Crash Market Stocks - Financial Tips On Making Money In The Stock Market

Back to Blogging

noreply@blogger.com (Finance Fanatic) — Tue, 06 Mar 2012 05:58:00 +0000

Thank you for your patience as I continue to try to find time to give updates on the site. Thanks to everyone who has reached out to make sure I am still alive, haha! All is well, and hopefully I get the opportunity to converse with many of you.

As for an update, I am pursing my MBA and am enjoying the opportunity to dig even deeper into financial markets and strategies. I have been lucky to work closely with faculty and staff who have extensive experience in portfolio trading and a long resume in market studies. It has been very interesting digging into market efficiency and really looking at the data and concluding if abnormal gains in investing can be accomplished and repeated and how... The results are very interesting. I will be sharing a variety of strategies and portfolio theory that we find and study with all of you as well as implementing these strategies in my account and sharing them with you.

Markets have continued to act unique this past year as it has since 2008. However, we are still finding many existing and new strategies are finding a lot of success in current trading environments. There are a variety of new portfolio strategies in today's market that allow for diversifying against non-systematic risk in portfolios. We are also seeing momentum trumping several past fundamental valuation methods.

The past two years, we have seen just exactly why fallen Angels small cap stocks are the optimal choice for portfolios rather than value growth stocks. Rebounds in companies such as Las Vegas Sands, Citi, and Wynn show just how profitable being 0n the right side of these rebounds can be.

I am excited to reignite some passion with the readers of this site... I look forward to some great gains and strategies for this year and hopefully we can share in the success that the markets are sure to bring this year. Happy Trading!

Stocks Suffer Despite Consumer Income Rise

noreply@blogger.com (Finance Fanatic) — Wed, 23 Nov 2011 23:19:00 +0000

It is the week of all weeks for retailers. In fact, I find it comical to browse around online retailers to see that the norm has now become "Black Friday Week." Retailers are riding the black friday train as long as they can. Some, like Amazon, keep the party going a whole week after. For many, 40-50% of their profits will be earned in the next two months. That can be a big gamble if consumers are tightening spending a bit, which recent data is showing.

First, lets discuss the drops in stocks. This was initiated by the failure of Congress to pass a bill to cut into the Federal Deficit, which has caused for a lot of concern on Wall Street with some speculating another future downgrade in US debt. The one received earlier caused quite the shake in markets.

Coupled with politics, is the recent spending data which was released this week that showed despite consumer earning more income this past month, their spending rate decreased. Sure, October can be an exhaust month in anticipation of the holidays, but many see it as consumers being concerned about economic uncertainty.

In addition, jobless claims ticked up by 2,000 this week, which didn't help.

A lot of eyes will be on Black Friday spending to see how consumer sentiment is going into the holidays. Don't be fooled by coupons being sent in the mail. Many retailers are cutting back on holiday savings, due to recent declines in sales despite large discounts on items (big ticket items especially).

As for now, I have a straddled position in the market, hedging many of my longs with shorts. To offset the rest, I am bullish on commodities and gold as I continue to believe uncertainty amongst investors will push up those markets. Happy Trading.

China and Stocks

noreply@blogger.com (Finance Fanatic) — Thu, 17 Nov 2011 18:41:00 +0000

It is continually the big elephant in the room. On one hand, because of China, interest rates continue to remain at record low levels due to the large supply of treasuries they continue to buy (and the Fed). On the other hand, China's aggressive currency valuation and manufacturing is definitely starting to be felt in US businesses and has been for quite some time. So what is the answer?

Yesterday, President Obama announced that the US would be beefing up the military presence in Northern Australia, that man believe sends a message to China that the US still owns the Pacific.

Recently, I have been able to get two sides of the story as well as two perspectives and how we should go forward with our relationship with China.

First, I attended a presentation given by Joshua Cooper Ramo of Kissinger Associates, who has been nearly a diplomat of China and has lived there for over 10 years. He has recently written a book called "The Age of the Unthinkable," which talks about China in more detail.

Essentially, Ramo talks about the rising power of China and how, because of the population and buying power of the upcoming middle class, a mutual beneficial relationship cannot be ignored. He addressed many of the concerns and preconceived prejudices that many Americans have of China, as well as tried to dive into the culture of China and why they react a certain way to things.

Ramo feels that the next generation of China brings much more diversity and "free thinking" than does the current Communist party. He feels that as China continues to accept capitalistic companies into the country and with the help of social media, these barriers will continue to break down. He feels that if the US can make a mutual relationship work with China, it will be the best decision the US ever made.

However, there are always two sides to a story.

Next, I have listened to the words of Peter Navarro, a professor of Finance at The University of California Irvine and the author of the book, "Death by China." In this book, Navarro breaks down the manipulation and fraud of Chinese leaders in which directly effects both the health and economic well being of the US. He talks of the hacking, spies, and theft that occurs daily as well as the military threat as China continues to build their forces.

He also discusses the fault of the government for allowing many of the problems to happen. China allows almost no imports into the country, but exports more than half of the world's goods. Many factories in Detroit, Chicago, and Kansas City have been closed down and replaced with factories in China.

Navarro believes that unless something is done to regulate how China conducts business, especially within the US, we will suffer many consequences, as will our children.

You decide. How does the US go forward with their relationship with China? The fact of the matter is, that China does hold the largest middle class population and will have only more consumer buying power in years to come. As China continues to develop and become more urbanized, without a debt there will be extremely large opportunities there. The question is will US companies be able to take advantage of it. Some already have. This is why I continue to be bullish in Chinese companies. Happy Trading.

