Dow’s monthly win this week to seven. The Nasdaq turned it’s first negative month since December, and the S&P it’s first since November.

  Historically  May is the third worst month for the Dow and S&P. It’s time to be optimistic about the stock market. If you got out of the market, at these levels it’s time to get back into the market.

  Corporate profits continue to surprise to the upside, and half way through the earning

 season’s first quarter, seventy percent of the S&P companies have outperformed, beating expectations. I expect that trend to continue.

  Expectations have been very low, and looking back nine-months ago, the most recent beat is ahead, but well below the expectations of nine months ago. Don’t expect to see severe increases in those corporate earnings.

   Look for consistent single digit earnings type momentum. Margins are high, but if we learned anything over this earnings season, it’s that earnings can continue to remain elevated and consistent. There has also been top-line growth, which can be expected to continue.

  GDP is not growing the way it has in other recoveries, but it is growing, and margins will continue or improve. Labor costs here in the U.S. are down about thirty percent over the last five years. There is also room for capacity utilization two places pointing to elevated margins for some time.

   The balance sheet in American house holds is stronger than it has been five years ago, and arguably in the last twenty years. Consumer spending has picked up about four percent year-over-year, but that spending has dropped. Disposable income is up a bit, so U.S. consumers do have some capacity to continue spending. Debt service levels here in the U.S. for house holds are at their lowest levels in twenty years.

  Follow me at http://www.Twitter.com/StockMktTeacher for a better understanding of what is happening in the stock market.

The hunt for yield…In Junk Bonds Lesson 126

  What are Junk Bonds? They are bonds that are 'BB' or lower because of their high default risk. Should you be investing in these, read on...

  The hunt for yield is drawing many investors into the junk bond market, so many in fact that there may not be enough supply to keep up with demand. A strange dynamic with  potentially interesting outcomes.

  Recently there have been huge inflows into mutual funds that buy into high yield junk bonds, and yet there isn't enough supply to keep up.

  The hunt for yield is fierce, and we're only nine weeks into the new year. At this time there is almost as much cash money coming into the high yield market as seen in all of last year. The inflow doesn't seem to be stopping.

  As investors get more comfortable about taking more risk, they are increasingly putting more money into high risk assets like high yield.

  For the issuers of high yield the current situation is great, and many of these issuers have already refinanced their debt in the last couple of years. Coming out of the debt crisis, they didn't want to wait.

 Maturities have already been taken out by the refinancing at much lower rates, and the supply needs to come from somewhere to meet all the demands coming to these high yield funds.

  There are two opportunities...One is Europe, arguably the bigger opportunity. European companies represent about 30% of the global supply, and that's growing faster than prior years.

  In Europe many of the commercial banks are pulling back, and is creating a void that J.P. Morgan would like to step into. (Lending is not happening in Europe to constrict their balance sheets to lower the asset levels).

   Investors in the U.S. want the price risk, and so believe they can get a higher yield by going into the European market and taking the commercial banks out of their paper. The opportunity is very large, in the tens of billions of dollars.

   Some of the current funds that are taking in money now are giving it back because of inadequate supply to put money to work. This hasn't happened in twenty years.

    The problem as a portfolio manager is to beat the index, and if the index has no cash in it, and if you have too much cash and you can't deploy it productively, you're forced to give it back.

   There hasn't been more merger and acquisition with all the money that is available, perhaps because of the worry of paying too much for assets, and perhaps sponsors are taking more care into how they construct these deals...But capital is plentiful with cheap debt. Low confidence and history may be the reason for the extra care in spending.

  We may see more dividends being paid going forward and perhaps more leverage-buyouts. Dividends paid to the owners of businesses are an easy way for sponsors to get capital off the table without having to go to the IPO market. This could be a major theme in 2012.

  Credit Spreads (the spread between Treasury Securities and Non-Treasury Securities that are identical in all respects except for quality rating). For instance, a company must offer a higher return on their bonds because their credit is worse than the government's.

   If you look at  credit spreads, there is not a bubble being created in the high yield market. Spreads relatively speaking continue to be wide, and the high yield market hasn't yet rallied as much as some of the other markets. Example: The high grade markets having record issuance.

  Maturities inside the U.S. are relatively low, making Europe for 2012 and 2013 the place investors will be moving their money.

  Daily market information can be found at Twitter.com/StockMktTeacher..Follow me.

Comments on Today’s Market Lesson 125

 It’s great having a little follow through from yesterday’s big up day.  The big concern was if yesterday’s move was just a one day event, or if it would be the beginning to the market pushing through to higher levels.

  So far today, we are seeing a nice little continuation to the up momentum, not very strong, but enough to keep optimism going, but on disappointing low volume. Volume is low in buying and selling, with no clear direction in either way.

  It’s nice having strong banks leading the way in today’s trading, with a tech giant Apple, the leader of all stocks right now leading tech. Many things in the market are being pulled along, a really good sign.

  Volume is hugely disappointing. The upside volume wasn’t as much as it could have been, but the downside volumes were equally as light too. It’s hard to make a big deal one way or the other.

  It’s very disappointing that the total equity market volume has been on a down trend and not stabilizing and improving at all.

  Low volume may be due to competition in many different products, but also shows that there is lots of money on the sidelines. If and when there is desire for investors to get back into equities happens, it could be a monster move.