Bulls and Bears Stand Divided

noreply@blogger.com (Finance Fanatic) — Wed, 16 Nov 2011 21:51:00 +0000

Republicans and Democrats are not the only people drawing lines in the sand and not wanting to budge. We are seeing a pretty divided stance on the near term movement of markets. I have been to several economic forecast meetings in which very highly respected economists discuss their near term outlook of the economy and it surprises me that I have heard many different stories from all of them.

This perfectly explains the volatility of the markets. In fact, some people change their minds day to day. Whatever it may be, their currently exists major differences of opinions among highly regarded economists and corporate CEOs.

For some, the debt crisis in Europe, combined with the monumental debt piling up in the US is only delaying the inevitable. That being another dip in markets. For others, record low interest rates, strong earnings among manufacturers, and more liquid banks is priming the market for more of a rebound. The one thing that most will agree, is even if we do trend upwards, that will be a very slow growth.

I am encouraged with recent earnings from manufacturers, however am discouraged with many of their "restructuring" plans for 2012. With the latest earning reports, many US manufacturing companies released a restructuring plan for 2012 in which they will be looking to scale down operations as well as cut certain jobs. All seem to have the same answer when asked why. Because they are unsure of near term outlook. They would better be prepared than be caught by surprise.

What worries me most is how sluggish the current economy is, while enjoying record low interest rates. In fact, without such interest rates, I believe it is safe to say we would be head deep in a depression as of now. They are the lifeline that has kept us a float, barely. However, this cannot last forever. How long will the government extend this benefit while stockpiles of debt continue to grow? That of course, will be the big question as we go into 2012. The government has made it clear by both words and actions they will take ANY action necessary to keep markets flowing. Whether or not that will come back to haunt us is a big subject of debate.

At any rate, I see commodities finishing strong to end the year. As risk and uncertainty continues to rise, commodities will go stronger. I see a lot of opportunity in some of the emerging market sectors, but I will go into much more detail about that in a later post. Happy Trading.

More Market Volatility and Netflix

noreply@blogger.com (Finance Fanatic) — Thu, 13 Oct 2011 05:40:00 +0000

Stocks have rebounded quite nicely since September's trading woes. Two weeks ago, trading was looking quite grim with not a lot of optimism. However, markets have had some good trading days and bounced back. Beware of falling into the trap of going long too soon. There still remain a lot of discouraging signs in the market that could push for another sell off. Consumers are sensitive and just the slightest negative pressure can turn optimism into pessimism.

One big thing to keep eyes on is the VIX levels. We have seen quite the spike in the VIX (volatility index of markets), which mostly leads to downward trading in the long run. We saw record VIX levels in 2009 when markets reached lowest levels. The theory is that the more uncertain traders are, the more sensitive and volatile they trade. In fact, just in the past two months, we have seen several +/- 1% Dow trading days. It has come down a bit this past week, but still remains in high levels.

After months of upsetting their subscribers, Netflix announced this week that they would not be splitting their streaming and DVD company up. Recently, Netflix changed their subscription prices, charging significantly more for those wanting to continue receiving DVDs. In addition to the price change, Netflix announced their plan to divide the company and retain the streaming service under the Netflix name and create a new company (Quickster) to house the DVD business line.

Customers responded to this move with even more anger for the company, which resulted in some loss of subscribers. After a few months, Netflix finally gave into the complaints and hacked the Quickster company, keeping the two businesses under the same roof.

Throughout the duration of this debacle, we have seen a tremendous drop in Netflix's (NFLX) stock price. After reaching highs of well over $300, the stock almost reached the $100 mark this past week. Investors have begun to question the decision making ability of the company's leaders and whether or not they have the ability to continue strong growth.

Additionally, Amazon is starting to show its big, ugly face around the corner as a massive competitor of Netflix as they just recently announced their new Tablet as well as their growth in streaming content for their Prime users. This is another influencer for selling NFLX.

Personally, I believe the stock has been a bit oversold at this point. Much of the reaction has been emotional, which tends to reach far beyond the point of logical valuing. The point is, Netflix still controls the largest amount of streaming media content, which will always bear the largest subscription base. If Netflix can keep this trend, they should continue strong growth. I threw some of their stock in my account on Monday. Happy Trading.

Berkshire Buybacks Spur Market Rally

noreply@blogger.com (Finance Fanatic) — Tue, 27 Sep 2011 04:58:00 +0000

A new week begins, and considering what happened last week, there was a lot of anxious investors awaiting the opening bell on Monday. Warren Buffett made it easier on everyone by announcing his plan for Berkshire Hathaway to begin purchasing back its own stock. This move is very interesting, as it is usually Buffett who is critical on companies who initiate to do so, accusing them of "propping up" stock prices for their own companies. He, however, said when there is added value, the move can be very worthwhile for investors. I guess the the market agreed, as Berkshire Hathaway A traded up nearly 8% today. However, it still remains down over 20% for the year.

Buffett is not the first to initiate buybacks for his stock. In fact, 2011 is already one of the highest volume of buybacks ever. This does not necessarily lead to upward trading in the overall markets. In fact, the largest year for stock buybacks was in 2008, which as many know, was the year that also marked the extremely large drop in the markets. The takeaway is, indeed companies buying back stock can be a very good thing for investors and often causes a short term pop in the price, however, it definitely does not guarantee big returns for that particular company.

Markets took a tumble last week as Bernanke announced his newest stimulus plan for the economy. Many felt that the proposed plan was much less than expected which caused a strong retreat in markets on Thursday. Fortunately, markets have recovered a bit since. However, a negative sentiment is still looming over Wall Street as new home sales continue to remain stagnant and employment is sluggish.

Kodak is seeing record drops in their stock price, as investors' concerns are growing in regard to their ability to reposition themselves as a "printer" company. Risky investors are hoping that indeed the sell off is too aggressive and hoping for a small buy back. At this point, they are clearly at high risk, but where there is risk there is a possibility of good reward right? Too risky for my blood.

We are reaching a very pivotal time in market trading, where the next few weeks are really going to set the stage for institutions heading into "redemption" seasons. We saw the massive sell off in gold on Thursday, as hedge funds were forced to sell, needing to show profits for positions. This indeed could be a trend in the near future, leading to me cool off on the gold investment for the short term. Time will tell. Happy Trading.

VIX Rising... Stocks Falling?

noreply@blogger.com (Finance Fanatic) — Wed, 17 Aug 2011 00:20:00 +0000

The past month has been an eventful one in the stock market. It almost feels like 2008 again. I almost thought the day of 500+ point daily drops in the market was over, but as I have always said, this fragile state of the market we continue to wade in, not much is required to shake things up.

Debt problems in Europe continue to apply pressure to domestic markets and US has their own basket of problems with their own debt. We have been a kid at a candy store with mom's credit card for the past two years, and collectors are beginning to come knocking. Anyone who believed that we would cruise out of this recession as we have, with minor scratches, was drinking too much government Kool-Aid. The fact is, is that our economy was hinging on borders of depression and that true unemployment spiked to over 20% in some states and that we have now sailed out and are having consumer responses as they were in 2006... Be assured, this is a mirage.

No doubt the government is prepared to battle any new or unforeseen crisis that hit our economy, but if they continue to do so with mindless spending and stimulus, we will find ourselves in a debt hole that is far to deep to dig out. VIX levels are on the rise, which is an alarm clock for bears... Also, high volume levels, which has been bulls' biggest ally, are finding recent record lows. Are we pivoting the market as we speak? I only see a couple scenarios.

The continual trend that we continue to see is the inverse relationship between the dollar and the stock market. As the dollar decreases, we see corporations outsource manufacturing and production which in turn ups their bottom lines, lifting stocks. However, as dollar values rise, foreign purchasing goes down, lowering net income, which causes for a downturn in the market.

With record low levels for the dollar, it is hard to see how it can dip much further. Of course, there is the rare the case that these two could head in the same direction, which would be a very paradoxical event, yet it is possible. If that is the case, it could cause quite the stir in markets.

The Fed has reiterated their plan to keep interest levels low for however long it takes. Many felt that this was the year we would see the hike back up, but it was not meant to be. Banks have forgotten what it is like to have to pay interest on loans and to earn their margins. They have enjoyed the life of free printed money for the past two years and I fear that when the day comes to reinstate interest rates, banks will have quite a problem. Of course, the government does not worry about such things, as much like the stock market, the government is only concerned about the present and not the future.

Keep an eye on the market the next two months, because it will be a telling one. Many bulls may find themselves wishing they would have cashed in on those big gains... I have. Happy Trading.

Greener Pastures for Stocks?

noreply@blogger.com (Finance Fanatic) — Wed, 22 Jun 2011 18:37:00 +0000

It seems as if every new week brings in a new generation of the economy. As we now deal with a global economy, there is so many different occurrences on a weekly basis that effects investor sentiment, that it can be hard to keep up with. At any rate, despite inflated energy and food costs, consumers have kept spending into the storm and morale seems high. Quite honestly, I do really know if this a good thing or something we will pay for later, but for now, long stocks are reaping the benefits.

Looking at some influential data, the rising stock trend may keep on a bit longer. Here are some outside influences that are point to a continuing rising market in the near future:

Bonds in Possible Trouble
Bonds have definitely been the comfort spot for many people during this past downturn, and frankly, the past couple of decades. Yields have steadily risen and made many of their investors happy. Thus, there has been a lot of investment taken out of stocks and put into to bonds, which is another reason why we saw such a strong drop in the markets.

Well, the appeal for bonds could be changing. With financial markets continuing to look more stable, it is only a matter of time until The Fed begins to hike up interest rates. This will directly effect Bond rates and may cause a bit of a retreat into stocks. If the retreat is severe, expect stocks to get a pretty strong bump.

Individual Investor Sentiment Down
It kind of sounds like an oxymoron, however it carries some weight. There constantly exists an inverse reaction of Institutions and private investors... When one believes things are good, the other is fleeing for the hills. As for me, I like to be on the side of the institutions, as they definitely throw their weight around much more and thus drive the market in a stronger direction.

As of late, there has been a lot of negative sentiment with private, individual investors. With this usually comes a more bullish move from larger funds. Don't be surprised to see some large blocks trade within the next few weeks and some violent bumps in key markets.

Japan Back on Their Feet
The stall in production that has occurred in Japan due to the earthquake and tsunami has had a global effect on markets, especially the tech industry. Well, latest data shows that indeed Japan has bounced back from recent production stalls and actually is ramping up production and is seeing some pretty strong growth numbers. This translates into a very favorable factor for upward stock movement and is already effecting momentum.

The realist side of me continues to look at the economy with fear, knowing that any large amount of bad news could very easily change momentum of this recent strong climb. Markets continue to be in a VERY sensitive state, and thus far, we have been very fortunate not to experience anything too catastrophic that could send consumers back to saving their money (that sounds funny). However, the above influences should continue to drive markets upward for the near future.

At any rate, the game plan SEEMS to be working at the moment, when looking at the stock market, but there still remains plenty of problems that need addressing. The stock market is not a true gauge of the actual state of the economy, it is only the perception of stock buyers. As of late, it has been the manipulation game of big banks. My advice, don't put all your eggs in one basket, as it is hard to tell where the money is going at this point. Happy Trading.

How Better Off Are We Now Really?

noreply@blogger.com (Finance Fanatic) — Thu, 14 Apr 2011 18:48:00 +0000

I apologize for my lack of consistency in posts as I have been very busy in multiple different projects. I love discussing with the CrashMarketStocks.com community and will be doing updates much more frequently from now on.