  We had been expecting a pullback in the market after its constant rise, and the 200 point pullback recently, was less than expected. We’ve spent so much time trying to punch through 1370, and as I write this (8:15am) we’re almost 30 points higher than that, we may be seeing a sign, that if you’re on the sidelines, it may be time to get in to prevent missing out.

Bruce Cortez

 Follow me at Twitter.com/StockMktTeacher

What’s driving oil prices higher? Lesson 124

  Crude Oil has rebounded in the last couple of days, WTI Crude today settled at 106.79 up 0.59%, but crude is still down about 2% in the last week and were still talking about $106, a barrel oil.

  There are a few things driving oil prices higher in today’s market. Iran is one with its concerns of a potential supply dislocation with that issue. There is also South Sudan, Yemen, Syria. All of these non OPEC sources also cut off-line. That’s a 500,000 barrel a day disruption of crude.

  There are also about 500,000 barrels a day off line in the global context , people abandoning the use of Iranian crudes, so about a Million barrels worth of supply implication is really what’s elevating this.

 The converse of this is that we’re seeing a pretty good demand implication of that higher price.

  Some think that the market will compensate for any volatility if the Straight of Hormuz were closed. There will be reaction if that happens. 20% of the world supply moves through the Straight of Hormuz. About half of that, you have relatively short term implications, in terms of being able to redirect those supplies with other pipeline systems. That still leaves about eight million barrels a day of a disruption. That would create an impact of upward in oil price.

 Just taking Iran off line, (oil exports are about 2-million barrels a day)  Our global strategic stocks have the capacity globally to satisfy an Iran short-fall for about twenty-four months. It just depends on how dramatic and how durable it is.

  The U.S. military has made it clear that The Straight of Hormuz blockage would only be a momentary period.

  These high oil prices (Nymex should be $90 - $100, Brent should be $100 - $110) do allow investors to position themselves for the opportunity. If the military strike against Iran, prices will move higher.

 If oil prices stay where they are, then look at EOG Resources (EOG 114.41), SM Energy (SM 78.17), Carrizo Oil & Gas (CRZO 29.10). These have or will transition in to much more exposure to the oil side.

  Bottom line on oil prices;

   Iran’s the wild card. Lets hope that we have a diplomatic solution through that issue. If you get that, you’re getting enough demand implication to get relief in oil price, in over the course of the year oil prices will move down $10 - $15 a barrel from current levels.

   Nymex at $90 - $100 and Brent at $100 - $110 are kind of the equilibrium levels in global context with geo-political overlay. This looks like where oil prices are headed.

  If prices stay at today’s levels, global growth and demand would be hindered, but the demand side of the the equation is what would move oil back to lower prices.

  Even with the disruptions mentioned here, there is still half a million to one million  barrels on non-OPEC growth. The demand side of the fundamental equation would remove the geo-political elements, moving us back to the lower price window.

 Bruce Cortez 

 Follow me at Twitter.com/StockMktTeacher

Investing in Today’s Market Using Technical Analysis Lesson 123

   How will the S&P perform for the balance of 2012? Looking at Charts (Technical Analysis) gives us a clue of what may very well happen, and this offers us a chance to protect our investment in the stock market. How do we protect our investment, you ask?... Buy only quality stocks on pull-backs (on sale), that pay dividends, and buy more of these same quality stocks at a cheaper price.

 For those that have money in a work place savings / investment account like a 401K what you do is move your money from the investment portion of the account to the savings portion of the account to lock in your gains while the market drops, then put your money back into the investment again to increase profits as the market again rises. Note: (401K and similar accounts have rules to promote stability in the account. They don't like lots of trading, so read the rules of your account). Example: Every few months its allowed that you make six transactions ( move into investment three times, and move out of investment three times, on line) there after to slow you down, you'll need to use snail mail to do the same thing. After more time has passed, you can then use the internet again for moving in and out of investments within the 401K account.
 Learn the rules of your account, and use them to your advantage.

 If  technical analysis is correct and very often it is, we then will have an opportunity to buy more quality stocks at reduced prices when the market offers them on sale and makes its normal 10 percent or more correction.

   S&P 500 at 1450 area is determinant level for the rest of 2012. A sequence that repeats itself is seen again with technical analysis of the S&P500.

 In 2010 from May to October, the S&P maintained a level of around 1050 to 1110, then at about September the S&P began its climb upward at a steady rate till hitting resistance at about the 1344.07 level and maintained that level from late March till July when the S&P made a correction down to 1074.77 and maintained that level till October when the S&P again began its upward climb till it hit a new resistance at 1448.87.

   This new level of support (at about 1450) could be reached by April of this year, and if history repeats itself, there will be a drop of the S&P500 to the support level of 979.45 by October of 2012.

  By keeping an eye on the charts, (Slow Stochastic, Moving average, MACD and others), we can see how the institutions are investing.  When they are buying, this causes prices to rise…or selling, causing prices to drop.

  Profits in the stock market are created by buying stocks at ‘your price’… NOT the markets, and buying when the institutions are buying. Reduce losses and create profits by learning to use charts. Learning Technical Analysis is one tool well worth learning.

 More information is at http://www.Twitter.com/StockMktTeacher