We are now closing in almost two and a half years since the major downturn in our economy began to take place. It feels like a distant memory as of now. I still remember waking up on mornings wondering, "who will be the big bank to fall today?" Businesses were dropping into bankruptcy left and right and not just small businesses, business that have been around for decades (Circuit City, Mervyns, Levitz and more).

Today, you would never even assume that existed only two years ago. Malls are full again, consumers are happily paying over $4.00 a gallon for gas and companies like Apple are having record breaking sales numbers. I have seen a lot of magicians in my day, but this is by far the most impressive illusion I have ever seen.

I have endured multiple recessions and I believe our most recent had the quickest change of sentiment out of all of them. What makes this remarkable is what fundamental changes were made during that time. National big banks entered bankruptcy, home foreclosure levels at record numbers, unemployment reaching mid teens in some states, and the stock market dipping the lowest we've seen in years. It is all a distant memory, at least that's what it feels like.

So what has caused such a miraculous turn around? I can't complain, my business is seeing huge turn arounds. What makes me nervous, is the artificial nature it has been built on. Why is it artificial? Here are a couple reasons:

The government has essentially partnered with big banks and is allowing them to rake in record profits off essentially government printed money. The US has issued profit/loss share agreements that are extremely favorable to banks and institutional investors that make doing business a no brainer, while delegating the downside to the government. Now you and I as taxpayers will carry the burden of loose underwriting and bad business practices that brought down many of the banks in the first place.

People are hailing that the housing market has reached bottom. Really? The FDIC reports that 1/6 homes are in foreclosure. Do you see these homes on the market? That is because the government is rewarding banks for holding on to these homes. Shadow inventory (homes that are not foreclosed but are in default) is even worse. Most of these agreements have 5 year lifespans, which makes me wonder what happens in 2o13 when a lot of these agreements are up? Slap another band aide on it I suppose.

Unemployment is still devastating. By far the most influential fundamental tracker still shows a depressing result. Am I suppose to be excited about a 9% national unemployment rate? And this number is not going down anytime soon, even the government admits that.

What we have learned the past two years is that we are not accountable for foul play and bad business practices. People have been bailed out left and right for, in some cases, very criminal decisions. This is why millions of consumers have found that they can stop paying their mortgage and spend their extra income on big screen tvs and new cars with no consequence. Sure, the US Treasury printing press can pick up the bill for now, but that result will come full circle eventually. In my mind, it is a time bomb waiting to explode, and when it does, not even our government will have the time or resources to defuse it. I am staying on my toes.

Gold vs Silver

noreply@blogger.com (Finance Fanatic) — Wed, 30 Mar 2011 16:49:00 +0000

The debate continues. Which is stronger? Which has more upside, especially if global uncertainty continues?

Gold has incredible amounts of emotional baggage attached to it, while silver is in a different league - at least for the moment. The video link below will show you two indicators that can help you capture either market when and if the upward trend decides to resume.

With all of the world's troubles, there are plenty of reasons why one would think that both of these markets should be much higher. The question is, why aren't they? This great MarketClub video answers a lot of these questions.

As always their videos are free to watch and there are no registration requirements. Enjoy.

Watch the Gold vs Silver Video Here

Oil Climbing, but No Inflation?

noreply@blogger.com (Finance Fanatic) — Mon, 28 Feb 2011 23:13:00 +0000

That's right,. Ignore the financial burden that you and I have felt over the past couple years of rising commodity prices, because analysts say there is no inflation...Rubbish.

Anyone who has lived in the United States the past two years has noticed a strong climb in commodities. The latest release on inflationary numbers from our so called analysts is that core commodities are only rising at a 1-2% rate. This number would shun any ideas that indeed inflation is an immediate concern, but the real question is are the analysts correct?

In regards to oil, we of course know this is not the case. The cause of the most recent ascent in oil prices above $100 per barrel is largely due to the recent turmoil throughout the region. Honestly, is this new? The Middle East has been in turmoil since the beginning of time. However, anytime any new threat is known globally, there becomes a rush into oil prices. As this tends to be the trend, I would expect oil to start peaking shortly.

Oil is not the only thing rising at this point. We have seen increases in phone costs, utilities, health care, food, and construction. I just received a letter from my health insurance telling me that my monthly premium was being increased 25% next month due to inflationary reasons! However, Wall Street is telling me that we are moving at a 1-2% rate.

Hopefully, no one reading this site is naive to think that this is true. Our government has just spent trillions of dollars in borrowed stimulus money in hopes to jump start the market. For the time being, it seems that indeed the market is running, but this injection will come with consequences. That is of course years of massive inflation. We are already beginning to see early seeds.

At this point, I have to believe oil is not going much higher. In fact, within the next couple weeks, I will be taking positions in DUG or even consider purchasing some September expiring DIG put options. Oil is going for a roller coaster ride once again, and I believe we are nearing the top soon.

For those non-believers thinking that indeed inflation is not in our midst. I thought I would share an interesting study Jeff Cox, CNBC analyst, did illustrating commodities recent moves. The following are prices he found in products showing first their month/month change (December to January) and then year over year change (2009/2010). The results are scary.

* Ground beef up 6.8 percent month over month, and 11.1 pct year over year.
* Butter, up 3.2 percent monthly and a stunning 27 percent over the past year.
* Coffee, up 6.5 percent and 16 percent.
* Potatoes, up 3.6 percent and 7.1 percent.
* Lettuce actually fell 5 percent monthly after a spike higher in December, but is up 5 percent over the past year.
* Bread up 1 percent and 3 percent.
* Chicken up 0.8 percent. and 4.3 percent .
* Egg prices have been fairly steady.
* Milk, down slightly month over month, but up 2 percent year over year.

Now you decide...Are we experiencing inflation?

Uncle Sam Wants Payback - Buffett Speaks

noreply@blogger.com (Finance Fanatic) — Thu, 17 Feb 2011 23:11:00 +0000

What? You thought the government was just going to keep giving handouts for free? Never. The IRS has announced that those who took advantage of the first time home buyer tax credit that was issued in 2008, will now need to start paying that back on 2010's tax return.

How this will work is that all those who took advantage of the $7,500 maximum tax credit in 2008 will be asked to add $500 to their taxable income for the next 15 years. If the house is sold before the 15 years is up, then the full amount will be due upon the sale.

What will really ruffle some feathers is that only people who took the credit in 2008 will be required to pay.

Not like this is going to affect the overall economy much. When you consider that about 70% of Americans are estimated to not be paying their home mortgage right now, you better believe their not paying their taxes either. At any rate, Uncle Sam is starting to look for payback, and its only going to get worse.

Another interesting side note is that Warren Buffett has reduced his portfolio holdings of Berkshire Hathaway to 25 positions, the lowest we've seen form Buffett in several years. Obviously, Warren himself, is having to think that indeed this run has to be coming to an end soon. This was surprising to many, considering that Buffett has been rather optimistic through much of the recovery.

In addition to reducing his holdings, Buffett also sold off all the remaining of his Bank of America stock, and up'd his positions in Wells Fargo. It seems as though Warren had seen enough of bad underwriting and news from the bank giant and has not gotten out. Wells seems to be a safe play at this point for financials as they remain as the high standard of underwriting and continue to make a killing off of interest spreads. Happy Trading.

Troubles With Gold

noreply@blogger.com (Finance Fanatic) — Thu, 27 Jan 2011 00:10:00 +0000

There has been a lot of recent anxiety with gold and questions of whether it is pulling back at this point. Up until now, Gold has been a very bright spot for a portfolio and has shown a lot of strength throughout much of the uncertainty of markets. However now, it is dealing with some selling pressures.

Below is a great video which discusses the latest gold trend and why we may be in store for some more downward pressure. Adam and the guys at INO do a great job at these technical chart analysis and offer videos for free! Just click the link below the video to sign up for their free videos. Tomorrow I will discuss some penny stocks that are catching my eye as of now. Happy Trading.

CLICK HERE TO SIGN UP FOR FREE VIDEOS

Watch Out For REITs!

noreply@blogger.com (Finance Fanatic) — Wed, 19 Jan 2011 22:02:00 +0000

Markets struggled to gain ground today as there were a lot of selling pressure throughout the entire day. Despite the down day, for most of January, thus far, we have seen this continual uptrend in markets, which is continuing to surprise me. At this point, I do not know how much longer it will last, but chart trends are definitely showing a slowing in momentum.

Commercial REITs have enjoyed record stock gains this past year. Those that were willing to roll the dice on them a year and a half ago have been rewarded significantly. At one point, there were many analysts who did not think any would survive the storm at the end of the day. However, this past year, from a stock price perspective, they have rebounded significantly.

My worry is what is driving this? Sure, lending markets have softened up a bit after being completely frozen for a year and a half. However, with exception to single family and multi-family financing (thank you Fannie and Freddie), good commercial loans are difficult to come by.

I am a professional in the real estate market and it is quite the paradox that we are seeing in today's market. Properties are trading, but in abnormal rates. Valuation spreads have become huge depending on property type and market density. All the major big buyers out there right now are... Wall Street (REITS). You know why? Because they are the only ones crazy enough to be buying at the prices they are offering.

I am amazed at what large portfolios have closed at what price, when looking at a variety of recent closings. When looking at the buyers pool, there is a clear separation of where the REITs are coming in at and where the private investors are. So why the gap?

REITs have the luxury of using other people's money. Much of their administration fees are made by doing actual transactions. In many times, these funds have deadlines in which funds need to be placed, or they will lose the funds. When that loss of funds can amount to millions in lost fees on behalf of the fund, you better believe that money will be placed. This is why, especially in more primary markets, you will see REITs offering 2007 prices for real estate today. Fundamentally, it doesn't make sense.

Unfortunately, many people investing in REITs are ignorant to what is happening and just want a chunk of their portfolio to be in real estate. REITs are the best option then right? I don't have the risk and responsibility for owning and managing a property, but I have equity in the upside. That's if there is upside. Many people are fooled into thinking that an increasing REIT stock price directly reflects the quality and value of their holdings. This is not the case. The stock price is relative to the demand of investors. It is hard to link that action to fundamental valuation.

As of now, it seems to be working for REITs, as there has been a big shift into real estate the past few months, as many investors are wanting to diversify a bit more out of equity markets due to fear of a near pullback. As a result, REITs have cash and they are spending it. The big question is are they sustainable or is it another Ponzi scheme? Mark my words, we have not seen the end to sunken REITs.

This is not to say that there are no legitimate REITs out there. Not at all. Just keep in mind that just because they have a rising stock price, this is not reflective of their real estate performance. In fact, many have had to slash dividends from around 5% to 1%. That definitely changes your return on investment. When buying into REITs, look up their recent transactions. Verify that they are not just maximizing volume as to make their managers rich. There are good deals out there, just not too many at this point. Do your due diligence before making a decision. Happy Trading.

Stock Bargains That Have Taken A Beating

noreply@blogger.com (Finance Fanatic) — Tue, 11 Jan 2011 21:51:00 +0000

Friday's employment data was not as transparent and defining as investors were hoping. Thus, since then, we have seen a bit of mix trading in the markets. The market was expecting a 150k increase in Non-farm payrolls, resulting in a change in Unemployment rate to 9.7%. The actual numbers came in with only 103k new jobs for December, but with a much larger than expected reduction in the unemployment rate, all the way down to 9.4%. If anything, this probably confuses investors more, which is why the market seems to be at odds with itself.

Much has changed since last January. As I look through many of the popular stock plays, it is beginning to find the "bargains" and potential over looked stocks that we saw at the beginning of last year. Bank stocks have rebounded greatly. Apple is setting record highs, as Google is once again a rich man's stock play. It amazes me how easy it is to erase all the doubt and concern of complete economic catastrophe and replace it with complete confidence. Sure the market itself is purely driven by investor confidence and action, however, it also historically follows a fundamental pattern. As of now those two factors are inversely pointing to two different directions.

While there are many positive trending fundamental data, there still exists hordes of restricting data that shows a long, clawing recovery back to recent highs. From a consumer confidence perspective, times are better than ever. Retail sales are up, saving rates are declining, and money exchange is once again flowing. However, this is also partnered with an increase in defaulted mortgages (many are no longer paying for their house!), increase in credit default, and record setting government stimulus.

So what are the plays for 2011? For me, that still remains to be seen, as the overall momentum for the first quarter has yet to be established. However, there are places that we can look to still see some potential value. There is one sector that took, not only the back seat, but trunk space as blue chip stocks entered record low prices and caught the attention of all investors. This sector is the IPO sector. Despite economic turmoil, believe it or not, there were many high growth potential companies that were established within the past two years that were cast aside due to investors solely focusing on blue chip day trading. Many of the IPO companies could barely make headlines as they could not compete with possible Bank of America bankruptcy news. Well, we are starting to see this change.

There are a couple of companies worth looking at that have been greatly sold off due to a variety of reasons. In evaluating recent IPO companies, it is important to look at the strength of their balance sheet, as well as their projected growth estimates and market cap. Here are a couple that pass the test and should be in for a great 2011.

Duoyuan Global Water (DGW) sold off to the degree of a 40% price reduction in September of last year, due to accounting problems that were reported from Duoyuan Printing (DYP). Aside from sharing the same Chairman, the two companies share no common relation and are complete separate entities. However, DGW took a beating along with the printing company. Due to the rise in concerns with water quality in China, the water filtering business has extreme promise, which is Duoyuan's expertise.

Also, DGW hired the auditing firm Grant Thornton to help keep their accounting in check and gain confidence from US investors. This should be a strong move in boosting investor confidence and is becoming a popular trend for Chinese companies. DGW took a 67% stock plunge last year and is expected to experience growth near the 22% range.

Another Chinese Water purifying company is Tri-Tech Holdings (TRIT). TRIT took a plunge as well last year as a 2009 IPO with a 40% drop in price. The company, however, is showing strong signs of growth in 2011, with a recent 20% rebound in price. The company expects a monumental 70% growth number for 2011 and is teed up to make a big run if fundamentals continue.

These are definitely two to look at as a long term 2011 play. Overall, the fundamentals seem strong and the P/E ratios look really strong. Sure, investing in emerging markets always bring their own risks, but if you are comfortable with them, these should be considered. Happy Trading.

Big Dates to Cause Big Stock Moves

noreply@blogger.com (Finance Fanatic) — Fri, 07 Jan 2011 00:53:00 +0000

Stocks spent most of the day in the red today, however, 2011 has remained in the green thus far. For the most part, mostly positive remarks continue to flow from the mouths of popular "media analysts", saying that 2011 looks to be on the up and up. In my opinion, we bought into that notion already during the big rally we had in the second half of 2010. Even if 2011 proves to be relatively strong, I still feel we are overbought at the moment.

Some key dates are approaching that could change momentum in the markets. They could also propel them higher, depending on the results of course. Durable goods and jobless claims came is as positive indicators for the economy for 2011, which is a big reason why many investors are cheering. We saw similar signs back in spring, however, they were quickly changed as summer months came.

Tune in tomorrow for the employment numbers for December. If we see a drop in the Unemployment rate, I would expect to see a strong buying day to end the week, with some adjusted forecasts. However, if despite seeing a reduction in jobless claims, we see a stagnant Unemployment number, I would expect investors to not be too happy, especially going into the weekend. So make it an early morning tomorrow.

Next Friday, the National Federation of Small Businesses (NFIB) Optimism Index is released. Many investors are only concerned about the big corporations and look to their results to help influence their investment decision, however, it is the small businesses which drive our economy. We are coming off four straight months of positive growth in this index, so a continuing run would cause for cheers from investors.

In my opinion, tomorrow acts as the key day for January. If we see a strong employment number, January should bode as a good month for trading. If it fails to impress, I think we will see a retracting January. Happy Trading.

RSI is Saying Sell! Sell! Sell!

noreply@blogger.com (Finance Fanatic) — Wed, 15 Dec 2010 23:21:00 +0000

A big fundamental index I enjoy watching for overall buying/selling trends in the stock market is the Relative Strength Index (RSI). This index essentially compares the recent gains with recent losses, while factoring in the trading time line and magnitude of momentum. In Wall Street, many look to this index as a an indicator of whether the market is currently overbought or oversold.

Sure, the movement in stock market is purely dependent on the mass trending of traders and has no fundamental dependence whatsoever (as we have seen quite clearly the past year and a half), however, the RSI has remained to be a pretty reliable index for indicating upcoming trends.

An index level passing lower than the 30 mark is usually a strong sign that the market is well oversold, which tends to bring a nice rally in the short future. On the flip side, a movement above the 70 level, is known to fundamental investors that the market is probably overbought for the time being.

For the first time in over 30 days, we just surpassed that key 70 mark, which history shows that indeed a pull back should be in our near future. Sure, we've seen the index go into the 90's before seeing an actual pull back, however, those levels are very rare.

This number combined with the very low volume that accompanies the last couple weeks in December could open the doors for a bit of selling going into 2011. Consumer confidence is what continues to fight the battle upward, but I have to think that even the extra bullish investors are starting to feel the time to pull some chips off the table for the time being. Keep your eyes out. Happy Trading.

Small Company Making Big Noise

noreply@blogger.com (Finance Fanatic) — Thu, 09 Dec 2010 23:47:00 +0000

As we grow closer to the end of the year, I try to start thinking about next year and new strategies and positions I will be considering. The past two years have been wild ones, and I'm not sure that 2011 will be that far off. We continue to see some companies become obsolete and thus fail, while others thrive on new innovation and technology that you and I cannot live without. Apple has done an amazing job the past 5 years in positioning themselves as the media giant and had no problems penetrating the cell phone market.

No one has a crystal ball, but trends can tell a lot. Lately, we have seen big trends towards hand held devices and social networking. Utilize both of these successfully and you will most likely be golfing most of the year.

There is a company that has been on my radar for quite some time and I think 2011 could be a break out year for them. Their name is Augme Technologies (AUGT). Sure their under $2 stock price doesn't make you jump out of your seat at first glance, but a bit of research and due diligence makes me like the company.

Augme is developing the technology to help large businesses communicate with consumers through their hand held devices. Already, the company has a client list that includes HBO, Ralph Lauren and Johnson & Johnson. They are ahead of the game in helping consumers be able to interact with these businesses, all from their handheld.

Right now, the company has a near $20 million of committed sales in their pipeline, which is a large leap compared to their current $4 million per year revenue stream. The cell phone marketing industry as a whole is projected to have a $5 billion value by 2012.

From a technical value, their stock has a strong trend going up. Their 20-day moving average is strong and their regression line has a strong uptrend for 2010. Don't be surprised if 2011 is their year to shine. Happy Trading.

Holiday Buying and An ETF on the Rise

noreply@blogger.com (Finance Fanatic) — Sat, 04 Dec 2010 00:46:00 +0000

Markets were able to put on a big rally to end the week in the close having the Dow close up almost 20 points, after being in red for the entire day. Bulls are looking to finish out the year strong (as they usually do) as shopping malls look crowded, the noise of cash registers opening are filling stores, and consumers seem to be much more positive this year, looking forward, then they were last year. Whether they have good reason to be, is still yet to be seen, but at any rate, Wall Street should benefit from it here in the short term.

I am always looking for good plays in our current economy, because it still remains a unique one and could change its face at any time. One ETF I have been eyeing has a strong upward trend and has been performing, and should continue to perform quite well. This is the PowerShares DB Agriculture Fund (DBA), which is mostly comprised of the most liquid and most traded agriculture commodities (corn, wheat, cattle, etc).

As you can see from the chart above, it has put on some good momentum in the last couple days. I think we may see it pull back a bit near the $30.05 range, but if the stock can stay at that first support level and bounce back, I believe we will see some great gains from it. Either way, like gold, it is a good one for me to stock away, as commodities are a good hedge against inflation.

We should see things begin to heat up in the market next week, as that year end date grows near and hedge funds become a bit more antsy. Happy Trading.

High Yields Hiding in Wall Street

noreply@blogger.com (Finance Fanatic) — Wed, 01 Dec 2010 22:19:00 +0000

It has definitely been a roller coaster the past two years in the stock market. On both the Bull and the Bear side, there has been a lot of money made. As of now, it has become much more difficult to find "high yielding" investment instruments than it was a couple of years ago. Banks are lucky to give you .5%, and even more riskier investments (or illiquid) may offer you in the 3-4% range. But it seems as if the days of 9-10% dividends are gone...or are they?

There continues to remain several opportunities to pursue high yields in equity markets, despite being in a recession. I thought I would share a few tips.

First, is to look outside of the usual common stock play. Stocks are great and there are opportunities, however, it is where every Tom, Dick, and Harry invests when they open a bank account. It is harder to find opportunities, in a market like ours currently, in the stock realm. For me, I enjoy adding preferred shares to the mix of my portfolio. For many companies offering yields, you may find a 3% yield on their common shares. A lot of the times, you can purchase their preferred shares and enjoy a 6-7% yield. This is common with major companies like Verizon, GE, and Proctor & Gamble.

Second, dig deep. Sometimes, large company stocks get a bit "over trendy" which equates to an inflated stock price. There are many hidden jewels out there that for whatever reason, do not have a high trading volume, but offer some very enticing yields. Do be aware, that there are some stocks out there claiming ridiculous yields that should cause for a red flag. Make sure to do a bit research on the company before purchasing, as to not get scammed.

Income Deposit Securities and Master Limited Partnerships (MLPs) can be great investment vehicles. These act as traded partnerships, in which equity (units) are offered to investors in a particular industry. These are very common in the Real Estate and Financial sectors. These instruments commonly have much greater yields than common stock trades.

I have also found that there are many Canadian REITs that are offering very high yields. There are several strong companies that are offering near 10% yields on their stock. Sure, in Canada, you do not have the "security" you do in the US, but there hasn't been any problems there in quite along time. For those of you have big appetites for big returns, I would definitely check out a few Canadian REITs.

Many bonds have taken a beating of this market due to a strong pullback in consumer confidence. Well, heading into the holiday season, we usually see our spike in consumer confidence, which usually tends to bring back the bond markets for a short period. A great way to get some big yields is by purchasing discounted bonds. Exchange Traded Bonds can be a great buy for those that have been oversold due to uncertainty. Look for those strong bonds that are trading well below their par for a chance to see some very high returns.

As it is with the game of risk/return, remember that seeking higher returns usually means taking on higher risks. This is no exception. As I do feel that my above noted practices do provide pretty secure investment opportunities and have for me in the past, there is still always the possibility of not reaching high returns or losing money. Make sure to do your own due diligence before purchasing any investment vehicle.

Don't Want GM? Try This Auto Giant

noreply@blogger.com (Finance Fanatic) — Tue, 30 Nov 2010 19:54:00 +0000

GM has recently been stealing the spotlight from many other auto companies. Auto sales seemed to have endured rather well, especially this past year. Though many mainstream auto companies don't interest me that much at this time, there is an emerging auto company that is making a lot of noise.

India has 12 cars per thousand people, which seems like nothing when compared to the US's number of 842 cars per thousand. For India, this number is rapidly growing every year and has plenty of room to keep growing.

Tata Motors (TTM) (yes, I'm sure there were many who giggled at the name) is the largest Automobile maker in India, building buses, tractors, trucks, and passenger cars. The company owns 60% of India's marketshare and has a rather strong buying pool outside of the country as well.

In 2009, TTM stock returned over 281% to its investors and in 2010, the stock is up over 90% so far. Indeed, as is the case with many emerging markets, the stock is very volatile, but when looking at the chart (above), you can see the MACD is leveling out and should be due for yet another jump in price, if the recent trend continues. With the US economy still questionable at this point, India is not a bad place to look for some alternatives.

Is GM a Good Buy?

noreply@blogger.com (Finance Fanatic) — Tue, 30 Nov 2010 19:43:00 +0000

Much has been made of the largest IPO in history...General Motors (GM). After their brief time away from Wall Street (Bankruptcy), they have been able to rearrange their liabilities column to hopefully be able to survive the rest of the storm. Of course there have been many large companies that have been able to take the road of bankruptcy, only to come back stronger, however, I am not sure GM will be one of them.

First of all, they have been out competed the last 10 years to the Japanese in the construction of automobiles. Sure, they do get their "American" made claim to their brand with their big trucks and SUVS, however, as consumers tighten their budget, they shop for efficiency and longevity. All signs point to Japanese in that regard. Now, GM is attempting to re-brand themselves into a competitive brand to the Japanese, while still trying to keep their loyal "American Only" customers. At any rate, their stock seems to be gaining a bit of momentum in the short term (see graph above), however, if post holiday stock woes are in our midst, this trend can quickly change. In my next post, I will discuss an auto stock (Indian) that is definitely worth noting and watching. Happy Trading.

New Chinese IPO to Look At

noreply@blogger.com (Finance Fanatic) — Fri, 19 Nov 2010 18:43:00 +0000

With all the hype of the recent GM IPO after their short vacation away from Wall Street while in bankruptcy, I believe this Chinese IPO has been overlooked.

China is the largest customer for vehicle purchases and their number one source to purchase vehicles are through online vendors. Last year, online vendors attracted 140 million unique visitors, which was up from 29 million in 2005. Bitauto (BITA) is the largest online vendor that services vehicle information in China. On Wednesday, Bitauto issued 10.6 million shares to the NASDAQ for $12 per share.

Since going public, there has been some downward pressure on the stock price and volume has remained relatively low.

As with many Chinese public stocks, BITA carries risk. It has a higher forward multiple, which is typical for Chinese companies. Due to the recent release of shares, their market cap has been put to $492 million. Once this company gets some more exposure, I would not be surprised to see some strong, positive movement.

Uptrend for Gold

noreply@blogger.com (Finance Fanatic) — Thu, 18 Nov 2010 20:04:00 +0000

Nice solid movement coming from the Gold Spot (Forex XAUUSDO). Good regression line and also a pretty solid crossover on the MACD. Definitely a beginning of a good uptrend. Markets rallying pretty good today, which should continue the last hour. I would not be surprised to see half of the profits returned tomorrow as many got a nice little pop today.

Stocks on the Move

noreply@blogger.com (Finance Fanatic) — Thu, 04 Nov 2010 22:26:00 +0000

It seems as though Wall Street approves of the latest changes in politics that took place on Tuesday. The Dow enjoyed a 200+ point move today as investors seem to have a bit of optimism. In reality, there is little that the changes will be able to do. Sure, efficient incentives and policies can mitigate damages done to the economy and ease the pain, but the careless management and banking that has taken place the past 10 years cannot be erased by the signing of a pen or printing new money. It will take a lot of time and, unfortunately, pain.

Last year I discussed a penny stock with you that I had invested in and seen a great deal of success. The company is Imaging3 (IMGG). We were able to buy into this stock a $0.05, where the stock remained at for a few years. Well, last year, rumors of a near FDA deal caused for the stock to leap the the near $2.00 range, which we then opted to sell all of our shares. I have dealt with FDA pending stocks before, and history has shown me that it is much better to get out on the hype then to roll the dice on whether it really happens. Well, in this case, it was a wise decision.

This past week, IMGG had a shareholder conference call in which they announced that their application for FDA was rejected which greatly surprised IMGG management. Much of their notes, related to administrative deficiencies more so than actual performance of their product. You could sense the frustration of the CEO in not knowing exactly why it happened. As a result, the stock has now plummeted back down to the near $0.10.

Sure, the news is frustrating for investors, but this does not mean they will not get approval. In fact, the stock price is starting to become very appealing for re-entry at this point, as it is clear they will continue to fight for FDA approval. If it becomes clear that once again they are near that approval, I expect the stock to react much like it did the first time around. So, IMGG is definitely on the hot watch list for me and anymore decay in its price will force me to have to make a move.

First Friday of the month coming this week, which you know what that means...Unemployment data. Once again, unemployment will act as the main driver of sentiment in the marketplace and until we can consistently start to reduce that number, massive problems will still be in our midst. Anyway, look for this political rally to quickly be squashed of the numbers come in disappointing. Happy Trading.